At the record high of 133-1/2 in 1956, 12 per cent of
Aluminum
was worth $329,262,364.
Lundberg - The-Rich-and-the-Super-Rich-by-Ferdinand-Lundberg
The wealthy, like everyone else, dislike to pay taxes and, unlike most other people, they know how to minimize them through the exercise of political influence.
This is one of the nice differences between being wealthy and being poor.
The Constitution of the United States bars the bestowal of titles of nobility. But in many ways it would clear up much that is now obscure if titles were allowed. Not only would they show, automatically, to whom deference was due as a right but they would publicly distinguish those who held continuing hereditary power from people who are merely temporarily voted in or appointed for limited terms. The chroniclers of High Society-that is, the circles of wealth--recognize this need and, in order to show hereditary status and family position, they allude to males in the line of descent by number, as in the case of royal dynasties. Thus in the English branch of the Astor family there is a John Jacob Astor VII. 45 But there are also George F. Baker III, August Belmont IV, William Bird III, Joseph H. Choate III, Ire? ne? e and Pierre du Pont III, Marshall Field V, Potter Palmer III, John D. Rockefeller IV, Cornelius Vanderbilt V and so on. 46
It is names such as these that would properly be found in an American Almanach de Gotha.
Two
ROOM AT THE TOP: THE NEW RICH
Were it not for the miscellaneous batch of hard-bitten, shirt-sleeved Texas oil-lease speculators and wildcatters that since World War I has risen on a tide of special tax privileges like science-fiction dinosaurs, it could well be said that the day of accumulating gargantuan new personal fortunes in the United States is just about ended; this leaves the tubbed, scrubbed, and public-relations-anointed inheritors of the nineteenth-century money scramble holding most of the chips. As it is, fortune-building continues--albeit at a greatly subdued pace outside the lushly flowing oil industry. For just about everything else of marketable value is tightly vaulted down, much of it resting comfortably in trust. But even in the oil industry, magnitudes are exaggerated, Texas-style, by writers who desire to bedazzle readers with a modern if oil-soaked Arabian Nights tale.
New personal wealth is dealt with in this chapter-that is, great individual wealth that has shown itself since World War I and, more particularly, since World War II. For the most part it is wealth not known to Gustavus Myers, historian of the first waves of American fortunes and, partly because of the give-away oil depletion allowance, it postdates America's Sixty Families (1937). Classification of these new fortunes with respect to wealth and super-wealth and their comparison with the old fortunes are deferred until Chapter IV.
Actually, before larger sums are bandied about in these pages, let it be noted that a person worth only $10 million (insignificant though $10 million is compared with many modern fortunes) is very, very wealthy indeed. If a prudent, hardworking, God-fearing, home-loving 100 per cent American saved $100,000 a year after taxes and expenses it would take him a full century to accumulate such a sum. A self-incorporated film star who earned 81 million a year and paid a 10 per cent agent's fee, 10 per cent in business expenses, a rounded 50 per cent corporation tax on the net and then withdrew $100,000 for his own use (on which he also paid about 50 per cent tax) would need to be a box- office rage for thirty-four unbroken years before he could save $10 million. Yet some men do acquire such sums--and much more. But never by offering mere talent, whatever it is, in a free market. Even the most talented bank robbers or kidnappers have never approached such an accumulation before being laid low by the eager gendarmerie.
The incandescent Marilyn Monroe, as big as they come in filmdom and a veritable box office Golconda, died broke-an old story with the mothlike entertainers and professional athletes. She bequeathed 81 million to friends but, despite posthumous earnings of $800,000 accruing to her estate, nothing was left after taxes and creditors' claims. Clearly she was in need of a tax lawyer. There was even nothing left to establish a trust fund to generate a paltry $5,000 a year for her invalid mother. Yet Miss Monroe, obviously a true-blue American, reportedly drew $200 million to the box office from 1950 to 1963. 1 More recent reports indicate that something was salvaged for her mother.
Hard to get, $10 million shows its power in another way. If invested in tax-exempt securities it can generate about $250,000 a year. Now if the owner exercises initial frugality and invests this income similarly each year, it will produce $6,250 the first year and (disregarding compound interest all along) $12,500 the second year, $18, 750 the third year, $25,000 the fourth year and so on, In the tenth year the income of the accumulated income of the original $10 million Will be $62,500 on a new capital sum of $2. 5 million, which automatically doubles itself every ten years. The owner might
even do a bit better by investing in taxable securities and paying taxes, particularly on the second accumulation, but I have focused on tax-exempt securities in order to keep to the simplest terms. Yet the ordinary man on his 4 or 5 per cent in the savings bank must pay full taxes. This sort of accumulating on the income of the income, thus generating new capital sums, has long been the investment style of old Boston and Philadelphia families. Careful to a fault, they own only small yachts, drive only old (but well- maintained) cars and are accustomed to wear old but expensive clothes of the first class so that they look quaintly dowdy. And they intermarry with old families, unfailingly. They are people who would rather study the fine engraving on a stock certificate than the brush strokes of an old master. They are, in short, respectably, unobtrusively rich.
How the sizes of new fortunes were obtained will appear in the text. The Most conservative available figures are used throughout and are critically evaluated. For precise figures it would be necessary to get certified copies of net worth, which (not being voluntarily proffered ) could be obtained only in the unlikely event of a congressional subpoena with the acquiescence of the Supreme Court. The sacred right to privacy is used to screen the dimensions of great wealth, although privacy becomes expendable when young men are summoned into the armed forces for "police" duty at coolie pay and are unceremoniously ordered to strip naked for minute scrutiny and examination. And if subpoenaed the figures might not be even momentarily accurate because, owing to the undeveloped state of a part of many large holdings, the owners themselves honestly don't know how much, at going market prices, they are worth. Seeking such accuracy in the figures amounts to committing the fallacy of misplaced precision. 2
The Fortune Study
Fortune, stepping into the data vacuum decreed by a delicately sensitive Congress, has given us the latest pre? cis on the largest individual contemporary fortunes. 3 Beginning our exposition with it and selecting only the relative newcomers, we find that with few exceptions the newer fortunes rose on the basis of oil and its generous depletion allowances, and upper executive position in General Motors Corporation.
Fortune assumed, reasonably enough, that an income of $1 million or more per year (some incomes range much higher--up to perhaps $25 to $50 million) might suggest asset-holdings of at least $50 million. But some large incomes are nonrepetitive, derive from unloading assets (which might have been procured very cheaply) at a large profit; they are not the same as continuing incomes from investments. The incomes swollen by relieving oneself of assets at higher prices (capital gains) are reflected in boom times in the sharp rise in million-dollar incomes-- from 49 in 1940 to 398 in 1961. But no steady million-dollar incomes at all blossom from the sale of services or talent; not even the most extravagantly rewarded executives or film stars pick up that much in straight across-the-board pay.
The point of departure for Fortune was a Treasury official's estimate that in 1957 there were between 150 and 500 $50-million-plus asset-holders; there were actually 223 incomes of $1 million-plus, according to the Treasury's subsequently published Statistics of Income: 1957 (p. 20). Fortune to its own satisfaction identified 155 of them by name. Of this group it published the names of half, the ones thought to possess assets of $75 million upward, and gave estimates of their net worth in broad ranges. Fortune also named a few other steady big-income beneficiaries at random in its text, outside its list, giving no reason for this deviation. The list, confined to then living people, did not name all the big post-1918 fortunes, although here and there some persons who had
recently died were mentioned. Some such fortunes omitted from the Fortune list will be mentioned further along.
Before scanning the Fortune list and then noting qualifications of it, the reader will be better prepared if he ponders over the tables in Appendix A that provide a broad statistical background since 1940 on the larger incomes and lay the ground for some incisive observations. In the upper brackets at least, these income recipients abstractly impaled like skeletal insects in the tables are unquestionably included among Lampman's 1. 6 per cent of adults that compose American wealth-holders. No doubt the Fortune list in its entirety, with some additions to be supplied, represents a part of the moneyed elite of the Lampman higher strata. But in the group of Appendix A incomes below $100,000 or so, many are only those of potential wealth-holders--for the simple reason that they are from salaries.
Property and Politics
Nonetheless the varying totals shown in Appendix A of incomes in excess of $25,000--numbering 49,806 in 1940 and 626,997 in 1961--certainly represent the cream of the take in the American svstem. This is not a large group and, in relation to a population of nearly 260 million, of which more than half are adults, it is not any different in relative size from the small group of tight-fisted landowners found in Latin American countries or from the Communist Party of Soviet Russia.
In order to participate in politics in the Soviet Union one must be a member of the Communist Party. This is a formal condition. Similarly, in order to participate meanirtgfully in politics in the United States one must be a property owner. This is not a formal requirement; formally anyone may participate. But, informally, participation beyond voting for alternate preselected candidates is so difficult for the nonpropertied as to be, in effect, impossible. The nonpropertied person in the United States who wishes to attain and hold a position of leverage in politics must quickly become a property owner. And this is one reason why unendowed budding American politicians, not being property owners, must find or create opportunities (legal or illegal) for themselves to acquire property. Without it they are naked to the first wind of partisan adversity and gratuitous public spitefulness.
