Vancouver Sun and Newspaper Enterprise Association, Inc., October 22, 1932
BY ROBERT TALLEY
Staff Writer for the Vancouver Sun and NEA Service.
CHICAGO, Oct.22.—At the peak of his career, Samuel Insull (November 11, 1859 – July 16, 1938) was master of the most gigantic chain of public utilities ever controlled ay one man.
His hundreds of electric plants, gas plants, water plants, ice plants, street car lines, bus lines and electric railroads dotted the map from Maine to Texas and overflowed into Canada and Mexico.
His varied enterprises operated in thirty-two states, served more than 5,000 cities, towns and villages, had supplied the public utility needs of approximately 15,000,000 persons.
The combined assets of all his companies was close to $4,000,000,000—which is merely another way of saying four thousand million dollars.
Six hundred thousand persons owned stock in his companies, a half million more had bought his bonds.
Samuel Insull, personally, was worth $100,000,000. Aside from his investment income, he drew $500,000 a year in salaries from his companies. He was chairman of sixty-five companies, president of eleven, sat on the boards of eighty-five more.
It is no exaggeration to say that he was the most powerful man in Chicago. He held the world’s fourth largest city in hollow of his hand. Bankers courted his favors, politicians cowed before him.
He was past 70 and an industrial tyrant. He absolutely dominated everything he had anything to do with, ran all matters as he pleased. There was nobody to tell him “No.”
That was Samuel Insull of yesterday—the mighty Samuel Insull who was swept, almost overnight, from billions to penury in the gigantic collapse of the Insull empire of utilities. It will go down in history as the greatest failure in American business annals. It was ten times bigger than the Kreuger collapse in Europe.
High points in Samuel Insull’s 50-year climb to his rule of the world’s greatest public utility empire are pictured above. This chart, of course, does not show the hundreds of other companies that came under Insull’s control as he expanded his holdings. At the left is the late Thomas A. Edison as he appeared when Insull was his business manager; at the right, Insull as he appeared in 1918 when his companies were just beginning to spread over the land and, below, Insull officiating at the opening of a gigantic new gas plant in Chicago in 1928.
INSULL, IN EUROPE NOW, IS DEJECTED, AGING MAN.
The Samuel Insull of today, a voluntary exile in Europe, is a vastly different man. In six months he aged a dozen years, say those who have seen him. The fire had faded from his eyes, his once brisk manner has yielded to an air which denotes either dejection or confused bewilderment. It has been called both.
His $100,000,000 personal finance is gone; he tossed it into his failing companies in a futile effort to stem the tide of disaster. Lost also is his magnificent 4,300-acre estate at Libertyville, Ill., with its $125,000 mansion of Italian Riviera architecture, bird sanctuaries and sunken gardens. His Chicago home, a fashionable apartment of Chicago’s “Gold Coast,” is for rent. So is his Old English pent house atop the Chicago Civic Opera Building, which he built to gratify his love of music.
Not only is Insull said to have lost everything he had, but he is also $15,000,000 in debt. Five millions of this represents his pledges to charity, which he never can pay.
Until recently he lived in Paris with Mrs. Insull. They had two rooms at the Prince des Galles Hotel, for which they paid $10 a day, with $2.75 added for Mrs. Insull’s maid. The former master of billions is watching his pennies; the baggageman who carried up his trunks says Insull tipped him 60 cents.
Insull’s only income at present so far as known, is an annual pension of $18,000 from his three big Chicago operating companies—Commonwealth Edison, the People’s Gas and the Northern Illinois Public Service. These three companies are not involved in the Insull failure or string of Insull receiverships.
Also out of the U.S. are Insull’s son and brother, his closest business associates. The latter is Martin Insull, former president of the mighty Middle West Utilities Co., greatest of the Insull holding companies. Martin Insull disappeared from Chicago about the time Middle West went into receivership last April. He was recently found living with his wife in a $20-a-week boarding house in the little town of Orillia, Ont., 90 miles north of Toronto, shunning all companions and seeking seclusion.
The most recent to depart was Samuel Insull, Jr., 32-year-old president of the two vast Insull investment trusts now in bankruptcy, who sailed for Paris unexpectedly a few days befire a federal court bankruptcy hearing was to begin. Friends said young Insull was called to Paris by the illness of his mother.
Above is a certificate for 100 shares of stock in Insull Utility Investments, Inc., one of Samuel Insull’s two great super-holding companies. At peak prices of 1929 this 100-share certyificate was worth $16,000. It was last offered at about 25 cents a share, with no bidders. At right is Samuel Insull as he appeared at the peak of his power, on his 70th birthday.
