JOSEPH P. KENNEDY
Posted: Wed Dec 07, 2011 1:56 am
Joseph Patrick "Joe" Kennedy, Sr. (September 6, 1888 – November 18, 1969) was a prominent American businessman, investor, and government official.Kennedy, an Irish American, was the father of U.S. President John F. Kennedy, United States Attorney General and Senator Robert F. Kennedy, United States Senator Edward M. Kennedy, naval officer Joseph P. Kennedy, Jr., Special Olympics co-founder Eunice Kennedy Shriver, and former U.S. Ambassador to Ireland Jean Kennedy Smith; and the grandfather of U.S. Representatives Joseph P. Kennedy II and Patrick J. Kennedy.He was a leading member of the Democratic Party and of the Irish Catholic community. He was the inaugural Chairman of the U.S. Securities and Exchange Commission (SEC), appointed by President Franklin D. Roosevelt (FDR), and later directed the Maritime Commission. Kennedy served as the United States Ambassador to the United Kingdom from 1938 until late 1940, including the early part of World War II.Born to a political family in Boston, Massachusetts, Joseph P. Kennedy, Sr. was educated at Boston Latin School and Harvard University, and embarked on a career in finance, making a large fortune as a stock market and commodity investor and by investing in real estate and a wide range of industries.[1] At the repeal of Prohibition, Kennedy and FDR's son James Roosevelt traveled to Scotland to buy distribution rights for Scotch whisky. In addition, Kennedy had purchased spirits-importation rights from Schenley Industries, a firm in Canada.[2]During World War I, he was an assistant general manager of Bethlehem Steel and developed a friendship with Franklin D. Roosevelt, then Assistant Secretary of the Navy. Kennedy made huge profits from reorganizing and refinancing several Hollywood studios, ultimately merging several acquisitions into Radio-Keith-Orpheum (RKO) studios. After Prohibition ended in 1933, Kennedy consolidated an even larger fortune when his company, Somerset Importers, became the exclusive American agent for Gordon's Gin and Dewar's Scotch. He owned the largest office building in the country, Chicago's Merchandise Mart, giving his family an important base in that city and an alliance with the Irish-American political leadership there.His term as ambassador and his political ambitions ended abruptly during the Battle of Britain in November 1940, with the publishing of his controversial remarks suggesting that "Democracy is finished in England. It may be here, [in the US]."[3] Kennedy resigned under pressure shortly afterwards. In later years, Kennedy worked behind the scenes to continue building the financial and political fortunes of the Kennedy family. After a disabling stroke on December 19, 1961, at the age of 73, Kennedy lost all power of speech, but remained mentally intact. He used a wheelchair after the stroke. Kennedy was one of three fathers (the other two being Dr. George Tryon Harding, Sr. and George H. W. Bush) to live through the entire presidency of a son. He died on November 18, 1969, two months after his 81st birthday.Kennedy allowed surgeons to perform a lobotomy (one of the earliest in the U.S.) on his daughter Rosemary Kennedy in 1941. Various reasons for the operation have been given, but it left her permanently incapacitated.Joseph Patrick Kennedy was born in Boston, Massachusetts. He was the elder son of Mary Augusta Hickey Kennedy and P. J. Kennedy, a successful businessman, ward boss and Irish American community leader. All of Kennedy's grandparents had emigrated to Massachusetts in the 1840s to escape the Irish famine. Kennedy was born into a highly sectarian society, where Irish Catholics felt themselves excluded by upper-class Boston Brahmins. Boston Irish became thus active in the Democratic Party, including P. J. and numerous relatives.P. J. Kennedy's home was comfortable, thanks to his successful saloon business, investments, and an influential role in local politics. His mother encouraged Joseph to attend the Boston Latin School, where Joe was a below average scholar but was popular among his classmates, winning election as class president and playing on the school baseball team.Kennedy followed in the footsteps of older cousins by attending Harvard College. He focused on becoming a social leader, working energetically to gain admittance to the prestigious Hasty Pudding Club. While at Harvard he joined the Delta Upsilon International fraternity and played on the baseball team, but was blackballed from the Porcellian Club.On October 7, 1914, Kennedy married Rose Elizabeth