Politically the nonpropertied carry little efficient influence in the United States--that is, they have at best only marginal individual leverage--which is not the same as saying that all property owners participate in politics. But, when all the chips are down, these latter rule or significantly modify the situation in committee rooms and cloakrooms, directly or through amply rewarded intermediaries, In the United States the ownership of property, often evidenced by possession of a credit card, gives the same personal amplitude that possession of a party, card confers in Soviet Russia.
Although different, the political systems of Soviet Russia and the United States are not basically so different as widely supposed. The United States can be looked upon as having, in effect, a single party: the Property Party. This party can be looked upon as having two subdivisions: the Republican Party, hostile to accommodating adjustments (hence dubbed "Conservative"), and the Democratic Party, of recent decades favoring such adjustments (hence dubbed "Liberal"). The big reason third parties have come to naught--a puzzle to some political scientists--is simiply that no substantial group of property owners has seen fit to underwrite one. There is no Anti-Property Party.
BIG NEW WEALTH-HOLDERS
Stated Net Financial Age
Worth Activity in
Name
Schooling
1. J. Paul Getty
Oxford (A. B. )
(Los Angeles)
2. H. L. Hunt
grade
(Dallas)
(millions)
$700-$1,000
$400-$700
1957
Integrated oil 65
companies
3. Arthur Vining Davis ditto
Amherst (A. B. )
(deceased 1962)
4. Joseph P. Kennedy $200-$400
Harvard (A. B. )
Alcoa executive 90
Market operator 69
Ship operator 60
(Boston)
5. Daniel K. Ludwig
Public school
(New York)
6. Sid Richardson*
college
(deceased 1959)
ditto
ditto
Oil operator
60+ Some
7. Alfred P. Sloan, Jr. ditto
M. I. T.
(New York)
8. James Abercrombie* $100-$200
(Houston)
General Motors executive 82
9. Stephen Bechtel
college
(San Francisco)
10. William Blakley*
(Dallas)
11. Jacob Blaustein
college
(Baltimore)
12. Clarence Dillon
Harvard (A. B. )
(New York)
13. William Keck*
(Los Angeles)
14. Charles Kettering
State
(deceased 1959)
ditto
ditto ditto
ditto
ditto ditto
Oil operator
Public construction
57 Some
15. William L. McKnight ditto
Public school
(St. Paul)
Railway Express and airlines
Integrated oil companies 65 Some
Investment banker 75
Oil operator
General Motors executive 81 Ohio
Minnesota Mining and 70
Manufacturing Co.
Oil operator
67 Fifth
16. John Mecom ditto
college
(Houston)
17. C. W. Murchison ditto
college
(Dallas)
18. John L. Pratt* ditto
(Fredericksburg)
19. R. E. Smith* ditto
(Houston)
20. Michael Benedum $75-$100
Public school
(deceased 1961)
21. Donaldson Brown ditto
Virginia
(Baltimore)
Polytechnic
tute
22. George R. Brown ditto
college
(Houston)
23. Herman Brown ditto
college
(deceased 1962)
24. James A. Chapman* ditto
(Tulsa)
25. Leo Corrigan ditto
Public school
(Dallas)
26. Erle F. Halliburton*
(Duncan, Oklahoma)
27. Henry J. Kaiser ditto
Public school
(Oakland)
28. John W. Kicckhefer ditto
(Milwaukee)
29. John E. Mabee* ditto
(Tulsa)
30. John D. MacArthur ditto
Public school
(Chicago)
31. H. H. Meadows ditto
school
(Dallas)
Oil operator
Oil operator
45 Some
62 Some
General Motors executive
Oil operator
Oil operator 88
General Motors 72
and Du Pont executive
Public construction
Public construction
Oil operator
Insti 59 Some
65 Some
Real estate and 63
hotel operation
Oil well equipment
Public construction 75
Paper, containers
Oil operations
Insurance promotion 60
Oil operator
58 Law
32. Charles S. Mott
Stevens Institute
(Flint)
Technology
33. James Sottile, Jr.
Public school
(Miami)
34. George W. Strake*
(Texas)
35. Louis Wolfson
college
ditto General Motors exec. 82
of
ditto Banking 44
ditto Oil operations
ditto Financial operator 45 Some
New York)
*Not listed in Who's Who 1956-57, 1964-65.
In general, American politics are not nearly so brusque, arbitrary and doctrinaire as Russian politics. But those carried away by the lullaby of American democracy should consult the harsh experience of the Negro and other repressed groups in the American system. There matters begin to take on a distinctly Russian complexion.
As to the sources of the big incomes (those above $500,000 and over $1 million), Appendix A shows that the aggregate received in this category includes comparatively little in salaries or partnership profits. Receipts in the form of dividends and capital gains, interest and other forms of property return, were comparatively colossal. The 398 persons in the $1 million-plus income class in 1961, for example, took only $18,607,000 in salaries, an average of $46,753, and $10,503,000 in partnership profits but took $259,574,000 in dividends, $434,272,000 in capital gains, $8,754,000 in interest, $3,163,000 from trust funds (not including capital gains from such) and $2,371,000 from rents and royalties. The group as a whole also absorbed $7,915,000 of business loss, more than offset by the interest it received. This, in brief, is not a group of workers even of the upper executive class, and the same holds true of the $500,000- $1,000,000 group of income recipients.
Fortune differentiated between inherited and personally assembled wealth. We will leave the inheritors for Chapter IV; examined above is the Fortune list of the new big wealth-holders, thirty-five in number.
Left off the Fortune list but referred to in its text were Dr. Martin Miller, New Orleans surgeon, with a reported annual income of $7-$8 million from oil royalties; E. V. Richards, New Orleans real estate operator estimated by Fortune to be worth $50-$100 million; and Matilda Geddings Gray of New Orleans, who inherited an oil fortune of unstated present value from her father. Fortune also mentioned a sprinkling of new names in the $50-million bracket, but these persons need not detain us here.
Revision of the List
Under critical analysis, this list requires some pruning and rearranging, both with respect to the number of inclusions among the new big rich and to estimated size of holdings.
Only the probates of estates of those who have died since 1957 can give . us a clue to the value of the fortune, although even they cannot be decisive. But Michael Benedum, "King of the Wild-Catters," died in 1961 at the age of ninety-two and the probate of his will in Pittsburgh showed a net estate of $68,199,539, putting him only some 10 per
cent below Fortune's $75-$100 million range in which be appears. 4 I count this estimate a direct "hit," as holdings of this size can easily vary in value by 10 to 25 per cent from year to year, up or down.
Benedum left half his estate to the inevitable tax-evading foundation and after a number of specific bequests to relatives be left the residue to a nephew, Paul G. Benedum, who now ranks as a wealthy man of the lower ranks and directs the Benedum oil properties through his own holdings and those of the Benedum foundation. In passing, it may be noted that Benedum, as Fortune relates, had the amiable and rare habit of cutting younger and even menial employees in on some of his lucrative ventures; thus, a chauffeur who looked for no more than a steady $50 per week was so favored and predeceased his benefactor worth some $17 million.
Arthur Vining Davis, former head of the Mellons' Aluminum Corporation of America, died in 1962. The press report of his will played back the Fortune estimate of $400 million on his wealth,5 but the probate showed that Fortune had missed wildly on this one; it was too high by about 370 per cent. 6 The actual size of the Davis estate was $86,629,282. 83, not including $5 million of Cuban property. As there is no record of early Davis gifts large enough to have ever put him in the $400- to $700-million class of wealth-holder, on this one Fortune must be debited with a very bad miss.
There is no public evidence to justify such a high estimate by Fortune. As of December 11, 1939, according to a Securities and Exchange Commission study (TNEC study, Monograph No. 29, to be cited later), Mr. Davis owned 11. 4 per cent of Aluminum Company of America common and a brother owned . 96 per cent. Mr. Davis also owned 5. 41 per cent of the cumulative preferred. At-the 54-3/4 close for 1962 a block of 12 per cent of Aluminum common then outstanding was worth $140,397,615; 5. 5 per cent of the preferred was worth $3,128,547 at the year's high.
At the record high of 133-1/2 in 1956, 12 per cent of Aluminum was worth $329,262,364.
This block of stock never could have put Davis into the $400- to $700-million class even in a momentary market flurry. As it was, he had obviously sold much of it at lower levels or transferred it to others off the record. He could not have sold at or anywhere near its high point because then the proceeds exceeding $300 million would have been in his estate; he was too old at the time to divest himself of any by gift under the provisions of the tax code.
The Davis will, after assigning $1 million and his home to his secretary, divided the estate into 100 shares. Of these, 50 were put into a public trust with the First National Bank of Miami, a nephew among the co-trustees; 25 were put into a public trust with the Mellon National Bank and Trust Company of Pittsburgh, the nephew and a son-in- law among the trustees. Ten shares went to the heirs of a deceased brother, 10 shares to a stepdaughter and 5 shares were set aside for inheritance taxes. Thus, 75 per cent of the estate escaped taxes. The tax-free income of the trusts was broadly designated for the usual charities and scientific, educational and religious work But the trustees, like those of many similar establishments, will continue to exercise the corporate voting power of the Davis holdings, which is what counts. Davis thus passed his financial power, diminished only by an overall tax of 5 per cent, on to his relatives.