COLLAPSE MEANS LOSS TO THOUSANDS.
State’s Attorney John A. Swanson of Chicago, who is hunting for evidence of criminality in the Insull collapse, has requested all three of the Insulls to return to Chicago for questioning. He intimated that he might take other action if they did not comply voluntarily. He has since done so.
A second investigation is being conducted by Federal Judge Lindley in the government’s hunt for bankruptcy assets. A third probe is being conducted by United States District Attorney Dwight Green, who is trying to ascertain if any federal criminal statutes have been violated.
It is difficult to estimate what the collapse of the intricate system of Insull hoding and investment companies will mean in terms of money lost to investors, but conservative Chicago bankers fis the number in excess of three-quart u8 m,ers of a billion dollars. Other estimates are as high as two billions. Only many months of investigation—and perhaps years of litigation—will tell.
Much of this money is lost by persons able to afford it, for Samuel Insull strongly encouraged customer-ownership of his many securities, and Insull’s name was magic in Chicago where his success had been so tremendous. Consequently, when a new issue of Insull stock appeared, money came out of savings banks, out of stocks, out from under mattresses and quickly found its way into his company’s coffers.
Insull stock could be bought with electric toasters, gas ranges, electric washing machines, coke or whatnot. Employees—from bookkeepers to meter readers—were given quotas of stock and ordered to sell the stock to different families.
But Insull didn’t do this because he needed capital from his customers. He had a deeper motive. If there was a rate increase, the customer’s objection would be calmed by the idea that he was paying money to himself. If Insull wanted to seek a favorable franchise at city hall, the political influence of thousands of small investors, who felt they were part owners in the company, would be behind him.
AN “ANGEL” IN POLITICS, HELPING BOTH PARTIES.
Insull favored public ownership of utilities—but his brand of public ownership meant customer ownership, under Insull control. In Chicago and vicinity alone he had nearly 300,000 investors.
This gray-haired Napoleon of a utilities empire, who usually got what he wanted, also had other irons in the fire. He was a generous, though cautious, contributor to political campaign funds. In 1926, as a Senate investigation later disclosed, he contributed $125,000 toward the election of Frank L. Smith, who was elected to the State from Illinois but denied his seat in that body on the grounds of corruption. At the time of his candidacy, Smith was chairman of the Illinois Commerce Commission, the state’s utilities rate-making body.
But cautious Insull played no favorites. The same investigation disclosed that he had contributed $15,000 to the campaign of George Brennan, Smith’s Democratic opponent.
In the years when Mayor “Big Bill” Thompson was threatening to “bust the kaiser in the snoot,” holding rodeos in the city hall and performing other antics, Insull was really the power behind the throne at city hall, so Chicagoans tell you. They say Insull exercised his power through Corporation Attorney Samuel Ettelson, who really ran things.
PYRAMID OF HOLDING COMPAMIES CRASHES.
It is of utmost importance to remember that then Insull operating companies are not involved in the present debacle. The companies now in trouble are the gigantic holding companies, which produce no gas or electricity themselves, but merely own securities of the operating companies. Practically all the operating companies are sound properties.
On these holding companies Insull stacked a high pyramid of holding company upon holding company, topped by two gigantic investment trusts—the $250,000,000 Insull Utilities Investments, Inc., and the $150,000,000 Corporation Securities Co.
All was well until securities began to shrink in value, and then the whole lofty financial superstructure came tumbling down and a series of bankruptcies and receiverships.
Thousands of investors suffered loss or ruin. At the bottom of the pile was the 73-year-old Samuel Insull, destroyed by the very thing that he had worked for 50 years to create.
He is the world’s greatest failure!
Vancouver Sun and Newspaper Enterprise Association, Inc., October 22, 1932
While Thomas A. Edison dabbled with inventions, Samuel Insull sat up nights trying to figure out ways to make money out of the products of the electrical wizard’s brain.
Insull was Edison’s business manager for 12 years. That’s how he got his start.
What the dreamy Edison lacked in the way of business acumen, the the aggressive Insull supplied. It was a perfect team. Fifty years later it led Insull to his positiin as a 73-year-old Napoleon of the largest industrial empire the world has ever seen, which has just climaxed by his failure.
It is clear that Insull believed himself a man of destiny. As early as 1916, speaking before a society of Chicago engineers, he pictured one vast super-power electric system for the United States. It was to turn the wheels of all industry, light every home, operate all railroads, rescue the human race from drudgery in every form. Without directly saying so, he made it clear this industrial giant was to be an Insull enterprise.