Fitzgerald, the eldest daughter of John Francis "Honey Fitz" Fitzgerald, a Democratic mayor of Boston and probably the most recognized politician in the city. The marriage joined two of the city's most prominent Irish-American political families. The couple had nine children. As Kennedy's business success expanded, he and his family kept homes in the Boston area, suburban New York City, Hyannis Port, Massachusetts, and Palm Beach, Florida.Kennedy made a large fortune as a stock market and commodity investor and by investing in real estate and a wide range of industries. He never built a significant business from scratch, but his timing as both buyer and seller was usually excellent. Sometimes he made use of inside information in ways which were legal at the time but were later outlawed. He later became the first chairman of the SEC. After his death, various gangsters including Frank Costello claimed to have associated with Kennedy. According to some accounts, Kennedy was associated in the "bear raid" that precipitated the Wall Street Crash of 1929, as well as much of the bootlegging activity that was common at the time. When Fortune magazine published its first list of the richest people in the United States in 1957, it placed him in the $200–400 million band[10] ($1.56-3.12 billion today[11]), meaning that it estimated him to be between the ninth and sixteenth richest person in the United States at that time. The Americans with equivalent ranks in 2010 had net worths between $13–20 Billion in 2010.After graduating from Harvard in 1912, he took his first job as a state-employed bank examiner. This allowed him to learn a great deal about the banking industry. In 1913, the Columbia Trust Bank, in which his father held a significant share, was under threat of takeover. Kennedy, borrowing $45,000 ($996,667 today[11]) from family and friends, bought back control and at age 25 was rewarded by being elected the bank's president. Kennedy told the press he was "the youngest" bank president in America.[13]Kennedy emerged as a highly successful entrepreneur with an eye for value. For example, as a real estate investor, he turned a handsome profit from ownership of Old Colony Realty Associates, Inc., which bought distressed real estate.[14]Although skeptical of American involvement in World War I, he sought to participate in war-time production as an assistant general-manager of a major Bethlehem Steel shipyard in Quincy, Massachusetts. There he oversaw the production of transports and warships critical to the war. This job brought him into contact with the Assistant Secretary of the Navy, Franklin Delano Roosevelt.In 1919, he joined the prominent stock brokerage firm of Hayden, Stone & Co. where he became an expert in dealing in the unregulated stock market of the day, engaging in tactics that were later labeled insider trading and market manipulation. (He happened to be on the corner of Wall and Broad Streets at the moment of the Wall Street bombing on September 16, 1920, and was thrown to the ground by the force of the blast.)[15] In 1923 he left Hayden, and set up his own investment company, becoming a multi-millionaire during the bull market of the 1920s, and even more wealthy as a result of taking "short" positions in 1929.David Kennedy, author of Freedom From Fear, describes the Wall Street of the Kennedy era:(It) was a strikingly information-starved environment. Many firms whose securities were publicly traded published no regular reports or issued reports whose data were so arbitrarily selected and capriciously audited as to be worse than useless. It was this circumstance that had conferred such awesome power on a handful of investment bankers like J.P. Morgan, because they commanded a virtual monopoly of the information necessary for making sound financial decisions. Especially in the secondary markets, where reliable information was all but impossible for the average investor to come by, opportunities abounded for insider manipulation and wildcat speculation.Kennedy formed alliances with several other Irish-Catholic investors, including Charles E. Mitchell, Michael J. Meehan and Bernard Smith. He helped establish the Libby-Owens-Ford stock pool, an arrangement in which Kennedy and colleagues created a scarcity of Libby-Owens-Ford stock to drive up the value of their own holdings in the stock, using inside information and the public's lack of knowledge. Pool operators would bribe journalists to present information in the most advantageous manner. Attempts to corner stocks were made that would cause the price to go up, and bear raids could cause the price to collapse downward. Kennedy got into a bidding war seeking control of founder John Hertz's company Yellow Cab.