In 1952 Davis had established another foundation, the Arthur Vining Davis Foundation, which, according to the Foundation Directory, 1964, at the end of 1961 had assets of only $1,379,672. So no earlier Davis wealth of substantial proportions appears to have escaped notice.
A report is not yet available on the estate of Herman Brown of the construction firm of Brown and Root, Inc. , of Dallas, who died in 1962.
Charles F. Kettering, research director of General Motors, died in 1958 and left an estate "conservatively" estimated at a little more than $200 million but no inventory was cited. " The bulk went to the Charles F. Kettering Foundation and a trust. At the end of 1962 the Foundation had assets of $72,020,128, according to the Foundation Directory; and as Kettering in his lifetime placed large sums for medical research, there seems no reason to question seriously the Fortune rating of the $200-million range. (One of the surer ways of spotting truly big wealth is that it shows itself in huge public transfers of assets during the lifetime of the owner. )
Alfred P. Sloan, Jr. , also appears to be justifiably rated. By the end of 1962 Sloan had conveyed to the Alfred P. Sloan Foundation assets then worth $222,715,014 at the market. Charles Stewart Mott, also of General Motors, had at the end of 1960 put assets worth $76,754,317 into a foundation bearing his name. The John L. Pratt Foundation of Fredericksburg, Virginia, however, at the end of 1962 had assets of only $88,753. But this structure can be looked upon as a prepared financial tomb to receive a large portion of the Pratt fortune, ,which can be tentatively accepted as close to or in the range laid out by Fortune.
It is evident that the Fortune estimates as checked against available probates show extremely wide variations, approximately correct at times but at other times far off the mark. It would, in fact, be remarkable if Fortune had found an unofficial way to being even approximately correct in all cases.
Ambiguity of the New Wealth
Additionally, one must notice that much of this "new money" is concentrated in real estate, promotional effort and uncertain oil prospecting. The owner of real estate or of oil-producing land holds something not readily translated into dollars. The independent oil prospector is subject to price fluctations, curtailment of politically arranged tax privileges and, in many parts of the world, confiscation. In any event, his wealth consists largely of estimated below-ground reserves, which may be erroneous. The real estate operator, in order to cash in, must find for his properties buyers, who are relatively scarce; and often the big realty operator is sitting on a slippery cushion of bank loans and mortgages. His own equity is seldom as imposing as the facades of his properties.
Few men on the list are in manufacturing or banking, where there is not only solid evidence of what an enterprise is worth but where the heavy money is found. And even big oil operators fall on evil days. Glenn McCarthy, who in 1949 threw open the Shamrock Hotel of Houston to a less-than-astounded world and who is more recently financially in an ambiguous position, is a case in point. Hence I would place a question mark after the name of nearly every independent oil prospector on this list with respect to the rated extent of his wealth. I do this for two reasons: Most of them own purely private companies and few publish balance sheets and income statements. Those that do, such as Murchison's Delhi-Taylor Oil Corporation, have years of deficit operations alternating with profitable years. What nonfinancial observers do is to look at a heap of assets, usually no more than leases and land concessions, and put some figure on the heap. They do not take into consideration offsetting liabilities--cost of leases, drilling equipment, political contributions and the like. This is not to deny that the oil men mentioned are wealthy in varying degrees.
Nor is this a point made in passing. The issue underlying my remarks is this: Are large fortunes, solidly comparable in size to the inherited fortunes, still being made in profusion by free-as-air rugged entrepreneurs in the American economy? Fortune, the
Wall Street Journal and most newspapers that follow the "party line" laid down by these over-arching publications say "Yes. " I say, most respectfully, "No. " In the upshot, the reader can make his own choice.
We have already seen that Arthur Vining Davis drops like the proverbial plummet from Fortune's $400-million class to the $86-million class in probate autopsy and I venture to say that most of the independent oil operators will, when they throw in their final hands, show similar downward variations from ebullient outside estimates. But I incline to keep Jacob Blaustein pretty much in the position Fortune assigned him because be is a full-scale operator, is high in national political councils and is a known big stockholder of the muscular Standard Oil Company of Indiana--a solid, old-line Rockefeller enterprise.
The J. Paul Getty Story
J. Paul Getty may be worth less than Fortune rates him, but Getty does not belong to the list of new wealth. Getty himself provides this information as well as his own comments on the Fortune estimate. As wealthy people seldom contribute to the discussion of their affairs, Getty's action was most unusual.
Getty, incidentally, was scarcely known except to business associates until the Fortune article appeared, crowning him the world's richest man. "Illustrative of the extent to which I had been able to maintain my anonymity through the years," Getty writes in his memoirs, "was a chance encounter with a former classmate I had not seen since my undergraduate days at the University of California at Berkeley. Meeting accidentally on a Los Angeles street in 1950, we recognized each other and stopped to reminisce for a few moments. 'By the way, Paul,' my former schoolmate asked me at one point in our conversation, 'who are you working for these days? '"8
Right after the article appeared, Getty relates, he became a sitting duck for a parade of interviewers, cranks, money-seekers and spongers.
As to the source of his wealth, Getty writes, his father died in 1930, worth $15,478,137. As early as 1916 the elder Getty was a millionaire oil prospector. He left the bulk of his estate to his wife but by 1916 he had entered into a 70-30 partnership with his son, allotting the latter, gratis, 300 of 1,000 newly issued shares of the Getty Oil Company. By the terms of his father's will Getty got only $500,000; "but I had no real need for more money; I had several millions of my own. "9 He owned, in fact, more than 30 per cent of Getty Oil.
Getty, in brief, is an inheritor. The son of a wealthy oil operator, he completed his formal education at Oxford University before World War I and was brought in on the ground floor as a junior partner of a going business where he did well.
In 1930 Getty was elected vice president and general manager of George F. Getty, Inc. , but the controlling interest remained with his mother and former associates of the elder Getty. Young Getty, in order to protect the company's position, urged the acquisition of additional shares of companies in which the Gettys already had interests, but his elderly associates held back and young Getty went ahead on his own account. He first bought 160,000 shares of Pacific Western Oil Company at $7 a share: $1,120,000. He next started buying Tidewater Associated Oil Company in the open market at $2. 50 a share, depression-low prices, and acquired 285,004 shares for $923,285. 30 or an average price of $3. 59. 10
Getty, schooled by his father to reach only for aces, was out to get control of Tidewater. He found himself blocked by the powerful Standard Oil Company of New
Jersey but, with some unexpected luck, delicately outfenced this giant and finally got control of Tidewater and the Mission Corporation, which the New Jersey company had formed to hold its own Tidewater stock. He also picked up at bargain prices the Hotel Pierre in New York, and the Skelly Oil Company, which owned the Spartan Aircraft Company. In the meantime his mother had assigned her Getty shares to a trust for her grandchildren, with J. Paul Getty as sole trustee.
In 1963 Getty, after accepting Getty oil stock for his various independent holdings, held 12,570,939 shares of the Getty Oil Company, which now owns all or nearly all of Tidewater, Mission, Mexican Seaboard, Skelly and a good many others. 11 These shares in the same year, by the company's audited computation had a net tangible underlying value of $31. 21. This single holding alone, then, was solidly worth $392,339,006. 19 and is only part of the family holding. By late 1967 the market value of J. Paul Getty's Getty Oil holding's had advanced to around $1 billion $200 million.
As Getty personally has always liked to stand free and clear of banks, one may suppose none of it is up for collateral against hidden loans. Add here and there any stray properties Getty may own, consider that he has made. provisions for his sons and grandchildren going beyond those of his mother's trust fund, and one sees looming before one an authentic very large fortune, new in its latter-day magnitude at least, although not in its origin. Aside from the Sloan, Kettering, Pratt and Mott General Motors fortunes, all post-1918 jobs, it is one of the few so-called new big ones we can accept without demur (other than denying it is new) from the Fortune list. Had Getty not had money and insight provided by his father he could not have picked up these companies.
Getty, commenting on his elevation to hyperbolic billionaire status, said "there is no such thing as a billionaire among active businessmen, not in the sense that most people would understand the term, An individual may own or control business enterprises worth a billion dollars or even more, but little of his rated wealth is available to him in cash. A millionaire or billionaire does not have his millions on deposit in his personal checking account. The money is invested in his businesses.