He had gone far toward this goal. When his collapse came it was possible to buy Insull electricity in 22 states in 5,000 cities, towns and villages from Maine to Texas. In point of capital investment and distribution, he was the largest producer of electricity in the world. Gradually, he was linking his plans together. Always, he was expanding. Finally, he was stopped. But it took the worst business depression in history to do it.
MARKETS EDISON’S GADGETS.
Insull’s rise in life is a story of a purposeful character. Born in London of a middle-class English family, he became an office boy in an auctioneer’s office at 14 at a salary of $1.25 a week and improved himself by studying shorthand and book-keeping at home. Eventually he got a job with Edison’s London representative. Impressed by the boy’s ability and his determination to succeed, this agent recommended him for a position as Edison’s secretary. So, in 1881, Insull came to America to take up his new job.
Edison soon discovered that instead of a mere secretary he had a first-class manager. This aggressive young Englishman began organizing companies to manufacture and market Edison’s strange gadgets. Among the enterprises was the old Edison Electric Co., parent of today’s General Electric Company.
In 1892 death claimed the president of the old Chicago Edison Company, one of the five electric companies trying to compete with Chicago’s gas lights and horse-drawn street cars. Young Insull was asked to recommend a man. He chose himself.
By 1907 Insull had consolidated Chicago’s five independent electric companies into his own monopolistic Commonwealth Edison Company.
Insull’s next big step came in 1911 when he bought and linked together the scattered electric plants in a number of small towns surrounding Chicago, under the name of the Public Service Company of Northern Illinois. This was the world’s first interconnected super-power system.
AN EMPIRE TAKES FORM.
The following year Insull’s dream of empire began to take form. He launched the vast Middle West Utilities, a two-billion-dollar holding company around which he planned to build his super-power chain that would span the nation. (How well he progressed may be judged by the fact that when Middle West went into the hands of receivers recently it was a $2,000,000,000 concern with plants in 32 states).
In 1918, Insull added gas to his holdings. He took over People’s Gas Co., then approaching bankruptcy. Things had reached the point where dealers would not deliver a ton of coal to the company without getting a guarantee payment from a bank.
Insull dug in. He ordered all complaints routed over his desk. He investigated each personally. He hired and fired. Eventually he got what he wanted. By 1922 the reorganized People’s Gas Light & Coke Company was paying substantial dividends. It has since been one of his soundest companies.
Acquisition and expansion of operating companies required more capital. Insull began stacking holding companies and selling their stocks for capital. Always Insull kept enough of the common stock—voting stock—to retain control.
Gradually more than 100 holding companies, in various geographical groups, came under the span of Insull’s vast Middle West Utilities.
COMPANY UPON COMPANY.
The ultimate holding company was far removed from the operating companies. For example, the Scranton (Pa.) Street Railway was owned by the National Public Service Corporation, which was owned by the National Electric Power Company, which was owned by Middle West Utilities.
Then on top of this lofty pyramid, Insull erected two super-super-holding companies, which were to own Middle West Utilities and his other major holding companies. They were Insull Utility Investments and Corporation Securities Inc.
In all of these Insull sold securities. So long as prices of public utilities securities were rising, and more and more people were using current, and more and more people had money to invest, there was no limit to this method of expansion.
It was a dizzy game, but the bull market boom was in and the sky was the limit. In September, 1920, Insull stocks had increased in value over a half billion dollars in just 50 days.
Issues doubled, trebled and quadrupled in value overnight. For example, between June 15 and Aug. 3, 1929, Commonwealth Edison soared from $250 to $449 a share. This represented a gain in stock market value of $250, 032,600 on this one issue in just 19 days.
This sort of skyrocketing was too much even for Insull. Time after time he issued public warnings against “unwarranted and unjustified” prices of Insull electric.
But Insull might as well have been talking to the wind. The “wise ones” laughed at his warning, saying Insull wanted to beat down the prices so he could make millions by buying in the stock himself. The giddy game went on. Public Service of Northern Illinois hit $435, people’s Gas touched $404 , Middle West Utilities soared to $570, after which there was a 10-for-1 split.
Thus, when 1930 dawned, Samuel Insull could look back on this record of the expansion of his empire since his arrival in Chicago:
And his empire was still growing.
BUT THE DAY CAME.
One iof Insull’s favorite stories about himself, which he liked to tell at banquets, had to do with the installation of a huge steam turbine at his old Fisk street power house in 1903. It was then the largest steam turbine in the world and, naturally, there was quite a bit of worry about what was going to happen.
