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When The Headlines Said: Charlie Schwab Breaks The Bank
The Monte Carlo capers of U. S. Steel’s new president outraged Andy Carnegie but never ruffled J. P. Morgan
April 1957 | Volume 8, Issue 3
Their play, Schwab insisted, was completely casual “and simply for amusement.” True, they were betting what were called “maximums” (nine louis d’or), which were worth about $36, and occasionally when a member of the party won he left his chips on the cloth for a second play. But at no time did any of them win or lose any considerable sum. Indeed—and for some reason this seemed vital in Schwab’s eyes—they had never actually sat down at the table. They had created no disturbances, attracted no special attention, and had certainly not broken the bank. When indignant cables began to descend upon him, Schwab was dumfounded. “To say that I was astonished and chagrined,” he wrote a friend, “is putting it mildly.”
He was also badly frightened, especially by the thought of what might be going on in the New York office of J. Pierpont Morgan. No cable had reached him from that source, but President Schwab knew who really ran the United States Steel Corporation. He therefore cabled George Perkins, who was known to readers of the newspapers as “Morgan’s right hand man”:
AM ADVISED THAT THERE HAVE BEEN SENSATIONAL PUBLICATIONS REGARDING GAMBLING. … DID PLAY BUT SENSATIONAL STATEMENTS OF GREAT WINNINGS AND LOSSES ABSOLUTELY FALSE. FRIENDS ADVISE BY CABLE THAT SHOULD RESIGN. OF COURSE WILL DO SO IF MORGAN THINKS I SHOULD. SORRY. CABLE ME AT BRISTOL HOTEL VIENNA ANY ADVICE OR INSTRUCTIONS.
This cable reached the Morgan offices at the corner of Broad and Wall streets at about the same time as Carnegie’s letter to Morgan. The great financier and his “right hand man” compared notes. As a result, Perkins cabled Schwab:
VERY SENSATIONAL REPORTS IN NEWSPAPERS....THINK IT ADVISABLE AND IMPORTANT YOU CABLE SUCH A MESSAGE AS GAYLEY CAN GIVE NEWSPAPERS AND STOP BAD EFFECT.
When this order reached Nice, Schwab prepared a brief statement, which was published in the New York papers on the fifteenth. “I have been on an automobile trip through the south of France with a party of friends,” he announced. “I did visit the Casino at Monte Carlo, but the statements of sensational gambling are false.” But he realized that this was a pretty lame explanation, although it did have the virtue of being true. Mr. Morgan deserved a fuller account. However, one does not approach an emperor directly; Schwab addressed his letter to Perkins.
“I am sorry that my visit to the Riviera and especially to Monte Carlo should have provoked so much publicity,” he wrote. He described what had actually taken place, stressing his erect position while following the little spinning ball and the respectable company he had been with (“Lord Rothschild was with me”). He also admitted the error of his ways. “I can see now that it was a mistake. Of course. If the mistake was of such a character as to injure our company … by all means you should permit me to quietly resign…. Frankly cable me what Mr. Morgan and yourself think.” But he could not resist adding that late had treated him very badly. “ I have been coming here for 15 years,” he complained. “I always visit the Casino on acct of its orchestra.” And he signed himself “Sorrowfully Yours.” He also dispatched another long cable to Perkins, summarizing the situation:
MY ONLY REGRET IS THAT MR MORGAN SHOULD BE ANNOYED AND I WILL DO ANYTHING HE DESIRES. … HAVE GAYLEY DO ANYlHlNG IN THE MATTER YOU SEE FIT.
Back in New York the excitement and indignation were not stilled by Schwab’s weak public statement. The yellow press pushed the story for all it was worth. Wall Street was full of rumors that Morgan had given Schwab a terrible dressing-down via cable, and even before Schwab’s announcement was released the Journal had carried the headline: MORGAN TO SCHWAB: STOP GAMBLING . The Times, which had questioned the authenticity of the original reports, now condemned his actions. How, asked the Times, could a man of Schwab’s responsibilities “join the intellectual and social dregs of Europe around the gaming tables of Monte Carlo, and there make a more or less prolonged effort to ‘beat’ a game which to a mathematical certainty cannot be beaten?”
Fortunately for Schwab, the House of Morgan was unmoved by the clamor. Perhaps Morgan, whose own pleasure seeking was a constant source of interest to the newspapers, shared Schwab’s fondness for the casino orchestra. In any case, Perkins had begun to “straighten out” the press as early as the evening of the fourteenth, and after receiving Schwab’s elaborate cable of the fifteenth, he hastened to reassure the beleaguered gambler that he would not have to resign. “Any friends that cable you as you say are pretty poor sort of friends and under no circumstances should you take any such step,” he ordered. After another day of “straightening” the situation was well in hand, and Perkins cabled again to Schwab, who was by then in Vienna: