War Years – 1940 to 1945
War Years – 1940 to 1945
Corporate Finance and Investment Activity
In July 1940, A. G. Becker & Co. managed a $9,500,000 offering of three- to 10-year bonds priced at a small premium over par, to yield 3/8 of 1% up to 1 1/2%, issued by the First-Trust Joint Stock Land Bank of Chicago, the capital stock of which was owned by First-Chicago Corporation. First-Chicago was owned in Trust for the benefit of the shareholders of the First National Bank of Chicago. A few years later, in 1943, Becker assisted the First National Bank in distributing to its stockholders the shares of common stock of the Uptown Bank owned by First-Chicago Corp. After the distribution, Uptown would begin to pay dividends again, the last such distributions having been made in 1929.
Earlier in 1940, the Manhattan-Dearborn Corporation merged with and into its subsidiary, the Lawbeck Corporation, and changed its name to Consolidated Dearborn Corporation. The Consolidated Dearborn Corporation would continue the business of each predecessor corporation. Among other Lawbeck interests, now owned by Consolidated Dearborn, would be a significant interest in the Carlyle Hotel in New York.
In April 1943, Lear Avia, Inc., an aviation equipment and accessory manufacture with 2,100 employees headquartered in Piqua, Ohio, announced that it would be acquired by Consolidated Dearborn. Lear Avia was founded in 1930 by William Lear, former Chicagoan and prominent inventor. In 1942, the company realized a net income of $2 ½ million on sales of $9 ½ million. Sales in 1943 were expected to be in the $25-30 million range with good growth in net income over 1942. Consolidated Dearborn experienced substantial tax losses in recent years, and it was anticipated that Lear Avia’s profits would be shielded from taxation for some period.
New corporate client relationships established by Becker during the war time period included Gisholt Machine; Pittsburgh Steel; Kaufman Stores; Oscar Mayer; Katz Drug; Howard Stores; Mojud Hosiery; Gerber; Ashland Oil; Bond Stores; and Kroehler Manufacturing. Repeat public and secondary offerings during this period involving securities of clients established in earlier periods included Heyden Chemical; Hammermill Paper; Abbott Labs; Burlington Mills; Morrell; Wieboldt; Hart, Schaffner, and Marx; and Gardner Denver.
Investment Research Marketing
During this period, Becker began to recommend selected securities for investment through ads singularly promoting those securities, or in group lists, in research reports available on request, and by maintaining an over-the-counter market in those securities. These ads mentioned such issuers as City of New York (bonds); A. M. Castle; Cudahy Packing; Quaker State Oil; Commonwealth Edison; National Bank of Detroit; U.S. Playing Card; and the common stocks of a number of established clients including Parker Pen; Heyden Chemical; Gardner Denver; Gillette; Federated Stores; Ashland Oil; Acme Steel; Wieboldt's; and the First National Bank of Chicago.
At the same time, the firm renewed an “institutional” advertising program - no securities mentioned - with the text supporting such headlines as “Common Stocks for Income”; “A Common Stock Program”; “Common Stocks of Investment Quality”; “Complete Investment Service”; “Investing for Income”; "Preferred Stocks”; and the like. The Becker ads now had a slogan at the bottom of each ad: “Investment Banking for Over Fifty Years.” Read more about the firm's advertising program during this period in Appendix-5.
War Bond Sales
In January 1942, just a month after Pearl Harbor, an advertisement was published in the Tribune with the headline “Buy the Safest Investment in the World . . . United States Defense Bonds.” The ad goes on to report that Becker was appointed an official issuing agent for Series E bonds and, on behalf of clients, would execute the application for and delivery of Series F and G bonds, all at no charge.
In a Tribune story on November 12, 1942, all employees of the Chicago office gave up their Armistice Day holiday and gave full time to selling U.S. government bonds. At the close of day, the effort resulted in subscriptions from 430 individual and corporate customers totaling $10.2 million.
In April 1943, the Tribune reported that 147 securities houses in Chicago, utilizing 800 salespersons, though a large committee of which Andy Baird was a member, were committed to selling war bonds “with the war rapidly approaching the invasion stage . . . and the tremendous flow of money (which would be required) for supplies.”
In an ad on June 15, 1944, A. G. Becker recommended “maximum possible purchases of U.S. Government obligations, the safest investment in the world.” This ad was followed up with similar text on June 29. The sixth War Loan drive took place in October 1944 and the seventh in May 1945. In an ad in November 1945, with the headline “Finish the Job,” the firm invited the reader to participate in the eighth final government bond sales drive with the title “The Victory Loan Campaign.”
Throughout the wartime period, though at a reduced level, public taxable and tax-exempt offerings were syndicated and Becker participated in its normal level.
