Bubble, Bubble No— Toil, No Trouble


Although city, state, and federal officials in their overlapping investigations had turned up nothing against Ponzi, a less official but much more efficient investigation was being carried on in the editorial office of the Boston Post . Young Richard Grozier, the assistant editor and publisher, was convinced that Ponzi had never bought so much as a dime’s worth of international reply coupons and that he was merely taking in money at one wicket to pay it out at the next. If nobody else was able to show Ponzi up, Grozier determined the Post would.

On Sunday, July 25, Grozier discussed Ponzi and his scheme with Clarence W. Barren, the Boston financier and publisher of the financial daily The Boston News Bureau (later Barron’s Weekly ) Barron admitted that it was theoretically possible to make money by manipulating international reply coupons, but said he was sure it would be impossible to turn over more than a few thousand dollars that way. To talk of running them up to Ponzi’s ten million dollars was, Barron said, ridiculous. He added that it was odd for Ponzi to put his own funds into banks paying only around 5 per cent when he was offering 50 per cent to other people. Not even if Rockefeller made an offer like Ponzi’s would anyone with any financial sense put his money into it. The wizard of School Street was, in Barron’s opinion, just another goldbrick salesman.

Monday morning the Post headlined Barron’s views on the front page. The result was a run on the Securities and Exchange Company. A line of a different temper and intent soon choked School Street, but Ponzi, jaunty and self-assured as ever, saw to it that everyone in the line who wanted his notes cashed got his money back. By afternoon he had turned the run into a stampede of new investors. Meanwhile, he calmly admitted that his story of the coupons was just a blind. Its purpose, he said, was to keep Wall Street speculators from catching on to his moneymaking methods, which were his secret. He told Grozier that no investigation could hurt him, that he had money enough to pay off his investors in full any time. In spite of Grozier’s warning columns in the Post , Ponzi continued to prosper. Crowds welcomed him as he walked down Washington Street along Newspaper Row past the Post building. When someone shouted, “Three cheers for Ponzi,” they were given with a roar; and as they died down he shouted back, to their laughter, “Three groans for the Post !” “Who’s the greatest Italian that ever lived?” someone else called out to him. “Columbus,” Ponzi called back, “because he discovered America.” “But you discovered money!” came the reply, with many cheers. McMasters, the advertising man retained by Ponzi, told reporters that Ponzi was planning to give the city an Italian hospital and had already pledged $100,000 for an Italian orphanage. Ponzi himself said he was considering running for mayor or governor, not stressing the fact that he was still an alien.

Late Monday afternoon, July 26, 1920, District Attorney Pelletier announced that Ponzi had agreed to suspend accepting any more investment money until his books could be audited. The district attorney did not hint at any fraud and was careful to say that there was no charge against Ponzi; it was just that his operations had become so vast that an audit was in the public interest. Meanwhile Ponzi, unperturbed, continued to pay any notes that fell due and to redeem later notes at face value.


By the time the deposits closed on Monday at Twenty-seven School Street, 30,195 persons had paid in $9,582,591 since December, 1919, for a promised return of $14,374,818. The average investor had put down $300. Some of those from the little streets, however, had turned in their life’s savings. The confidence record seems to have gone to a Quincy woman who sold all her real estate and invested $33,000. Richard Engstrom, who had sold Ponzi his Lexington house, turned in $20,000. Judge Leveroni proved his faith, if not his acuity, by investing $5,400.

Even after the deposit wickets of the Securities and Exchange Company had been battened down, Ponzi was still a hero to the man in the street, the more so now because he seemed to have the bankers and the big people arrayed against him. He still continued to pay off any notes due, still drove into Boston daily in his Locomobile, as fresh and confident as ever. One day, to relax, he went for a plane ride at the Lynnway Airport. It cost him thirty dollars for thirty minutes, and he gave the pilot a ten-dollar tip and said he planned to buy a plane of his own. However, he had by this time become something less than a hero to his publicity agent. A disillusioned McMasters went around the corner to Grozier to tell him that Ponzi was “as crooked as a winding staircase” and agreed to write the whole story for the Post. It appeared under McMasters’ name in a special edition on the second of August. Ponzi was, according to McMasters, “hopelessly insolvent"; his debts were now between $2 million and $4.5 million.