[16]Kennedy later claimed he knew the rampant stock speculation of the late 1920s would lead to a crash. It is said that he knew it was time to get out of the market when he received stock tips from a shoe-shine boy.[17] Kennedy survived the crash "because he possessed a passion for facts, a complete lack of sentiment and a marvelous sense of timing."[18] During the Great Depression Kennedy vastly increased his financial fortune by investing most of it in real estate. In 1929, Kennedy's fortune was estimated to be $4 million (equivalent to $51.3 million today[11]). By 1935, his wealth had increased to $180 million (equivalent to $2.88 billion today.Kennedy made huge profits from reorganizing and refinancing several Hollywood studios. Film production in the US was much more decentralized than it is today, with many different movie studios producing film product. One small studio was FBO, Film Booking Offices of America, which specialized in Westerns produced cheaply. Its owner was in financial trouble and asked Kennedy to help find a new owner. Kennedy formed his own group of investors and bought it for $1.5 million ($18.8 million today[11]).Kennedy moved to Hollywood in March 1926 to focus on running the studio. Movie studios were then permitted to own exhibition companies which were necessary to get their films on local screens. With that in mind, in a hostile buyout, he acquired the Keith-Albee-Orpheum Theaters Corporation (KAO) which had more than 700 vaudeville movie theaters across the United States. He later purchased another production studio called Pathe Exchange.In October 1928, he formally merged his film companies FBO and KAO to form Radio-Keith-Orpheum (RKO) and made a large amount of money in the process. Then, keen to buy the Pantages Theatre chain, which had 63 profitable theaters, Kennedy made an offer of $8 million ($103 million today). It was declined. He then stopped distributing his movies to Pantages. Still, Alexander Pantages declined to sell. However, when Pantages was later charged and tried for rape, his reputation took a battering and he accepted Kennedy's revised offer of $3.5 million ($44.9 million today[11]). Pantages, who claimed that Kennedy had "set him up", was later being found not guilty at a second trial.It is estimated that Kennedy made over $5 million ($64.1 million today[11]) from his investments in Hollywood. During his three-year affair with film star Gloria Swanson,[20] he arranged the financing for her films The Love of Sunya (1927) and the ill-fated Queen Kelly (1928). The duo also used Hollywood's famous 'body sculptor', masseuse Sylvia of Hollywood.[20] Their relationship ended when Swanson wondered why an expensive gift from Joseph had been charged to her account.[21]James Roosevelt, son of President Franklin D. Roosevelt, helped Kennedy start his liquor business after Prohibition.[22]A recurrent urban legend about Kennedy is that he made money in bootlegging, the illegal importation and distribution of alcohol during Prohibition. Although there is no hard evidence of this, Kennedy did have extensive investments in the legal importation of spirits. The "bootlegging" rumor itself may be traceable to Canadian distiller Samuel Bronfman and to New England bootlegger Danny Walsh and his crime syndicate, which did in fact smuggle spirits across the Canadian-American border during this period. Post-Prohibition, Bronfman had a bitter rivalry with Kennedy in acquiring North American liquor distribution rights.[23] At the start of the Franklin Roosevelt administration, Kennedy and James Roosevelt founded Somerset Importers, an entity that acted as the exclusive American agent for Haig & Haig Scotch, Gordon's Dry Gin and Dewar's Scotch. They had assembled a large inventory of stock, which they allegedly sold for a profit of millions of dollars when Prohibition was repealed. (Kennedy himself drank little alcohol. He so disapproved of what he considered a stereotypical Irish vice that he offered his sons $1,000 to not drink until they turned 21.[24]) Kennedy invested this money in residential and commercial real estate in New York, Le Pavillon restaurant, and Hialeah Park Race Track in Hialeah, Florida. His most important purchase was the largest office building in the country, Chicago's Merchandise Mart, which gave his family an important base in that city and an alliance with the Irish-American political leadership there.