When the time came to turn ion the steam, Frederick Sargent, the installation engineer, turned to Insull and suggested that he had better get out.
“Is it going to blow up?” Insull asked.
“I don’t think so,” answered Sargent, rather uncertainly.
“Well,” Insull replied, “If this thing blows up the whole company will blow up and I’ll blow up, too, so I might as well stay here.”\
There came a day, in 1932, when not only one Insull company but a whole chain of them blew up—and Samuel Insull blew up with them.
Vancouver Sun and Newspaper Enterprise Association, Inc., October 29, 1932
Samuel Insull’s climb to control of a public utilities empire that was worth $4,000,000,000 at its high tide required 50 years.
His fall took just about that many days.
On April 13, 1932, Insull’s vast Mid Western Utilities Company, operating in 32 states, went into receivership. On June 6, the 73-year-old Napoleon of power abdicated.
He resigned as chairman of the Commonwealth Edison Company, the People’s Gas Light & Coke Company and the Public Service Company of Northern Illinois, three of the largest utility operating companies in the world.
He resigned as one of the receivers of Middle West Utilities. He resigned from 65 chairmanships, 85 directorates and 11 presidencies. For three hours Insull sat ayt his desk signing resignations.
When Samuel Insull finally laid aside his pen he had nothing left but three yearly pensions of $6,000 each, granted him by his three major companies.
The last days of empire saw a vastly different Samuel Insull from the hard-headed, autocratic financial tyrant to whom nobody in Chicago had dared say “No.”
BACK TO BOTTOM.
When reporters called at his luxurious office for a farewell interview they were greeted by a careworn old man whose hollow smile and trembling fingers indicated the strain under which he had labored in his vain effort to save his companies. Asked about his future plans, he was affable but reticent.
As a closing question, someone enquired about his health.
“Well,” replied Insull, “I got a good sleep last night; I feel pretty good today.”
Something in his tone seemed to imply there had been other nights—probably many—not so restful.
Later, an associate told reporters he had heard Insull say the day before:
I have gone from the bottom to top, and now I am at the bottom again. I only hope I will be able to keep a roof over my head and care for my wife.
There is no mystery about Insull’s downfall. The real mystery is how he managed to keep his fantastic pyramid of holding companies standing as long as he did in the face of the worst stock market decline in history.
Insull had fought desperately. He had thrown in his own $100,000,000 fortune. In perhaps the most hectic chapter of frenzied finance in history, he manipulated, borrowed, loaned, exchanged millions of dollars between his various companies in a manner that now has given auditors one of the most intricate and complicated financial tangles on record. He saddled his stock on his employees and ordered them to go out and sell it. He borrowed heavily from banks—millions on millions of dollars.
A SUDDEN CRASH.
In the years he was building his giant chain, Insull had been called “the greatest money raiser in history.” In the end this ability proved his undoing. For he contracted such burdens of debt for his investment companies that they eventually collapsed under their own weight.
When the end came Insull went down with his ship. Chicagoans tell you they are certain he lost every dime he had.
The crash came with deadly swiftness. In brief, here is the story:
Last spring, Middle West Utilities Co. found itself unable to meet $10,000,000 in short term notes. Insull frantically appealed to New York bankers. . . but, at last, his credit dried up. He could get no more money.
So a Chicago printing firm, to which the $3,000,000,000 Middle West Utilities owed an $3,000 bill, threw this industrial giant into receivership and the far-flung Insull empire toppled.
Middle West was the corner stone on which the Insull pyramid rested. One by one, the nother tightly integrated holding companies dragged each other down.
Among the first to fall were the great superholding companies. Insull Utility Investment and Corporation Securities, Inc., which capped the peak of the pyramid. They represented control of the great Insull domain.
Billboard posters of the Public Service Company of Northern Illinois
LOSSES IN MILLIONS.
When, the other day, auditors for the receivers of Insull Utility Investments completed a five-month examination of the books, they reported this condition had existed as of April 16:
Insull Utility Investments was hopelessly insolvent. It owed nine times as much as it owned. It had $27,473,364 of assets with which to pay $253,984,341 liabilities, a deficit of $225,000,000.
The reason for all this was clear. The auditors’ balance sheet showed this investment trust held securities for which it had paid $237,892,050 and which, at current prices, had a market value of $30,404,267, a shrinkage of more than $207,000,000.
As yet, there is no auditor’s report on Corporation Securities, Inc. The latest available is the company’s balance sheet of December 31, 1931. This showed investments with a book value of $145,455,706 and a current market value of $33,970,252, a shrinkage of more than $111,000,000.
