think of ourselves—and how little we think of the other person.”
CHAPTER FOUR
B y the 1930s the nation’s railroads had become tangled in bankruptcies, unrelated to the Depression, and the U.S. Senate wanted to know why. So the Interstate Commerce Commission started holding hearings to investigate the complicated financial schemes that enriched the bankers and brokers while simultaneously looting the railroads.
Leading the charge was the newly elected senator from Missouri, a failed haberdasher named Harry S. Truman. A New Dealer from the moment of his election, Senator Truman supported all of President Roosevelt’s programs to pull the country out of the Depression—the Works Progress Administration, the Social Security Administration, the Public Utility Holding Company Act, and the Rural Electrification Administration. Now he was determined to expose financial mismanagement of the railroads and reform the national transportation system.
A small part of the larger problem involved the reorganization of the Missouri Pacific system and the subsequent financing that led to its bankruptcy. This fiscal plunder, the Enron scandal of its day, fleeced employees and left directors and stockholders destitute while the wealthy financiers and their corporate lawyers skipped out with their pockets full of boodle. Playing a leading role in the pillage was George Herbert Walker, who was subpoenaed to testify before Senator Truman on November 17, 1937.
Bert walked into the Senate hearing room in Washington, D.C., with his lawyers from Cravath, de Gersdorff, Swaine, and Wood. Even in a suit and tie, he looked like a burly boxer with a trainer and a handler on either side, ready to remove his mouthpiece after every round and ram it back when the bell clanged. As a former amateur heavyweight champion in St. Louis, he was accustomed to pummeling brutes; the little senator in the wire-rim glasses hardly looked like a worthy adversary.
With a few polite questions, Senator Truman established that George Herbert Walker had been chairman of the board of Gulf Coast Lines when the Missouri Pacific acquired control of that company in 1925. At the time, Bert was also president of W. A. Harriman and Company, bankers for the railroad, and senior partner of G. H. Walker and Company, the brokerage firm that later sold the railroad. Bert admitted he had informed his board that the sales profit was going to W. A. Harriman and Company, but he neglected to tell them that the banking house was only a temporary receptacle for his own personal benefit.
Bert Walker testified that of the sale’s $518,680.80 ($5,519,620 in 2004) net profit, he personally received $173,387.57 ($1,845,130 in 2004). An additional $72,244.84 ($768,804 in 2004) went to his brokerage firm, G. H. Walker and Company, and more moneys, in the amount of $43,346.90 ($461,283 in 2004), went to W. A. Harriman and Company, of which he was president.
The Interstate Commerce Commission characterized his various fees as “excessive compensation,” but Bert’s defense was that he had worked on the deal, “a protracted negotiation,” for ten years without pay. “I never charged the railroad a penny of compensation,” he said. “I never even charged them most of the time for my out-of-pocket expenses.” Instead of taking a salary for his services, he said, he insisted on working free until it came time to sell the railroad to a big system. “I wanted the right to sell it and make the commission then.”
Bert showed no shame for his stupendous profits, which, his lawyers asserted, were perfectly legal. Nor was he embarrassed when the Senate committee counsel pointed out that the gross compensation totaled more than the salaries and expenses of all the railroad’s employees. Bert shrugged as if to say, “Business is business.”
One month later Senator Truman stood up in the Senate to passionately attack Wall Street and the larger evil of money worship—all that George Herbert
CHAPTER FOUR
B y the 1930s the nation’s railroads had become tangled in bankruptcies, unrelated to the Depression, and the U.S. Senate wanted to know why. So the Interstate Commerce Commission started holding hearings to investigate the complicated financial schemes that enriched the bankers and brokers while simultaneously looting the railroads.
Leading the charge was the newly elected senator from Missouri, a failed haberdasher named Harry S. Truman. A New Dealer from the moment of his election, Senator Truman supported all of President Roosevelt’s programs to pull the country out of the Depression—the Works Progress Administration, the Social Security Administration, the Public Utility Holding Company Act, and the Rural Electrification Administration. Now he was determined to expose financial mismanagement of the railroads and reform the national transportation system.
A small part of the larger problem involved the reorganization of the Missouri Pacific system and the subsequent financing that led to its bankruptcy. This fiscal plunder, the Enron scandal of its day, fleeced employees and left directors and stockholders destitute while the wealthy financiers and their corporate lawyers skipped out with their pockets full of boodle. Playing a leading role in the pillage was George Herbert Walker, who was subpoenaed to testify before Senator Truman on November 17, 1937.
Bert walked into the Senate hearing room in Washington, D.C., with his lawyers from Cravath, de Gersdorff, Swaine, and Wood. Even in a suit and tie, he looked like a burly boxer with a trainer and a handler on either side, ready to remove his mouthpiece after every round and ram it back when the bell clanged. As a former amateur heavyweight champion in St. Louis, he was accustomed to pummeling brutes; the little senator in the wire-rim glasses hardly looked like a worthy adversary.
With a few polite questions, Senator Truman established that George Herbert Walker had been chairman of the board of Gulf Coast Lines when the Missouri Pacific acquired control of that company in 1925. At the time, Bert was also president of W. A. Harriman and Company, bankers for the railroad, and senior partner of G. H. Walker and Company, the brokerage firm that later sold the railroad. Bert admitted he had informed his board that the sales profit was going to W. A. Harriman and Company, but he neglected to tell them that the banking house was only a temporary receptacle for his own personal benefit.
Bert Walker testified that of the sale’s $518,680.80 ($5,519,620 in 2004) net profit, he personally received $173,387.57 ($1,845,130 in 2004). An additional $72,244.84 ($768,804 in 2004) went to his brokerage firm, G. H. Walker and Company, and more moneys, in the amount of $43,346.90 ($461,283 in 2004), went to W. A. Harriman and Company, of which he was president.
The Interstate Commerce Commission characterized his various fees as “excessive compensation,” but Bert’s defense was that he had worked on the deal, “a protracted negotiation,” for ten years without pay. “I never charged the railroad a penny of compensation,” he said. “I never even charged them most of the time for my out-of-pocket expenses.” Instead of taking a salary for his services, he said, he insisted on working free until it came time to sell the railroad to a big system. “I wanted the right to sell it and make the commission then.”
Bert showed no shame for his stupendous profits, which, his lawyers asserted, were perfectly legal. Nor was he embarrassed when the Senate committee counsel pointed out that the gross compensation totaled more than the salaries and expenses of all the railroad’s employees. Bert shrugged as if to say, “Business is business.”
One month later Senator Truman stood up in the Senate to passionately attack Wall Street and the larger evil of money worship—all that George Herbert
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