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June 2024
1min read

Most Overrated Financier:

Bernard Baruch. This is not to say he was a poor politician or statesman. Baruch performed yeoman service during World War I, when he headed the War Industries Board, and he served well under Presidents Roosevelt and Truman. As financier, however, he has at best a spotty record. But still, he was a genius at self-promotion; unlike most of the plungers of his time, he yearned for the public spotlight, and he certainly had it. For instance, he created the fable that he sold his holdings just before the 1929 Crash and got back so into the market at the bottom in 1929. In fact he lost heavily in the Crash and was not in stocks in 1932.

Most Underrated Financier:

I would like to suggest that Clarence Dillon is the most underrated banker in American history. In 1921 his then smallish bank, Dillon Read, saved Goodyear from bankruptcy after the major banks, including J. P. Morgan & Company, had rejected the task as impossible. By so doing, Dillon filled the role Morgan had taken in the 1907 Panic and may have helped avert another calamity.

Dillon had an even greater international impact than had Morgan in his time. In the age of the five-cent hot dog, Dillon Read handled $1.5 billion in foreign underwritings alone. Investors during the 1920s imagined Dillon as a combination Warren Buffett and George Soros, with some Peter Lynch thrown in. Dillon’s most spectacular deal involved the leveraged buyout of Dodge Brothers and its eventual sale. The purchase was the largest cash transaction in American business to that time, and the timing of the disposition near perfect: In 1927 he sold Dodge to Chrysler for $170 million in Chrysler paper plus the assumption of the Dodge debt. Dillon sold the Chrysler securities quickly and so might claim a victory that looked even better when the industry nose-dived during the Great Depression.

That depression brought an end to the glory days of investment banking, and the bankers, heroes of the boom, became the scapegoats for the Crash. Along with other bankers Dillon went into eclipse.

He died in 1979, at the age of ninety-six, but long before then most 1920s veterans had either forgotten the man or thought him dead. Today, if he is recalled at all, it is as the father of C. Douglas Dillon, who served as Secretary of the Treasury in the 1960s. Who remembers the Dodge deal? Such is the nature of fame in investment banking.

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