It is interesting, in this connection, to note what happened to prices of the most important Insull security issues.
Middle West Utilities common soared to a high of $570 a share in 1929, was then split 10-for-1 and came to rest at $50. The 1932 low on this stock was 12½ cents a share; recent quotations, largely speculative, have boosted it to about 37½ cents.
$160 TO 12½ CENTS.
Insull Utility Investments Co. hit $160 a share in 1929, dropped to a low of 12½ cents in 1932. Recently there has been a little speculative buying at 25 cents a share.
Corporation Securities Inc. was sold in 1930 in $102 stock units, at which time the price of one share of common was $28.25. Its 1932 low was 12½ cents a share; latest data shows this stock offered “at the market”—and no takers.
It is important to bear in mind that these are security holding companies. The operating companies that Insull’s genius builded before he turned to high finance are, on the whole, doing as well as other utilities.
Commonwealth Edison, which soared to $450 a share in 1929, hit a low of $35 in 1932 and has since climbed back to about $75. People’s Gas, which went to $404 in 1929, dropped to $39 this year, but has since recovered to $75. Public Service of Northern Illinois, which was $435 in 1929, has recovered from a 1932 low of $35 to about $75.
Many Chicagoans tell you they believe Insull would have ridden out the storm had the depression been shorter of less severe.
One hears in Chicago now that Insull has lost his grip on himself, that the strain of his ordeal was too much for him.
Chicagoans tell you of a bent and bowed old man, showing all of his 73 years, whose step no longer is alert. They tell you that an associate, entering Insull’s private office, would find the slipping master of billions slumped in his chair, as though in a coma, staring at the wall. Then Insull would come to himself with a start . . . and begin issuing orders in his crisp manner of old.
This is the picture they draw of Samuel Insull as the shadows of ruin and bankruptcy closed in on him.
HE ADMITS ONE ERROR.
Only once in his long career did Samuel Insull ever admit he had erred.
He did this on last Feb. 16 when he addressed a meeting of 1,500 stockholders of Insull Utility Investments and Corporate Securities, Inc., who had called on him to explain why investments of the companies had shrunk $333,000,000 in value, according to the annual report.
“I exercised exactly the same judgement in purchasing these stocks,” he told them. “In the light of today, my judgement was very poor, but I did the best I could according to my knowledge and ability. I had no knowledge that we were in for a world crisis that would sweep values throughout the world and rock things to their foundations.”
Their confidence in Insull, still strong, the stockholders cheered him when he had finished.
In the evening gown and expensive fur coat, Mrs. Samuel Insull is shown above as she attended a gala “first night” at the great opera house her husband built. At the left is Mrs. Insull when she was Gladys Wallis, the actree; below Samuel Insull and Claudio Muzio, opera star, at a banquet.
The keen brain of Samuel Insull built a $4,000,000 public utilities empire, but he failed when he attempted to bring about his wife’s comeback as an actress after her 26-year absence from the stage.
That venture, before it folded up several years ago, is said to have cost Insull at least $200,000.
But this story, which has to do with Samuel Insull’s romance, really begins in the ’90’s.
In the same year that Dewey fought the battle of Manila Bay, a starry-eyed and raven-haired young ingenue, whose stage name was Gladys Wallis and whose real name was Mary Bird, played at Chicago’s old McVickers Theater in William Crane’s production of “The Senator.”1
In the audience one evening was Samuel Insull, the up-and-coming young president of the struggling Chicago Edison Company, who had come to Chicago a few years before to begin his career as a utilities operator. Young Insull, 36, admitted the beautiful Gladys Wallis, who was still in her ‘teens.
Later, they met at a dinner party and two years afterward—on May 23, 1899—they were married. She retired from the stage.
Twenty-six years rolled by, years in which Samuel Insull’s wealth and power soared with increasing speed and made him one of the richest and most powerful figures in Chicago. Mrs. Insull was a leader in society, mistress of a luxurious apartment on Chicago’s “Gold Coast” and of a magnificent country estate with a $125,000 mansion and numerous servants. Her jewels were the finest in Chicago. Her son, Samuel Jr., had grown to manhood and gone through Yale.
And so, in 1925, Mrs. Gladys Wallis Insull felt an urge to return to the stage—at attain “self expression,” as she explained it. Her husband acquiesced to her whim, provided money.