As in the case of all business organizations during this period, many employees, primarily male, joined the military and spent a number of years in far-flung places and some in combat. Someone in Becker had the idea of inviting its employees/servicemen to write letters from wherever they were stationed, describing what they were doing and seeing, and sending these letters to the Chicago office for transcription and distribution through the Daily Bulletin which was circulated to all employees in all Becker offices. In addition, the transcriptions would be mailed out to all the participating servicemen. The firm’s archives include a set of these letter transcriptions, running from July 18, 1942, through January 24, 1945.
For the record, below are all the names of Becker employees who wrote at least one letter as retained in the archives.
David S. Stern, Jr. Carl W. Stern Bob Carey Larry Garrity Fred Ornstein
Wendell Anderson Russell St. Clair Carol Stoike Larry Morris James Lynch
Warren Bergin Art Longini Jack Ransford Clinton Erlandson Joe Wolf
Arthur Carroll Arthur Curtis David Tripp Rudy Fisher Barney Feldhouse
Harry Fachs Bob Lane Bob Demske Harold Forbis
Irving Sherman - OSS
Interestingly, Irv Sherman is not in the above list. Upon closing the Berlin office in 1939, Irv returned to the New York office where very shortly thereafter he met his wife-to-be - Marie Vandeputte. Marie was a well-recognized concert pianist. They were married in 1941. On their honeymoon, Irv was tracked down by "Wild Bill" Donovan who had learned of Irv’s 1930s activities, connections, and knowledge of the German government financial situation in Berlin. After a brief discussion, Donovan “drafted” Irv into the then-being-formed Office of Strategic Services (“OSS”), predecessor to the CIA. Based on discussions with Richard Barzin, former Becker employee and Irv’s stepson, it appears that Irv spent most of the wartime years in Bern, the Switzerland office of the OSS, under the leadership of Allen Dulles. After the War, Irv assisted in the negotiations with Switzerland and U.S. allies in the disposition of seized assets in Switzerland and in the reestablishment of the German banking system, returning to Becker’s New York office in 1946.
All during the War, while Irv was with the OSS, Mrs. Sherman and her children (by a prior marriage) lived in the Carlyle Hotel which, as earlier noted, was owned in whole or in part by Lawbeck and then Consolidated Dearborn. Upon Irv’s return from Europe he joined the family at the Carlyle where they lived until 1948.
In 1967, in preparation for a trip together to Europe, Irv told the author the following story. Apparently as the war was ending and Berlin was being taken, an OSS team including Irv was embedded in a U.S. Army unit as it entered Berlin. Irv was contacted by old friends in the senior management of the Berliner Handelgesellschaft Bank, a long established Berlin institution. The bank's management was concerned that the Russians, coming into Berlin from the East, would pillage the gold in the bank’s vault. Irv quickly arranged for an Army caravan to go to the bank, load the gold into Army trucks, and transport the gold to a secret location to the west of Berlin occupied by the U.S. Army, well out of reach from the Russians. Shortly after the shooting stopped, the gold was retrieved by the bank, enabling it to initiate post-war operations. On the trip to Europe in 1967, Irv and I lunched at the bank and were given a royal, red carpet welcome. The conversation over lunch was centered on how Irv had saved the bank.
On the same trip to Europe, we had lunch in Dusseldorf with Heinz Kemper. The author remembers that, as an appetizer, our host consumed plovers’ eggs - a delicacy from the beaches of the North Sea. Kemper had just been elected Chairman of Vereinigte Elektrizitäts und Bergwerks Aktiengesellschaft (VEBA), which company in 1965 absorbed a portion of the Hugo Stinnes Corporation. Kemper had been the General Director and Irv Sherman a Board member of Stinnes. Once again, over lunch, Irv was the respected celebrity, as Kemper reviewed old times with his long-time friend.
As mentioned earlier, at some point in the fifteen years of depression and war, all of Becker’s offices which were open in 1929, other than Chicago, New York, and Milwaukee, were evidently closed as the domestic securities and commercial paper business “dried up,” and expense containment was crucial to survival. In 1938, an office in Rochester was opened but apparently closed during the war period. As noted earlier, the Berlin office was closed in 1939. An overview of Becker’s offices from inception to death is shown in this table.
Before moving on, it is interesting to note that in 1942, by reason of the old and very close relationship between Albert Lasker and Abraham Becker, the key executives of the Lord & Thomas agency - Emerson Foote, Fairfax Cone, and Don Belding - approached Becker for a loan to their newly formed enterprise, Foote, Cone & Belding. The purpose of this loan was to help finance the purchase of the fixed assets of Lord & Thomas, now in dissolution with Albert Lasker’s retirement. The loan for was $100,000 due in one year; it was promptly granted, and FCB was launched. Each of the principals provided an equal amount of the new firm’s equity of $100,000. The new agency paid off the loan in nine months. "Foote Cone," like its predecessor, went on to become one of the world’s leading advertising agencies.