"It is impossible for him to know what his investments are really worth at any given time. The values of a businessman's holdings fluctuate greatly. The price of stocks may rise or fall, corporations may show major increases or decreases in their net worth, innumerable variables may multiply the value of an investment or wipe it out completely. "12
Getty's entire life has been subdued in pitch. He went to school quietly--first to the University of Southern California, later to the University of California and then to Oxford. He traveled the world quietly, went into business with his father quietly and later bought large amounts of stock very cheaply--and quietly. He was married quietly seven times and as quietly divorced, with no hint of scandal. In his memoirs he quietly takes the blame for his marital failures and speaks with quiet commendation of his various wives. He appears to have quietly evaded politics and politicians at all times. In more recent years he has lived quietly in the baronial halls of Sutton Place, his English manor house, and will one day no doubt die quietly and quietly leave his swollen fortune to foundations and to his four sons and many grandchildren. Getty, beyond doubt, has been the all-time ghostly atypical presence in the procession of American wealth. When he speaks--and he has been interviewed on TV--he speaks, yes, very quietly.
H. L. Hunt and the Politics of Oil
Haroldson L. Hunt, No. 2 on Fortune's list, has been variously estimated as worth $250 million to $3 billion. 13 Forced to choose, I'd incline toward the lower figure; Fortune pegged him at $400-$700 million, leaving a good deal of leeway, But Hunt's fortune, like that of all the oil prospectors, rests literally in the sands and in money- inflamed politics, domestic and foreign. He no doubt holds a good hand, but one may doubt that it harbors a royal flush.
Hunt, a small-town cracker-barrel philosopher (in this aspect very much resembling the late Andrew Carnegie and Henry Ford) and overburdened with wildcatted possessions beyond his own wildest, wildcatting dreams, first came to national political notice during the 1950's (much as Henry Ford did in the early 1920's) as a rabble- rousing propagandist for hard-nosed right-wing political points of view. For Hunt takes seriously what he has heard around the town cracker-barrel. The violence of the diatribes in his subsidized radio programs--carried to 331 cracker-barrel stations--led many observers to see them as having at least helped nurture the mood for the assassination of President Kennedy. The programs, seeming overtures to schrecklichkeit, are prepared and taped by a stable of about twenty-five henchmen Hunt maintains in Washington, D. C. In general, views blandishing to the Ku Klux mentality are broadcast. 14
On the very morning of President Kennedy's assassination--in Texas--the Hunt radio program in Dallas and other areas predicted pessimistically that a day was soon coming when American citizens would not be allowed to own firearms with which they could oppose their rulers, an important function of red-blooded free citizens in the cracker- barrel point of view. Of a communist society (thought by cracker-barrel pundits to be imminent in the United States) the Hunt commentator said forebodingly: "No firearms are permitted the people because they would then have the weapons with which to rise up against their oppressors. "
Hunt staged his alarmist programs through a series of incestuous foundations--Facts Forum, Inc. , the Life Line Foundation and Bright Star Foundation, none of which is listed in the very complete Foundation Directory, 1964, issued by the Russell Sage Foundation. Until early 1965 (after the assassination of President Kennedy: that is), despite many strongly sponsored protests, Hunt seemed to have mysterious and powerful friends in or behind the Internal Revenue Service, which granted these propaganda foundations complete tax exemption. The Life Line Foundation originally got tax exemption as a religious organization! To his fingertips the pecuniary man as well as cracker-barrel philosopher, Hunt further improved his position by soliciting business donations for his foundations and giving his own food and patent-medicine companies reduced advertising rates on his radio programs. For H. L. Hunt believes in killing whole flocks of birds with a single stone.
One of Hunt's many immortal quoted sayings is: "Everything I do, I do for a profit. "
There is also the H. L. Hunt Foundation, founded in 1954, a financially anemic affair with assets at the end of 1961 of only $799,553, according to the Foundation Directory, and which in that year made charitable grants of a stupendous $17,500. No doubt it is this lithe creation that is destined to receive and immortalize any portion of Hunt holdings in flight from inheritance taxes.
Although Hunt--silver haired, soft-spoken, frugal, a food faddist-is very rich, few people are able to say they have ever seen the color of his money. He has never been known to contribute in the presence of witnesses more than $250 to $500 to any single political candidate; and in 1956 he gave the Republican Party, over the counter, a mere $38,000. In 1952 the Republicans tried to entice $300,000 from him, but Hunt came up
with only $5,000--this, at least, is according to the public role of penny-pincher that he plays.
But owing to the vastness of his landholdings, sprawling over the Southwest and the Middle East, and his seemingly uncanny ability to obtain high-level political chaperonage at crucial moments, realistic observers surmise that Hunt is passing out large sums under the table. "He must have a front man he spreads his money through," hostile Senator Ralph Yarborough of Texas has said. "A man with that kind of bank roll is bound to have. "
It is rumored in Texas, according to the New York Times (August 17, 1964), that Hunt put up $150,000 to get General Douglas MacArthur the Republican presidential nomination in 1952 and that he put up $100,000 for the Kennedy-Johnson ticket in 1960 owing to his longstanding friendship with Lyndon B. Johnson. Booth Mooney, the Hunt public relations man in Washington, wrote the authorized The Lyndon Johnson Story in 1956, updated in 1964; and Lyndon Johnson is an old friend of the oil depletion allowance as well as of Hunt. Although Senator Barry Goldwater in 1964 stood forthrightly for straight Hunt political wisdom, Hunt testily denied that he was supporting Goldwater against the old Huntsman, L. B. J.
One must agree with Senator Yarborough that Hunt and other Texas oil men are passing money (or some equivalent) to political figures. If they didn't, they wouldn't have the depletion allowance, ostensibly passed as a defense measure to stimulate the search for oil but also serving the useful function of providing a politician's entering siphon into the oil Golconda. There might instead be a special high tax on oil!
Here we touch the edge of a problem: Why, if the independent oil men are so favored by nature and politicians, do they show this political rancor? True, not all the oil men are so perturbed as Hunt and some others, who apparently feel that their easy-come wealth could as easily be whisked away; many of the more realistic, less anxiety-prone Texas oil crowd speak of themselves as just plain lucky and see no need for making the world safe for future wildcatters.
But H. L. Hunt is an expression in exaggerated form of the irritation and resulting apparent meanness of many oil independents, even though most oil men appear to regard him as more than a little kooky. What produces this irritation? There is, first, the annual tax bill. Some of the successful oil men write annual checks for the Internal Revenue Service in amounts that would stagger the ordinary man. And most of the oil men are ordinary men who early in their lives worked long hours for small wages. The men who write these checks still think in terms of the original $20-a-week roustabout. And while it is frequently said that one wouldn't mind writing big tax checks if one had the big incomes, to have worked in one's early life on the supposition that what one acquired one could keep and then to learn after hitting it big that one must share to some extent with the government--or politicians--is more than some persons can swallow gracefully. Some of the oil men, Hunt included, feel very much the way a man earning $60 a week would feel if he was told the withholding tax was to be $50. They just aren't psychically attuned to their new positions. On top of the tax bite, very much softened by the depletion allowance and drilling write-off, the oil men find they must share what is no doubt a good part of the depletion benefits with hungry politicians in the form of "campaign contributions. " And for these political contributions they feel the politicians ought to deliver more. The politicians, to extenuate their less than totalitarian success, no doubt report that there are various obstacles in the form of Liberalism, Communism, Socialism, Eastern Capitalists, Labor Unions, Welfarism and a world full of Wrong- Thinking People all the way from college professors and journalists to Supreme Court justices. The enormity of it all, the injustice of all these misguided people stirring a
witch's brew with which to annoy Horatio Alger's own darling boys out on the oil frontier, finally becomes more than human flesh--or at least H. L. Hunt's flesh--can stand.
Hunt has seen it all at first-hand, indeed. He has regularly attended the national conventions of both parties, keeping his ears close to the ground, his eyes sharp and his nose clean for any whiff of Godless un-Americanism. And there is, as God only knows, much of it around, in the very Constitution itself!
There is, too, the milieu of Texas as a force shaping Texas consciousness. For Texas has very much the economic and political status of a colony, as also have many far less bustling western states. In the words of Senator Wilbert (Pappy) Lee O'Daniel, Texas is "New York's most valuable foreign possession. "
The widely traveled John Gunther in 1947 found that "Texas reminded me a good deal of Argentina . . . cattle culture, absentee ownership, vast land holdings by semifeudal barons, a great preoccupation with weather, an under-developed middle class, interminable flatness and open spaces, and fierce political partisanship and nationalism. And . . . reaction closely paralleling that of Argentina. " 15
Most of the state is in fact absentee-owned by big eastern capital. The largest enterprise in the state is the Humble Oil and Refining Company, subsidiary of the global Standard Oil Company of New Jersey, the annual gross revenue of which exceeds the combined revenues of thirty state governments--$11. 471 billion versus $11. 375 billion in 19,65. The operations of the huge eastern enterprises--Du Pont, U. S. Steel, General Motors, Dow Chemical and various others--are splattered right and left. And many of the prominent men in the state, Hunt included, originate elsewhere, are in effect colonial concessionaires. Many Texas oil men are not native Texans at all.
With a thin layer of native wealthy and imported representatives of big corporations at the top, bellowing the glories of Texas in history and contemporary culture, most Texans find themselves somewhat dazedly in the low-income classes, dirt poor--in fact, colons. Gunther was told in Texas that twenty corporations ran the state, but he thought this exaggerated. I don't think so. At least, the rank and file colons, many close to peons, do not run it--and they know it.