Mrs. Insull was a member of the board of St. Luke’s Hospital, which is more or less a directory of Chicago’s ultra-rich. Her return to the footlights was to be a benefit for that institution. Herbert Druce, an English actor, was hired to play opposite her in a revival of Sheridan’s “School for Scandal,” and no excuse was spared in recruiting a capable supporting cast.
The opening night performance, on June 1, 1925, was one of the most dazzling events in Chicago’s society history.
Chicago’s social registries turned out en masse—in silk hats and Paris gowns and laden with jewels worth a queen’s ransom. They arrived in purring limousines, through a blazing arch of orange and green electric lights, three blocks long, that Samuel Insull had erected. The “great names” of the nation’s second city were there:
the Armours, the Marshall Fields, the Pullmans, the Drakes.
Boxes sold for $1,000; Samuel Insull bought two of them and with a flourish, donated them to nurses from the hospital. Seats were $25 each, debutantes sold programs for $25 apiece.
Mrs. Insull played the coquettish role of Lady Teazle, looking even younger—on the stage—than her 25-year-old son who watched his mother from a box. As the cyrtain fell on the first act, it required six ushers to carry the flowers down the aisle to the bowing, smiling little woman on the stage.
The show ran for two weeks and netted more than $125,000 for the hospital.
Mrs. Insull’s success in this venture spurred her ambitions. She went to New York to try a comeback on Broadway—and failed. In returning to Chicago in 1927 she leased the Studebaker Theatre for five years—and failed again after a few weeks when her company began playing to empty seats and running up a deficit of $1,000 a day.
Samuel Insull took matters in hand, announced he was “out of the theatre business.” But, under the terms of the lease, the banks handling Insull’s affairs were still paying rent on the theatre until a few weeks ago when the lease expired.
The mistress of the Insull millions was a tiny woman, barely five feet tall and weighing less than 100 pounds. Here hands and feet were so small that she had to have gloves and shoes made to order. Her favorite jewels were diamonds and emeralds; she often wore as many as 10 diamond bracelets at one time. At a certain dinner party where jewels were valued at $13,000,000, hers were the finest of the lot.
But Mrs. Insull was not the social favorite in Chicago one might expect. She had position because of her husband’s riches and power, but her personal popularity was decreased. according to all accounts, by a tremendous amount of that quality which in actresses is called temperament and which in lesser lights is called temper.
Insull’s interest in opera, which led him to build Chicago’s magnificent 42-story Civic Opera House, also provided an avenue for social activities. It enabled him and his wife to hobnob with opera stars of world reputation. won Insull a decoration from Mussolini and provided an opportunity for gala “first nights” in which the display of Chicago’s wealth, jewels and position made a dazzling spectacle.
Insull’s interest in opera was expensive. Year after years there were huge deficits, and much of it came out of Insull’s pocket. He built the great opera house as he had welded his chain of utilities through “customer-ownership” of securities.
He was thorough-going in this as in everything else; purchasing agents for the vast Insull companies quietly let it be known that an investment in the opera’s securities might help a lot, and firms that had occasion to do business with Insull found it convenient to rent office suites in the huge opera building.
Atop this 42-story edifice, said to have more bronze and gold than any other structure in the world. Insull built for, himself a six-room penthouse, outfitted with Old English furniture brought from abroad. This was his private club. There he could go after a long, hard day and relax into the life of an English gentleman amid the surroundings of his native land. A good host, he had whiskey-and-soda for his guests, though he never drank himself.
Here, in a reflective mood, Samuel Insull might look out upon the city that he virtually held in the hollow of his hand hand. Everything was his; the myriad electric lights that twinkled far below; electric trains that roared through the murky canyons of skyscrapers were his; gas that cooked the evening meal in a million Chicago homes was his; down in the city hall were politicians who cowed before him, in the great Loop were bankers who courted his favors.
But that was yesterday. Today is another day.
The wreakage of the Insull personal fortune and power is as complete as the wreckage of the wreckage of the Insull chain of industry. The penthouse is for rent. So is the luxurious apartment on Lake Shore drive. The magnificent country estate—with its stately mansion, sunken gardens, gleaming lakes and graceful swans—in the hands of his creditors.
Gladys Wallis’ own life drama has had a climax more startling than any play she ever acted.
Vancouver Sun and Newspaper Enterprise Association, Inc., November 12, 1932
The crown prince of the Insull empire of public utilities, which had spread over 32 states and was constantly expanding, was was 32-year-old Samuell Insull Jr. He was Samuel Insull’s only child.
