Dearborn independent. [volume], August 21, 1920, Page 7, Image 7

About Dearborn independent. [volume] (Dearborn, Mich.) 1901-1927

Image provided by: Central Michigan University, Clark Historical Library

                
THIS BEA2EIBIiM nMDEMEMIDEOT
Ponzied Finance, the Midsummer Madness
of the East
FOUR wcelf ago while the telegraph press wires
which crisscross the country were gossiping rdly
over more or less dreary midsummer news, an op
erator down in Boston suddenly tapped out a com
bination of five letters. In 48 hours the name which
that combination spelled was known in every city, town
and hamlet in the nation.
Charles Ponzi, a young Italian of Boston, the dis
patches said, was paying 50 per cent interest on 45-day
loans, lie was willing to take anything from $10 up
and so eager was the public to reap the promised
golden harvest that his offices were besieged by mobs
of people who thrust their money through his wickets
in such quantities that his clerks were obliged to heap
it in bushel baskets.
Almost immediately tfiere followed the news of
Federal investigations and of charges that Ponzi was
insolvent and his great money-making schemes but
figments of a distorted imagination. In a day the scene
changed and the public which had fought to deposit
its money now fought to get the money back.
The police of Boston were called to handle the
crowds that milled through the corridors of the building
in which Ponzi maintained his modest offices, and t
control the lines that twisted through the building and
filled historic Pi alley. ,
Ponzi, debonaire, smiling, unshaken, voluntarily
suspended business until state and Federal officials
could audit his books and offered to pay all depositors
who demanded their money back. The run lasted
three days. In that time there was paid out, according
to the best estimates, the sum of $3,500,000. It was a
run which would have broken any but the strongest
financial institutions, yet when it ended Ponzi was ap
parently in complete possession of the situation.
He had done everything that he had been asked to
do. He had submitted his books, he had completely
suspended his borrowing operations and he had volun
tarilv repaid loans which he was not obliged to repay
for three months. Meanwhile he went on making
good his promises to depositors who held their faith in
him On every matured loan, no matter what the
amount one was for $30,000 he paid back the prin
cipal and added 50 per cent interest until there is prob
ably no city within a day's ride of Boston where some
individual 'has not enriched himself through Ponzi s
offer. .
Naturally the fickle weather vane of public con
fidence has swung back in his favor. Crowds follow
him on the streets, mobbing the gorgeous limousine
in which this diminutive youngster rides, waiting for
hours at the entrance to his offices for a glimpse of
him and braving the heavy hands of his personal
bodvguards for an opportunity to touch his clothing
Financial authorities predicted his inability to with
stand the run made on his resources. A prominent
financial editor denounced him as a crook. Ponzi sued
him for $5,000,000. His press agent deserted him and
attacked him through one of the Boston papers m a
copyrighted article, predicting that he would fail with
in the next few days and would suspend payment on
his notes. Ponzi smiled and went on paying.
It is the most amazing thing that the financial world
has seen in a generation. It staggers the imagination.
Good sense seems to say that Ponzi cannot continue to
fulfill his promises. Yet he goes on, day after day,
meeting the combined attack of state and national of
ficials, withstanding the warnings of the financial dis
trict, giving his books up for an official audit, and
blandlv smiling over what he calls the "secret by which
he makes his wealth. According to his own statements
Ponzi was born in Italy 37 years ago, coming to this
countrv with his father in 1903. For K) years he
roamed, working at first one and then another calling,
and in the course of his wanderings drifted to Boston.
Three years ago he married the daughter of a well-to-do
Italian and entered his father-in-law's business. The
Since the war there has not been a newspaper story that has "stood up"
as has the story of the operations of Charles Ponzi, the fifty per cent speculator,
of Boston.
This page is intended solely to act as a news chronicle of the developments
up to and including August 7. IVhat has taken place since that date way well be
worth another article. Outside Boston there has been little or no attempt on the
part of the newspapers to publish adequate stories on the Ponzi affair and it is
because of the known interest throughout the entire country; that this story has
been obtained by a DEARBORN INDEPENDENT staff writer.
advertising. He depended on his investors to do his
advertising for him.
The 45-day periods began to expire. Ponzi met the
notes and paid as promised. The news spread and de
posits increased. Each day saw an increase in the
lines which passed before the modest pine partitions
of his offices. Money began to roll in in hundreds,
then in thousands and finally in hundreds of thousands,
until, as has been said, bushel baskets were brought
(C) Keystone
CHARLES PONZI
into use to hold the sums that poured across his
counters. v j r
Meanwhile Ponzi himself was showing evidences ot
newly acquired wealth. He bought fine raiment, a
beautiful country home, a stunning lmioteinc and he
sent to Italy for his old mother. He bought out a
firm with which he had once been employed and in
addition to this he purchased control of a trust com
pany recently formed in Boston.
He delighted in attending the theater and watching
himself in the movies. The newspaper men who fol
lowed him reported that he carried sheafs of $10,000
i t Uf RulUtin published by the Babson Institute, ay, after
Of Ponzi'. operation., the MU ft gff?, .L.an's .cheme impc.ible:
averting that there i. nothing to oe game y d in indefinitely, will bankrupt one or more
venture did not prosper greatly, it is said, and following
the death of his wife's parent Ponzi discontinued it.
Certain it is that during this period Ponzi was not
looked upon as a financial genius. In fact when he
first opened his offices on School street in Boston he
attracted no attention whatever. . .
It was in September of 1019 that he conceived his
present plans, he claims, and because of the di hcultv
of convincing men with funds of the practicability ot
his schemes, it was several weeks before he was aoic
to begin operations. Even then matters moved along