Texas boastfulness, free-swinging behavior and loud talk about independence of spirit are all a compensatory reflex to the feeling, deep in many Texans, that they are dusty puppets manipulated from outside.
The Constitution of the United States bars the bestowal of titles of nobility. But in many ways it would clear up much that is now obscure if titles were allowed. Not only would they show, automatically, to whom deference was due as a right but they would publicly distinguish those who held continuing hereditary power from people who are merely temporarily voted in or appointed for limited terms. The chroniclers of High Society-that is, the circles of wealth--recognize this need and, in order to show hereditary status and family position, they allude to males in the line of descent by number, as in the case of royal dynasties. Thus in the English branch of the Astor family there is a John Jacob Astor VII. 45 But there are also George F. Baker III, August Belmont IV, William Bird III, Joseph H. Choate III, Ire? ne? e and Pierre du Pont III, Marshall Field V, Potter Palmer III, John D. Rockefeller IV, Cornelius Vanderbilt V and so on. 46
It is names such as these that would properly be found in an American Almanach de Gotha.
Two
ROOM AT THE TOP: THE NEW RICH
Were it not for the miscellaneous batch of hard-bitten, shirt-sleeved Texas oil-lease speculators and wildcatters that since World War I has risen on a tide of special tax privileges like science-fiction dinosaurs, it could well be said that the day of accumulating gargantuan new personal fortunes in the United States is just about ended; this leaves the tubbed, scrubbed, and public-relations-anointed inheritors of the nineteenth-century money scramble holding most of the chips. As it is, fortune-building continues--albeit at a greatly subdued pace outside the lushly flowing oil industry. For just about everything else of marketable value is tightly vaulted down, much of it resting comfortably in trust. But even in the oil industry, magnitudes are exaggerated, Texas-style, by writers who desire to bedazzle readers with a modern if oil-soaked Arabian Nights tale.
New personal wealth is dealt with in this chapter-that is, great individual wealth that has shown itself since World War I and, more particularly, since World War II. For the most part it is wealth not known to Gustavus Myers, historian of the first waves of American fortunes and, partly because of the give-away oil depletion allowance, it postdates America's Sixty Families (1937). Classification of these new fortunes with respect to wealth and super-wealth and their comparison with the old fortunes are deferred until Chapter IV.
Actually, before larger sums are bandied about in these pages, let it be noted that a person worth only $10 million (insignificant though $10 million is compared with many modern fortunes) is very, very wealthy indeed. If a prudent, hardworking, God-fearing, home-loving 100 per cent American saved $100,000 a year after taxes and expenses it would take him a full century to accumulate such a sum. A self-incorporated film star who earned 81 million a year and paid a 10 per cent agent's fee, 10 per cent in business expenses, a rounded 50 per cent corporation tax on the net and then withdrew $100,000 for his own use (on which he also paid about 50 per cent tax) would need to be a box- office rage for thirty-four unbroken years before he could save $10 million. Yet some men do acquire such sums--and much more. But never by offering mere talent, whatever it is, in a free market. Even the most talented bank robbers or kidnappers have never approached such an accumulation before being laid low by the eager gendarmerie.
The incandescent Marilyn Monroe, as big as they come in filmdom and a veritable box office Golconda, died broke-an old story with the mothlike entertainers and professional athletes. She bequeathed 81 million to friends but, despite posthumous earnings of $800,000 accruing to her estate, nothing was left after taxes and creditors' claims. Clearly she was in need of a tax lawyer. There was even nothing left to establish a trust fund to generate a paltry $5,000 a year for her invalid mother. Yet Miss Monroe, obviously a true-blue American, reportedly drew $200 million to the box office from 1950 to 1963. 1 More recent reports indicate that something was salvaged for her mother.
Hard to get, $10 million shows its power in another way. If invested in tax-exempt securities it can generate about $250,000 a year. Now if the owner exercises initial frugality and invests this income similarly each year, it will produce $6,250 the first year and (disregarding compound interest all along) $12,500 the second year, $18, 750 the third year, $25,000 the fourth year and so on, In the tenth year the income of the accumulated income of the original $10 million Will be $62,500 on a new capital sum of $2. 5 million, which automatically doubles itself every ten years. The owner might
even do a bit better by investing in taxable securities and paying taxes, particularly on the second accumulation, but I have focused on tax-exempt securities in order to keep to the simplest terms. Yet the ordinary man on his 4 or 5 per cent in the savings bank must pay full taxes. This sort of accumulating on the income of the income, thus generating new capital sums, has long been the investment style of old Boston and Philadelphia families. Careful to a fault, they own only small yachts, drive only old (but well- maintained) cars and are accustomed to wear old but expensive clothes of the first class so that they look quaintly dowdy. And they intermarry with old families, unfailingly. They are people who would rather study the fine engraving on a stock certificate than the brush strokes of an old master. They are, in short, respectably, unobtrusively rich.
How the sizes of new fortunes were obtained will appear in the text. The Most conservative available figures are used throughout and are critically evaluated. For precise figures it would be necessary to get certified copies of net worth, which (not being voluntarily proffered ) could be obtained only in the unlikely event of a congressional subpoena with the acquiescence of the Supreme Court. The sacred right to privacy is used to screen the dimensions of great wealth, although privacy becomes expendable when young men are summoned into the armed forces for "police" duty at coolie pay and are unceremoniously ordered to strip naked for minute scrutiny and examination. And if subpoenaed the figures might not be even momentarily accurate because, owing to the undeveloped state of a part of many large holdings, the owners themselves honestly don't know how much, at going market prices, they are worth. Seeking such accuracy in the figures amounts to committing the fallacy of misplaced precision. 2
The Fortune Study
Fortune, stepping into the data vacuum decreed by a delicately sensitive Congress, has given us the latest pre? cis on the largest individual contemporary fortunes. 3 Beginning our exposition with it and selecting only the relative newcomers, we find that with few exceptions the newer fortunes rose on the basis of oil and its generous depletion allowances, and upper executive position in General Motors Corporation.
Fortune assumed, reasonably enough, that an income of $1 million or more per year (some incomes range much higher--up to perhaps $25 to $50 million) might suggest asset-holdings of at least $50 million. But some large incomes are nonrepetitive, derive from unloading assets (which might have been procured very cheaply) at a large profit; they are not the same as continuing incomes from investments. The incomes swollen by relieving oneself of assets at higher prices (capital gains) are reflected in boom times in the sharp rise in million-dollar incomes-- from 49 in 1940 to 398 in 1961. But no steady million-dollar incomes at all blossom from the sale of services or talent; not even the most extravagantly rewarded executives or film stars pick up that much in straight across-the-board pay.
The point of departure for Fortune was a Treasury official's estimate that in 1957 there were between 150 and 500 $50-million-plus asset-holders; there were actually 223 incomes of $1 million-plus, according to the Treasury's subsequently published Statistics of Income: 1957 (p. 20). Fortune to its own satisfaction identified 155 of them by name. Of this group it published the names of half, the ones thought to possess assets of $75 million upward, and gave estimates of their net worth in broad ranges. Fortune also named a few other steady big-income beneficiaries at random in its text, outside its list, giving no reason for this deviation. The list, confined to then living people, did not name all the big post-1918 fortunes, although here and there some persons who had
recently died were mentioned. Some such fortunes omitted from the Fortune list will be mentioned further along.
Before scanning the Fortune list and then noting qualifications of it, the reader will be better prepared if he ponders over the tables in Appendix A that provide a broad statistical background since 1940 on the larger incomes and lay the ground for some incisive observations. In the upper brackets at least, these income recipients abstractly impaled like skeletal insects in the tables are unquestionably included among Lampman's 1. 6 per cent of adults that compose American wealth-holders. No doubt the Fortune list in its entirety, with some additions to be supplied, represents a part of the moneyed elite of the Lampman higher strata. But in the group of Appendix A incomes below $100,000 or so, many are only those of potential wealth-holders--for the simple reason that they are from salaries.
Property and Politics
Nonetheless the varying totals shown in Appendix A of incomes in excess of $25,000--numbering 49,806 in 1940 and 626,997 in 1961--certainly represent the cream of the take in the American svstem. This is not a large group and, in relation to a population of nearly 260 million, of which more than half are adults, it is not any different in relative size from the small group of tight-fisted landowners found in Latin American countries or from the Communist Party of Soviet Russia.
In order to participate in politics in the Soviet Union one must be a member of the Communist Party. This is a formal condition. Similarly, in order to participate meanirtgfully in politics in the United States one must be a property owner. This is not a formal requirement; formally anyone may participate. But, informally, participation beyond voting for alternate preselected candidates is so difficult for the nonpropertied as to be, in effect, impossible. The nonpropertied person in the United States who wishes to attain and hold a position of leverage in politics must quickly become a property owner. And this is one reason why unendowed budding American politicians, not being property owners, must find or create opportunities (legal or illegal) for themselves to acquire property. Without it they are naked to the first wind of partisan adversity and gratuitous public spitefulness.