Before him lay the task of adding the remaining links to the nation0-wide super-power chain his 73-year-old father had started. A lot remained to be done, for a dream as immense Samuel Insull’s was too much for one lifetime. In the rush to acquire them, the scattered units of the Insull system had never been properly integrated; young Insull would have to hook them all together.
If the job proved too much for two lifetimes, there was Samuel Insull III, now an infant. It is significant that on the day Samuel Insull III was born old Samuel Insull I ordered flags flown from all his plants and buildings. It savored of the progression of a dynasty.
Though only a few years out of college, Samuel Insull, Jr., had already made good. He was vice-chairman of his father’s three great Chicago operating companies—Commonwealth Edison, People’s Gas and Public Service of Northern Illinois. He was vice chairman of the vast Middle West Utilities Company and president of Insull Utility Investments and Corporation Securities, Inc., the mighty investment trusts that topped thye Insull financial pyramid.
Chicagoans tell you that young Insull was a competent young man. But, like everybody else in the Insull organization, he was dominated by his father. Samuel Insull was the autocrat of all his enterprises.
In personal characteristics, there was little resemblance between father and son. Old Samuel Insull was feared, rather than liked; he was brusque and overbearing; his high position commanded him a place in society that his personality never could have won. On the other hand, young Samuel Insull was quiet and modest; he was courteous to those both above and below him and anybody in Chicago will tell you that he was every inch a gentleman.
Though popular and welcome, the younger Insulls played little part in society. They hated ostentation; when they were married in 1926 they could have had the most brilliant wedding in Chicago’s history, but they chose a simple home ceremony attended by less than two dozen guests.
Above are Mr. and Mrs. Samuel Insull Jr. as they appeared at a gala “first night” of his father’s Civic Opera Company. At the right, “Junmior,” the heir to the Insull-throne-that-was, seems to be trying to determine what the cards hold in store for him. This picture was taken at a bridge tournament in which he participated. t the right, below, is Martin J. Insull, brother of the elder Samuel.
The young Insulls maintained an apartment on Lake Shore Drive for town use, and 12 miles from Chicago they had a country home which, characteristically enough, they called “Simple House.” It sat upon an island in an artificial lake, and was accessible only by motorboat.
The home was constructed at the water’s edge in the fashion of a shop, with portholes for windows. Nautical maps lined the walls and one room contained an excellent marine library.
Samuel Insull, Jr., was born in Chicago in 1900, was graduated from Yale in 1921 and was given his first job in the statistical deprtment of Middle West Utilities Company in 1922.
Eight years ago the elder Insull gave the son a group of dilapidated Indiana properties and told him to do something about them. Chicago’s La Salle street bankers were amused; the old man apparently had given the boy an industrial plaything to break. In a few years the young Insull had presented his father with a prosperous group of utilities.
Insull Jr. was president of Chicago’s United Charities and vice chairman of Governor Emerson’s Commission on Unemployment Relief. In January, 1932, he was awarded the Junior Chamber of Commerce gold medal for the man under 35 who had performed the most outstanding service to Chicago in the previous year.
His wife the former Miss Adelaide Pierce, the daughter of of an old Chicago family, graduate of Smith College and a Junior Leaguer. She remained in Chicago when her husband went to Paris to join his parents recently.
MARTIN INSULL HELD.
The third member of the once-powerful Insull trio is Martin J. Insull, 63, younger brother of Samuel Insull Sr., and former president of the collapsed Middle West Utilities Company.
He left Chicago about the time the $2,000,000,000 concern went into receivership. In September he was found in Orillia, Ont., 90 miles north of Toronto, living is a modest boarding house where he paid $20 a week for himself and his wife, meals included. Recently, he was arrested on a warrant from Chicago and jailed.
Martin Insull, born in England, followed his brother to America and into the utility business, passing through a mechanical engineering course at Cornell in the process. Samuel Insull made him president of Middle West in 1924.
Martin lacked many of the qualities of his dominating brother. Chicagoans refer to him as “just Samuel’s brother.” In appearance, he reminds one more of a veteran English actor than a czar of utilities.
Never naturalized in the U.S. he still is a British citizen, and as such offered his services to the British consul in Chicago when Britain went to war with Germany in 1914. The offer was not accepted.
At the peak of his personal wealth was estimated at $20,000,000. His debts are now estimated at $7,000,000. He is under indictment in Chicago, charged with using his company’s stock to cover his own margin deals, resulting in a loss of $61,000 to the company.
Vancouver Sun and Newspaper Enterprise Association, Inc., November 12, 1932
The crash of Samuel Insull’s $4,000,000,000 utilities empire not only has rocked the power industry but it has heightened public interest in the political aspects of the so-called power trust.