very slowly, attracting no attention outside the Italian
colony of Boston. . . . . ,r
His method of obtaining money was simplicity itseii.
He gave a note on his company, the Securities ex
change Company, guaranteeing 50 per cent interest m
90 days but holding forth a tentative fromise ot pay
ment within 45 days. That was the only security tne
depositor received. It has not been found that he used
the mails and it is well established that he did no
bill
da
about in his pockets. And no matter what the
brought forth he smiled. Even those who distrust
him most admit tnat ne nas uic sn ui w ,
'Tevein.",' and there have been hundreds, as
to how he can possiblv pay the interest which he offers.
Po z returns , "That's my secret." There are two
thi ps which he absolutely refuses to do One .s to
, low the source of his wealth and the other is to de
tail his resources. "I will show the autbont.es enough
funds to rover all my obligations," he says, but that
'S aponi as 'intimated that part of his gains came
hrntirh a world-wide system of manipulating exchange
and internatTonal postal coupons postal authorities
s ated that no such business as Ponzi appeared to be
doing had been conducted through these coupons. The
total business done in redemption of coupons, it was
sa d did not exceed $8 a day. Following this came
1 that a Boston man had received information
from abroad to the effect that Ponzi's agents had
purchased hundreds of thousands of dollars' worth of
international reply coupons. Ponzi himself refused to
afTirm or deny anything. He merely added to the gen
eral discussion the statement that, "I never said that
all my money came through dealings in international
coupons."
Those who believe in Ponzi have only the vaguest
explanations for their faith. They think that he has
made his money through juggling foreign exchange.
It is suggested that he smuggles the cash into Switzer
land where it sells at a premium, that he has agents all
over the world who watch favorable opportunities to
convert funds from the currency of one country to that
of another. But mostly tlgsy do not care how he gets
the money. They want to brieve in him. Apparently
he has the cash. That to their minds overbalances all
the laws of probabilities, upsets every rule of banking
and discounts every lesson taught by the get-rich-quick
manipulators of the past.
One of the favorite arguments of those who believe
in the "wizard," as the crowds love to call him, is that
banks and bankers have been doing what Ponzi is
doing but have kept the huce profits themselves while
Ponzi shares them with the people. Ponzi claims that
he has humanitarian objects. In a statement which
he gave out when the attack against him was at its
height, he charged that the investigation was fostered
by an' "autocratic clique" and declared "the issue now
at stake is an issue between a man who wants to do
all he can for the people and men who want to take
as much as they can from the people without giving
adequate return," all of which sounded good to the
crowd in the street.
One of Ponzi's lawyers was more explicit ; he ex
plained that Ponzi loves common people and wants to
help them. Therefore, instead of borrowing money at
a much lower rate of interest and keeping a larger
share of the alleged profits of his transaction for him
self, he spreads this money through the community and
has'the enjoyment of knowing that he is helping thou
sands Then he added that Ponzi would not be able to
keep more than a small share of his profits anyhow as
under the income tax he would be compelled to turn
the major share over to the government.
Ponzi has retained as his attorneys the law nrm ot
Bailcn and Leveroni. Bailen is a Jew and Leveroni is
an Italian and judge of the juvenile court. In re
sponse to a question bv a Dearborn Independent cor
respondent as to whether he knew Ponzi's method, At
torney Bailen said he must refuse to answer He de
clared, however, that he was convinced of Ponzi s
SOlonzi estimates that he has lost $3,500,000 through
the interruption to his business. He says he could
have taken in millions during the week that the in
vestigation began and it is probable that he could for
he is generally credited with having accepted $J:U,UUU
the day before he stopped taking cash and it was evi
dent that the stream of revenue was not yet at flood
tide. . ,
During the week every nour saw fresh rumors in
the Boston newspapers. A group of New Yorlc finan
ciers it was stated, had offered Ponzi $10,000,000 for
his secret. He was said to be in communication with
Thomas Lawson. There were rumors that he was go
ing to enter the automobile business and other rumors
that he would found an entirely new and gigantic
enterprise which would reach around the globe and
would involve a string of banks and a great line of
ships. ...
Ponzi was rather vague in his statements concerning
this new venture. He professed, however, an unwilling
ness to continue his old company after the completion
of the official audit of his books and he said also that
he would not again offer 50 per cent interest on short
time notes. The rumors concerning the founding ot
a new concern Ponzi later declared to be true. 1 he
exact nature of its business he did not at the time
disclose, but he declared the public was to be taken in
as his partner. Other concerns, he said, were paying
huge dividends and there was no reason why he could
not do so. He would pay at least 12 per cent, he inti
mated, perhaps 20 per cent.
Meanwhile a Boston financial journal which fonzi
has sued, keeps up a continual barrage on his opera
tions This journal suggests that Ponzi is merely wash
ing this week's pavment with last week's deposits and
says Ponzi has been "satisfying his obligations with
hinds which equitably belong in part to his other
creditors." , . it . .
"Suppose," continues this paper, a man took in
$100,000 a day, promising to pay after 45 days $150 for
every $100 received. At the end of 45 days he would
have taken in $4,500,000 without raying out a cent. If
he had deposited the whole $4,500,000 in local I banks,
it would be easy enough for him to meet the $15U.UUU
that he would have to pay out on the 46th day. It he
then were stopped from taking in money, he could still
continue to pay $150,000 a day as his notes matured,
for 30 days, before his money would be exhausted, but
if he were permitted to do this there would be nothing
left for those whose money was taken the last 15
days of operations."
Other financial editors have a different solution,
(Condudtd on pmgt 13)