Politically the nonpropertied carry little efficient influence in the United States--that is, they have at best only marginal individual leverage--which is not the same as saying that all property owners participate in politics. But, when all the chips are down, these latter rule or significantly modify the situation in committee rooms and cloakrooms, directly or through amply rewarded intermediaries, In the United States the ownership of property, often evidenced by possession of a credit card, gives the same personal amplitude that possession of a party, card confers in Soviet Russia.
Although different, the political systems of Soviet Russia and the United States are not basically so different as widely supposed. The United States can be looked upon as having, in effect, a single party: the Property Party. This party can be looked upon as having two subdivisions: the Republican Party, hostile to accommodating adjustments (hence dubbed "Conservative"), and the Democratic Party, of recent decades favoring such adjustments (hence dubbed "Liberal"). The big reason third parties have come to naught--a puzzle to some political scientists--is simiply that no substantial group of property owners has seen fit to underwrite one. There is no Anti-Property Party.
BIG NEW WEALTH-HOLDERS
Stated Net Financial Age
Worth Activity in
Name
Schooling
1. J. Paul Getty
Oxford (A. B. )
(Los Angeles)
2. H. L. Hunt
grade
(Dallas)
(millions)
$700-$1,000
$400-$700
1957
Integrated oil 65
companies
3. Arthur Vining Davis ditto
Amherst (A. B. )
(deceased 1962)
4. Joseph P. Kennedy $200-$400
Harvard (A. B. )
Alcoa executive 90
Market operator 69
Ship operator 60
(Boston)
5. Daniel K. Ludwig
Public school
(New York)
6. Sid Richardson*
college
(deceased 1959)
ditto
ditto
Oil operator
60+ Some
7. Alfred P. Sloan, Jr. ditto
M. I. T.
(New York)
8. James Abercrombie* $100-$200
(Houston)
General Motors executive 82
9. Stephen Bechtel
college
(San Francisco)
10. William Blakley*
(Dallas)
11. Jacob Blaustein
college
(Baltimore)
12. Clarence Dillon
Harvard (A. B. )
(New York)
13. William Keck*
(Los Angeles)
14. Charles Kettering
State
(deceased 1959)
ditto
ditto ditto
ditto
ditto ditto
Oil operator
Public construction
57 Some
15. William L. McKnight ditto
Public school
(St. Paul)
Railway Express and airlines
Integrated oil companies 65 Some
Investment banker 75
Oil operator
General Motors executive 81 Ohio
Minnesota Mining and 70
Manufacturing Co.
Oil operator
67 Fifth
16. John Mecom ditto
college
(Houston)
17. C. W. Murchison ditto
college
(Dallas)
18. John L. Pratt* ditto
(Fredericksburg)
19. R. E. Smith* ditto
(Houston)
20. Michael Benedum $75-$100
Public school
(deceased 1961)
21. Donaldson Brown ditto
Virginia
(Baltimore)
Polytechnic
tute
22. George R. Brown ditto
college
(Houston)
23. Herman Brown ditto
college
(deceased 1962)
24. James A. Chapman* ditto
(Tulsa)
25. Leo Corrigan ditto
Public school
(Dallas)
26. Erle F. Halliburton*
(Duncan, Oklahoma)
27. Henry J. Kaiser ditto
Public school
(Oakland)
28. John W. Kicckhefer ditto
(Milwaukee)
29. John E. Mabee* ditto
(Tulsa)
30. John D. MacArthur ditto
Public school
(Chicago)
31. H. H. Meadows ditto
school
(Dallas)
Oil operator
Oil operator
45 Some
62 Some
General Motors executive
Oil operator
Oil operator 88
General Motors 72
and Du Pont executive
Public construction
Public construction
Oil operator
Insti 59 Some
65 Some
Real estate and 63
hotel operation
Oil well equipment
Public construction 75
Paper, containers
Oil operations
Insurance promotion 60
Oil operator
58 Law
32. Charles S. Mott
Stevens Institute
(Flint)
Technology
33. James Sottile, Jr.
Public school
(Miami)
34. George W. Strake*
(Texas)
35. Louis Wolfson
college
ditto General Motors exec. 82
of
ditto Banking 44
ditto Oil operations
ditto Financial operator 45 Some
New York)
*Not listed in Who's Who 1956-57, 1964-65.
In general, American politics are not nearly so brusque, arbitrary and doctrinaire as Russian politics. But those carried away by the lullaby of American democracy should consult the harsh experience of the Negro and other repressed groups in the American system. There matters begin to take on a distinctly Russian complexion.
As to the sources of the big incomes (those above $500,000 and over $1 million), Appendix A shows that the aggregate received in this category includes comparatively little in salaries or partnership profits. Receipts in the form of dividends and capital gains, interest and other forms of property return, were comparatively colossal. The 398 persons in the $1 million-plus income class in 1961, for example, took only $18,607,000 in salaries, an average of $46,753, and $10,503,000 in partnership profits but took $259,574,000 in dividends, $434,272,000 in capital gains, $8,754,000 in interest, $3,163,000 from trust funds (not including capital gains from such) and $2,371,000 from rents and royalties. The group as a whole also absorbed $7,915,000 of business loss, more than offset by the interest it received. This, in brief, is not a group of workers even of the upper executive class, and the same holds true of the $500,000- $1,000,000 group of income recipients.
Fortune differentiated between inherited and personally assembled wealth. We will leave the inheritors for Chapter IV; examined above is the Fortune list of the new big wealth-holders, thirty-five in number.
Left off the Fortune list but referred to in its text were Dr. Martin Miller, New Orleans surgeon, with a reported annual income of $7-$8 million from oil royalties; E. V. Richards, New Orleans real estate operator estimated by Fortune to be worth $50-$100 million; and Matilda Geddings Gray of New Orleans, who inherited an oil fortune of unstated present value from her father. Fortune also mentioned a sprinkling of new names in the $50-million bracket, but these persons need not detain us here.
Revision of the List
Under critical analysis, this list requires some pruning and rearranging, both with respect to the number of inclusions among the new big rich and to estimated size of holdings.
Only the probates of estates of those who have died since 1957 can give . us a clue to the value of the fortune, although even they cannot be decisive. But Michael Benedum, "King of the Wild-Catters," died in 1961 at the age of ninety-two and the probate of his will in Pittsburgh showed a net estate of $68,199,539, putting him only some 10 per
cent below Fortune's $75-$100 million range in which be appears. 4 I count this estimate a direct "hit," as holdings of this size can easily vary in value by 10 to 25 per cent from year to year, up or down.
Benedum left half his estate to the inevitable tax-evading foundation and after a number of specific bequests to relatives be left the residue to a nephew, Paul G. Benedum, who now ranks as a wealthy man of the lower ranks and directs the Benedum oil properties through his own holdings and those of the Benedum foundation. In passing, it may be noted that Benedum, as Fortune relates, had the amiable and rare habit of cutting younger and even menial employees in on some of his lucrative ventures; thus, a chauffeur who looked for no more than a steady $50 per week was so favored and predeceased his benefactor worth some $17 million.
Arthur Vining Davis, former head of the Mellons' Aluminum Corporation of America, died in 1962. The press report of his will played back the Fortune estimate of $400 million on his wealth,5 but the probate showed that Fortune had missed wildly on this one; it was too high by about 370 per cent. 6 The actual size of the Davis estate was $86,629,282. 83, not including $5 million of Cuban property. As there is no record of early Davis gifts large enough to have ever put him in the $400- to $700-million class of wealth-holder, on this one Fortune must be debited with a very bad miss.
There is no public evidence to justify such a high estimate by Fortune. As of December 11, 1939, according to a Securities and Exchange Commission study (TNEC study, Monograph No. 29, to be cited later), Mr. Davis owned 11. 4 per cent of Aluminum Company of America common and a brother owned . 96 per cent. Mr. Davis also owned 5. 41 per cent of the cumulative preferred. At-the 54-3/4 close for 1962 a block of 12 per cent of Aluminum common then outstanding was worth $140,397,615; 5. 5 per cent of the preferred was worth $3,128,547 at the year's high.
At the record high of 133-1/2 in 1956, 12 per cent of Aluminum was worth $329,262,364.
This block of stock never could have put Davis into the $400- to $700-million class even in a momentary market flurry. As it was, he had obviously sold much of it at lower levels or transferred it to others off the record. He could not have sold at or anywhere near its high point because then the proceeds exceeding $300 million would have been in his estate; he was too old at the time to divest himself of any by gift under the provisions of the tax code.
The Davis will, after assigning $1 million and his home to his secretary, divided the estate into 100 shares. Of these, 50 were put into a public trust with the First National Bank of Miami, a nephew among the co-trustees; 25 were put into a public trust with the Mellon National Bank and Trust Company of Pittsburgh, the nephew and a son-in- law among the trustees. Ten shares went to the heirs of a deceased brother, 10 shares to a stepdaughter and 5 shares were set aside for inheritance taxes. Thus, 75 per cent of the estate escaped taxes. The tax-free income of the trusts was broadly designated for the usual charities and scientific, educational and religious work But the trustees, like those of many similar establishments, will continue to exercise the corporate voting power of the Davis holdings, which is what counts. Davis thus passed his financial power, diminished only by an overall tax of 5 per cent, on to his relatives.