When a half million investors residing in every state from Maine to California lose upwards of three-quarters of a billion dollars in Insull securities, the power trust issue emerges from the haze of cold economics and becomes painfully real.
Every issue needs a personality to make it more intelligible, and Insull now personifies the power trust in the public mind. He said his methods—appropriately called :insullism”—are something that the layman can understand.
“Insullism” colored the Presidential campaigns of Roosevelt and Hoover. It is almost certain to be the subject of a Senate investigation in December. It is certain to stimulate legislation for federal regulation of public utilities. To Congress it has given a subject for debate equal to the Teapot Dome scandal.
“INSULLISM” AN ISSUE.
Political observers believe the reaction against “Insullism” helped Franklin D. Roosevelt and hurt Herbert Hoover. Roosevelt made an aggressive issue of the power trust, advocating more effective federal control of the industry. Though Hoover recommended the same thing four times in four years, his views are not as emphatically fixed in the public mind. The essential differences is that Roosevelt is for publicly owned plants, whereas Hoover is not.
Quick to seize the opportunity, Roosevelt attacked “Insull monstrosity.” He flayed sucj tactics bitterly.
The Insull collapse gave Senate Progressives probably the most important single break they have ever had in ntheir long campaign to make the power trust a popular understandable issue.
Chief among these Progressives is Senator George Norris of Nebraska, who has fought for years against the tactics that finally brought ruin to Insull and disaster to his investors.
ONE PER CENT CONTROL.
In a Senate speech this year, Norris cited a report by the Federal Trade Commission to show that the power industry was heavily over-capitalized. In certain big companies to which he called attention, Norris said the stock has been “watered” to the extent of $520,000,000.
“That means,” Norris said, “that with the investigation only partly completed, the Federal Trade Commission has disclosed ‘write-ups’ (that means water) of $520,000,000 on which the poor people, the common people, must pay a profit at all times.”
Usually, local rate-fixing commissions allow rates that will provide a return of 5 to 8 per cent on the company’s investment. To support $520,000,000 of increased valuation at 6 per cent, the public would have to pay more than $30,000,000 yearly in rates higher than they might be.
Upon groups of operating companies are erected holding companies whose financial operations are far more complete and intricate. Recapitalization through these holding companies provides additional opportunity for the promoters to profit Insull had scores of such companies. Sometimes the holding companies each controlling the one below it, were stacked five deep.
With successive concentrations of voting stock (only a small part of the total) control ascended peak-wise through these holding companies. Thus, if the “insiders” has a comparatively small investment in the topmost company, they could control everything below it.
To sum it up: When Insull’s Middle West Utilities Company was a $2,500,000,000 organization, it was estimated that $20,000,000 invested in the top holding company would control the whole far-flung empire that stretched from Maine to Texas. That represented control by an amount equal to less than 1 per cent of the total.
But Insull’s amazing financial system went even further. It was possible for him to control the whole Insull empire without a cent of his own money invested. (This was possible, but it was not the situation; Insull did invest his own money.)
The explanation of this lies in the fact that to short-circuit stockholder control, Insull often used a voting trust arrangement by which stockholders trusted to him the voting right of their shares. Such an arrangement at the topmost rung would have made it possible for Insull to control the whole structure without a penny invested.
These holding companies had another purpose. They were vehicles for originating and selling additional securities to the public. Thus they enabled Insull to raise money for his constant expansion. Each holding company marketed its stock, its bonds, its debentures on the basis of the earnings of the company below it.
Capping the great financial pyramid were Insull’s two super-holding companies, the $250,000,000 Utility Investment Company and the $150,000,000 Corporation Securities Inc., both of which have now collapsed. When bankruptcy auditors dug into these they found each company had invested millions in the stock of the other, control was gnarled and intertwined in a series of manipulations that probably represented the most amazing financial juggling in history.
This was the house of cards that Samuel Insull built up for himself, and by which he was destroyed in the greatest business failure in the world’s history.
Insull on Time
Left to right: November 29, 1926; November 4, 1929; May 14, 1934
Chicago Tribune, July 17, 1938
1 William Crane’s “The Senator” premiered in New York on January 13, 1890 and was never played in Chicago in 1890’s. The play that was referred to was probably William H. Crane’s “The Head of the Family,” which opened at Powers’ Theater on February 6, 1899. It featured Miss Gladys Wallis as Josie Holden, the Holdens’ youngest daughter. On June 1, 1899, it was announced that Insull married her in New York and moved into his apartment at 49 Delaware in Chicago.
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