Bubble, Bubble No— Toil, No Trouble


McMasters’ article started another and more persistent run on the Securities and Exchange Company offices. Again School Street was a bobbing mass of straw hats. Yet even now the little investor kept his faith in Ponzi, the man of the people, the one man who dared stand up to the big bankers and show he could beat them at their own game. Ponzi protested that if only the authorities would let him alone, he would pay i oo per cent interest in ninety days on all the money he had accepted. His supporters passed out handbills up and down School Street, defending their man and denouncing the “unscrupulous bankers” who were attacking him. Speculators edged up and down the lines of those waiting to get their money, offering to buy the notes on the spot at a discount. Ponzi followed, radiating reassurance, warning the impatient that anyone selling his notes then was giving up his certain profits. An employee of a Boston brokerage house declared that his firm had asked an Italian bank if Ponzi had credit, and the reply had come: “To any amount.” That story spread and grew.

By passing out hundreds of thousands of dollars without a tremor Ponzi kept the crowd with him. He paid with checks on the Hanover Trust Company, to which he was now indebted for a quarter of a million. About the same time he acquired a personal poet laureate, one James Francis Morelli, a sometime vaudeville hoofer with a knack for making rhymes. Morelli had a desk at the Securities and Exchange Company and an alleged salary of three hundred dollars a week. One of his efforts advised:

If they should ask you to sell your notes, Step forward and exclaim: “No indeed, I’m sorry, lad, ‘Cause my notes bear Ponzi’s name.” Just step in line, and wait with ease, And avoid all sorts of commotion For Ponzi has as many dollars as There are ripples in the ocean.

Ponzi thumbed his nose at Grozier’s office as he walked by on his way to the courthouse to bring a fivemillion-dollar libel suit against the Post . But the clouds were gathering. Early in August Massachusetts Bank Commissioner Joseph C. Alien closed down the Hanover Trust Company over the protest of the bank’s officers. Ponzi supporters, undaunted, reviled the commissioner. In spite of the Post and McMasters and the commissioner, Ponzi was still the poor man’s Midas, who could trounce the bankers at their own game.

Abruptly, predictably, and astonishingly— like John EaW5S Mississippi Scheme and the South Sea Bubble before it—the Ponzi bubble burst. Grozier, after receiving an anonymous tip that Ponzi had once been jailed in Quebec, sent a reporter, Herbert E. Baldwin, to Montreal. After two days of poking about in the Italian district and then checking his information at police headquarters Baldwin discovered that the Boston financier was none other than an exconvict, Charles Bianchi, alias Ponsi, who in 1908 had been sentenced to twenty months in the St. Vincent de Paul Prison for forgery.

On August 11 the Post broke the story in banner headlines. In 1908 Charles Ponsi had arrived in Montreal to organize a financial operation much like his later Boston scheme. With Joseph Zarrossi, the owner of a small cigar factory in a settlement of Italian immigrants, he had set up the banking office of Zarrossi & Company. Ponsi, as manager, announced that the company would pay depositors the highest rate of interest in the city. Immigrants flocked to the new bank with their savings. Ponsi paid the interest with the capital of the newest depositors. Zarrossi & Company also accepted remittances to be forwarded to Italy —money that somehow never arrived. When the police and the bank examiners finally closed in, Zarrossi decamped to Mexico. But Ponsi was so successful in placing the blame on his absent partner that he might have gone free if he had not lightheartedly borrowed a blank check from the Canadian Warehousing Company, traced the manager’s signature on it, and filled it out to the plausible figure of $423.68. It was this minor feat of penmanship that sent him to St. Vincent de Paul.


The Post ’s account of Charles Ponsi’s Canadian career was flanked by a Montreal rogues’-gallery photograph of a mustached Ponsi and a photograph of Boston’s Ponzi with a mustache painted on. The two looked almost identical. Before running the article Grozier sent two reporters to Lexington to show it to Ponzi, who laughed and said it was all false. The Montreal convict was somebody else, he assured the reporters. He himself had never been to Montreal, had never been arrested, and would bankrupt the Post with libel suits if any such story came out. Nevertheless Grozier, after a telephone talk with his reporter, who was still in Montreal, decided to go ahead and print.