In 1952 Davis had established another foundation, the Arthur Vining Davis Foundation, which, according to the Foundation Directory, 1964, at the end of 1961 had assets of only $1,379,672. So no earlier Davis wealth of substantial proportions appears to have escaped notice.
A report is not yet available on the estate of Herman Brown of the construction firm of Brown and Root, Inc. , of Dallas, who died in 1962.
Charles F. Kettering, research director of General Motors, died in 1958 and left an estate "conservatively" estimated at a little more than $200 million but no inventory was cited. " The bulk went to the Charles F. Kettering Foundation and a trust. At the end of 1962 the Foundation had assets of $72,020,128, according to the Foundation Directory; and as Kettering in his lifetime placed large sums for medical research, there seems no reason to question seriously the Fortune rating of the $200-million range. (One of the surer ways of spotting truly big wealth is that it shows itself in huge public transfers of assets during the lifetime of the owner. )
Alfred P. Sloan, Jr. , also appears to be justifiably rated. By the end of 1962 Sloan had conveyed to the Alfred P. Sloan Foundation assets then worth $222,715,014 at the market. Charles Stewart Mott, also of General Motors, had at the end of 1960 put assets worth $76,754,317 into a foundation bearing his name. The John L. Pratt Foundation of Fredericksburg, Virginia, however, at the end of 1962 had assets of only $88,753. But this structure can be looked upon as a prepared financial tomb to receive a large portion of the Pratt fortune, ,which can be tentatively accepted as close to or in the range laid out by Fortune.
It is evident that the Fortune estimates as checked against available probates show extremely wide variations, approximately correct at times but at other times far off the mark. It would, in fact, be remarkable if Fortune had found an unofficial way to being even approximately correct in all cases.
Ambiguity of the New Wealth
Additionally, one must notice that much of this "new money" is concentrated in real estate, promotional effort and uncertain oil prospecting. The owner of real estate or of oil-producing land holds something not readily translated into dollars. The independent oil prospector is subject to price fluctations, curtailment of politically arranged tax privileges and, in many parts of the world, confiscation. In any event, his wealth consists largely of estimated below-ground reserves, which may be erroneous. The real estate operator, in order to cash in, must find for his properties buyers, who are relatively scarce; and often the big realty operator is sitting on a slippery cushion of bank loans and mortgages. His own equity is seldom as imposing as the facades of his properties.
Few men on the list are in manufacturing or banking, where there is not only solid evidence of what an enterprise is worth but where the heavy money is found. And even big oil operators fall on evil days. Glenn McCarthy, who in 1949 threw open the Shamrock Hotel of Houston to a less-than-astounded world and who is more recently financially in an ambiguous position, is a case in point. Hence I would place a question mark after the name of nearly every independent oil prospector on this list with respect to the rated extent of his wealth. I do this for two reasons: Most of them own purely private companies and few publish balance sheets and income statements. Those that do, such as Murchison's Delhi-Taylor Oil Corporation, have years of deficit operations alternating with profitable years. What nonfinancial observers do is to look at a heap of assets, usually no more than leases and land concessions, and put some figure on the heap. They do not take into consideration offsetting liabilities--cost of leases, drilling equipment, political contributions and the like. This is not to deny that the oil men mentioned are wealthy in varying degrees.
Nor is this a point made in passing. The issue underlying my remarks is this: Are large fortunes, solidly comparable in size to the inherited fortunes, still being made in profusion by free-as-air rugged entrepreneurs in the American economy? Fortune, the
Wall Street Journal and most newspapers that follow the "party line" laid down by these over-arching publications say "Yes. " I say, most respectfully, "No. " In the upshot, the reader can make his own choice.
We have already seen that Arthur Vining Davis drops like the proverbial plummet from Fortune's $400-million class to the $86-million class in probate autopsy and I venture to say that most of the independent oil operators will, when they throw in their final hands, show similar downward variations from ebullient outside estimates. But I incline to keep Jacob Blaustein pretty much in the position Fortune assigned him because be is a full-scale operator, is high in national political councils and is a known big stockholder of the muscular Standard Oil Company of Indiana--a solid, old-line Rockefeller enterprise.
The J. Paul Getty Story
J. Paul Getty may be worth less than Fortune rates him, but Getty does not belong to the list of new wealth. Getty himself provides this information as well as his own comments on the Fortune estimate. As wealthy people seldom contribute to the discussion of their affairs, Getty's action was most unusual.
Getty, incidentally, was scarcely known except to business associates until the Fortune article appeared, crowning him the world's richest man. "Illustrative of the extent to which I had been able to maintain my anonymity through the years," Getty writes in his memoirs, "was a chance encounter with a former classmate I had not seen since my undergraduate days at the University of California at Berkeley. Meeting accidentally on a Los Angeles street in 1950, we recognized each other and stopped to reminisce for a few moments. 'By the way, Paul,' my former schoolmate asked me at one point in our conversation, 'who are you working for these days? '"8
Right after the article appeared, Getty relates, he became a sitting duck for a parade of interviewers, cranks, money-seekers and spongers.
As to the source of his wealth, Getty writes, his father died in 1930, worth $15,478,137. As early as 1916 the elder Getty was a millionaire oil prospector. He left the bulk of his estate to his wife but by 1916 he had entered into a 70-30 partnership with his son, allotting the latter, gratis, 300 of 1,000 newly issued shares of the Getty Oil Company. By the terms of his father's will Getty got only $500,000; "but I had no real need for more money; I had several millions of my own. "9 He owned, in fact, more than 30 per cent of Getty Oil.
Getty, in brief, is an inheritor. The son of a wealthy oil operator, he completed his formal education at Oxford University before World War I and was brought in on the ground floor as a junior partner of a going business where he did well.
In 1930 Getty was elected vice president and general manager of George F. Getty, Inc. , but the controlling interest remained with his mother and former associates of the elder Getty. Young Getty, in order to protect the company's position, urged the acquisition of additional shares of companies in which the Gettys already had interests, but his elderly associates held back and young Getty went ahead on his own account. He first bought 160,000 shares of Pacific Western Oil Company at $7 a share: $1,120,000. He next started buying Tidewater Associated Oil Company in the open market at $2. 50 a share, depression-low prices, and acquired 285,004 shares for $923,285. 30 or an average price of $3. 59. 10
Getty, schooled by his father to reach only for aces, was out to get control of Tidewater. He found himself blocked by the powerful Standard Oil Company of New
Jersey but, with some unexpected luck, delicately outfenced this giant and finally got control of Tidewater and the Mission Corporation, which the New Jersey company had formed to hold its own Tidewater stock. He also picked up at bargain prices the Hotel Pierre in New York, and the Skelly Oil Company, which owned the Spartan Aircraft Company. In the meantime his mother had assigned her Getty shares to a trust for her grandchildren, with J. Paul Getty as sole trustee.
In 1963 Getty, after accepting Getty oil stock for his various independent holdings, held 12,570,939 shares of the Getty Oil Company, which now owns all or nearly all of Tidewater, Mission, Mexican Seaboard, Skelly and a good many others. 11 These shares in the same year, by the company's audited computation had a net tangible underlying value of $31. 21. This single holding alone, then, was solidly worth $392,339,006. 19 and is only part of the family holding. By late 1967 the market value of J. Paul Getty's Getty Oil holding's had advanced to around $1 billion $200 million.
As Getty personally has always liked to stand free and clear of banks, one may suppose none of it is up for collateral against hidden loans. Add here and there any stray properties Getty may own, consider that he has made. provisions for his sons and grandchildren going beyond those of his mother's trust fund, and one sees looming before one an authentic very large fortune, new in its latter-day magnitude at least, although not in its origin. Aside from the Sloan, Kettering, Pratt and Mott General Motors fortunes, all post-1918 jobs, it is one of the few so-called new big ones we can accept without demur (other than denying it is new) from the Fortune list. Had Getty not had money and insight provided by his father he could not have picked up these companies.
Getty, commenting on his elevation to hyperbolic billionaire status, said "there is no such thing as a billionaire among active businessmen, not in the sense that most people would understand the term, An individual may own or control business enterprises worth a billion dollars or even more, but little of his rated wealth is available to him in cash. A millionaire or billionaire does not have his millions on deposit in his personal checking account. The money is invested in his businesses.
"It is impossible for him to know what his investments are really worth at any given time. The values of a businessman's holdings fluctuate greatly. The price of stocks may rise or fall, corporations may show major increases or decreases in their net worth, innumerable variables may multiply the value of an investment or wipe it out completely. "12
Getty's entire life has been subdued in pitch. He went to school quietly--first to the University of Southern California, later to the University of California and then to Oxford. He traveled the world quietly, went into business with his father quietly and later bought large amounts of stock very cheaply--and quietly. He was married quietly seven times and as quietly divorced, with no hint of scandal. In his memoirs he quietly takes the blame for his marital failures and speaks with quiet commendation of his various wives. He appears to have quietly evaded politics and politicians at all times. In more recent years he has lived quietly in the baronial halls of Sutton Place, his English manor house, and will one day no doubt die quietly and quietly leave his swollen fortune to foundations and to his four sons and many grandchildren. Getty, beyond doubt, has been the all-time ghostly atypical presence in the procession of American wealth. When he speaks--and he has been interviewed on TV--he speaks, yes, very quietly.
H. L. Hunt and the Politics of Oil
Haroldson L. Hunt, No. 2 on Fortune's list, has been variously estimated as worth $250 million to $3 billion. 13 Forced to choose, I'd incline toward the lower figure; Fortune pegged him at $400-$700 million, leaving a good deal of leeway, But Hunt's fortune, like that of all the oil prospectors, rests literally in the sands and in money- inflamed politics, domestic and foreign. He no doubt holds a good hand, but one may doubt that it harbors a royal flush.
Hunt, a small-town cracker-barrel philosopher (in this aspect very much resembling the late Andrew Carnegie and Henry Ford) and overburdened with wildcatted possessions beyond his own wildest, wildcatting dreams, first came to national political notice during the 1950's (much as Henry Ford did in the early 1920's) as a rabble- rousing propagandist for hard-nosed right-wing political points of view. For Hunt takes seriously what he has heard around the town cracker-barrel. The violence of the diatribes in his subsidized radio programs--carried to 331 cracker-barrel stations--led many observers to see them as having at least helped nurture the mood for the assassination of President Kennedy. The programs, seeming overtures to schrecklichkeit, are prepared and taped by a stable of about twenty-five henchmen Hunt maintains in Washington, D. C. In general, views blandishing to the Ku Klux mentality are broadcast. 14
On the very morning of President Kennedy's assassination--in Texas--the Hunt radio program in Dallas and other areas predicted pessimistically that a day was soon coming when American citizens would not be allowed to own firearms with which they could oppose their rulers, an important function of red-blooded free citizens in the cracker- barrel point of view. Of a communist society (thought by cracker-barrel pundits to be imminent in the United States) the Hunt commentator said forebodingly: "No firearms are permitted the people because they would then have the weapons with which to rise up against their oppressors. "
Hunt staged his alarmist programs through a series of incestuous foundations--Facts Forum, Inc. , the Life Line Foundation and Bright Star Foundation, none of which is listed in the very complete Foundation Directory, 1964, issued by the Russell Sage Foundation. Until early 1965 (after the assassination of President Kennedy: that is), despite many strongly sponsored protests, Hunt seemed to have mysterious and powerful friends in or behind the Internal Revenue Service, which granted these propaganda foundations complete tax exemption. The Life Line Foundation originally got tax exemption as a religious organization! To his fingertips the pecuniary man as well as cracker-barrel philosopher, Hunt further improved his position by soliciting business donations for his foundations and giving his own food and patent-medicine companies reduced advertising rates on his radio programs. For H. L. Hunt believes in killing whole flocks of birds with a single stone.
One of Hunt's many immortal quoted sayings is: "Everything I do, I do for a profit. "
There is also the H. L. Hunt Foundation, founded in 1954, a financially anemic affair with assets at the end of 1961 of only $799,553, according to the Foundation Directory, and which in that year made charitable grants of a stupendous $17,500. No doubt it is this lithe creation that is destined to receive and immortalize any portion of Hunt holdings in flight from inheritance taxes.
Although Hunt--silver haired, soft-spoken, frugal, a food faddist-is very rich, few people are able to say they have ever seen the color of his money. He has never been known to contribute in the presence of witnesses more than $250 to $500 to any single political candidate; and in 1956 he gave the Republican Party, over the counter, a mere $38,000. In 1952 the Republicans tried to entice $300,000 from him, but Hunt came up
with only $5,000--this, at least, is according to the public role of penny-pincher that he plays.
But owing to the vastness of his landholdings, sprawling over the Southwest and the Middle East, and his seemingly uncanny ability to obtain high-level political chaperonage at crucial moments, realistic observers surmise that Hunt is passing out large sums under the table. "He must have a front man he spreads his money through," hostile Senator Ralph Yarborough of Texas has said. "A man with that kind of bank roll is bound to have. "
It is rumored in Texas, according to the New York Times (August 17, 1964), that Hunt put up $150,000 to get General Douglas MacArthur the Republican presidential nomination in 1952 and that he put up $100,000 for the Kennedy-Johnson ticket in 1960 owing to his longstanding friendship with Lyndon B. Johnson. Booth Mooney, the Hunt public relations man in Washington, wrote the authorized The Lyndon Johnson Story in 1956, updated in 1964; and Lyndon Johnson is an old friend of the oil depletion allowance as well as of Hunt. Although Senator Barry Goldwater in 1964 stood forthrightly for straight Hunt political wisdom, Hunt testily denied that he was supporting Goldwater against the old Huntsman, L. B. J.
One must agree with Senator Yarborough that Hunt and other Texas oil men are passing money (or some equivalent) to political figures. If they didn't, they wouldn't have the depletion allowance, ostensibly passed as a defense measure to stimulate the search for oil but also serving the useful function of providing a politician's entering siphon into the oil Golconda. There might instead be a special high tax on oil!
Here we touch the edge of a problem: Why, if the independent oil men are so favored by nature and politicians, do they show this political rancor? True, not all the oil men are so perturbed as Hunt and some others, who apparently feel that their easy-come wealth could as easily be whisked away; many of the more realistic, less anxiety-prone Texas oil crowd speak of themselves as just plain lucky and see no need for making the world safe for future wildcatters.
But H. L. Hunt is an expression in exaggerated form of the irritation and resulting apparent meanness of many oil independents, even though most oil men appear to regard him as more than a little kooky. What produces this irritation? There is, first, the annual tax bill. Some of the successful oil men write annual checks for the Internal Revenue Service in amounts that would stagger the ordinary man. And most of the oil men are ordinary men who early in their lives worked long hours for small wages. The men who write these checks still think in terms of the original $20-a-week roustabout. And while it is frequently said that one wouldn't mind writing big tax checks if one had the big incomes, to have worked in one's early life on the supposition that what one acquired one could keep and then to learn after hitting it big that one must share to some extent with the government--or politicians--is more than some persons can swallow gracefully. Some of the oil men, Hunt included, feel very much the way a man earning $60 a week would feel if he was told the withholding tax was to be $50. They just aren't psychically attuned to their new positions. On top of the tax bite, very much softened by the depletion allowance and drilling write-off, the oil men find they must share what is no doubt a good part of the depletion benefits with hungry politicians in the form of "campaign contributions. " And for these political contributions they feel the politicians ought to deliver more. The politicians, to extenuate their less than totalitarian success, no doubt report that there are various obstacles in the form of Liberalism, Communism, Socialism, Eastern Capitalists, Labor Unions, Welfarism and a world full of Wrong- Thinking People all the way from college professors and journalists to Supreme Court justices. The enormity of it all, the injustice of all these misguided people stirring a
witch's brew with which to annoy Horatio Alger's own darling boys out on the oil frontier, finally becomes more than human flesh--or at least H. L. Hunt's flesh--can stand.
Hunt has seen it all at first-hand, indeed. He has regularly attended the national conventions of both parties, keeping his ears close to the ground, his eyes sharp and his nose clean for any whiff of Godless un-Americanism. And there is, as God only knows, much of it around, in the very Constitution itself!
There is, too, the milieu of Texas as a force shaping Texas consciousness. For Texas has very much the economic and political status of a colony, as also have many far less bustling western states. In the words of Senator Wilbert (Pappy) Lee O'Daniel, Texas is "New York's most valuable foreign possession. "
The widely traveled John Gunther in 1947 found that "Texas reminded me a good deal of Argentina . . . cattle culture, absentee ownership, vast land holdings by semifeudal barons, a great preoccupation with weather, an under-developed middle class, interminable flatness and open spaces, and fierce political partisanship and nationalism. And . . . reaction closely paralleling that of Argentina. " 15
Most of the state is in fact absentee-owned by big eastern capital. The largest enterprise in the state is the Humble Oil and Refining Company, subsidiary of the global Standard Oil Company of New Jersey, the annual gross revenue of which exceeds the combined revenues of thirty state governments--$11. 471 billion versus $11. 375 billion in 19,65. The operations of the huge eastern enterprises--Du Pont, U. S. Steel, General Motors, Dow Chemical and various others--are splattered right and left. And many of the prominent men in the state, Hunt included, originate elsewhere, are in effect colonial concessionaires. Many Texas oil men are not native Texans at all.
With a thin layer of native wealthy and imported representatives of big corporations at the top, bellowing the glories of Texas in history and contemporary culture, most Texans find themselves somewhat dazedly in the low-income classes, dirt poor--in fact, colons. Gunther was told in Texas that twenty corporations ran the state, but he thought this exaggerated. I don't think so. At least, the rank and file colons, many close to peons, do not run it--and they know it.
Texas boastfulness, free-swinging behavior and loud talk about independence of spirit are all a compensatory reflex to the feeling, deep in many Texans, that they are dusty puppets manipulated from outside.
