Chapter 8 The Last Great Corner

BETWEEN SPRING and midsummer, 1958, the common stock ofthe E. L. Bruce Company, the nation’s leading maker ofhardwood floors, moved from a low of just under $17 a shareto a high of $190 a share. This startling, even alarming, risewas made in an ascending scale that was climaxed by a franticcrescendo in which the price went up a hundred dollars ashare in a single day. Nothing of the sort had happened for ageneration. Furthermore—and even more alarming—the rise didnot seem to have the slightest bit of relation to any suddenhunger on the part of the American public for new hardwoodfloors. To the consternation of almost everyone concerned,conceivably including even some of the holders of Bruce stock,it seemed to be entirely the result of a technical stock-marketsituation called a corner. With the exception of a general panicsuch as occurred in 1929, a corner is the most drastic andspectacular of all developments that can occur in the stockmarket, and more than once in the nineteenth and earlytwentieth centuries, corners had threatened to wreck thenational economy.
The Bruce situation never threatened to do that. For onething, the Bruce Company was so small in relation to theeconomy as a whole that even the wildest gyrations in its stockcould hardly have much national effect. For another, the Bruce“corner” was accidental—the by-product of a fight for corporatecontrol—rather than the result of calculated manipulations, asmost of the historic corners had been. Finally, this oneeventually turned out to be not a true corner at all, but only anear thing; in September, Bruce stock quieted down and settledat a reasonable level. But the incident served to stir upmemories, some of them perhaps tinged with nostalgia, amongthose flinty old Wall Streeters who had been around to see theclassic corners—or at least the last of them.
In June of 1922, the New York Stock Exchange began listingthe shares of a corporation called Piggly Wiggly Stores—a chainof retail self-service markets situated mostly in the South andWest, with headquarters in Memphis—and the stage was set forone of the most dramatic financial battles of that gaudy decadewhen Wall Street, only negligently watched over by the federalgovernment, was frequently sent reeling by the machinations ofoperators seeking to enrich themselves and destroy theirenemies. Among the theatrical aspects of this particular battle—abattle so celebrated in its time that headline writers referred toit simply as the “Piggly Crisis”—was the personality of the hero(or, as some people saw it, the villain), who was a newcomerto Wall Street, a country boy setting out defiantly, amid thecheers of a good part of rural America, to lay the slickmanipulators of New York by the heels. He was ClarenceSaunders, of Memphis, a plump, neat, handsome man offorty-one who was already something of a legend in his hometown, chiefly because of a house he was putting up there forhimself. Called the Pink Palace, it was an enormous structurefaced with pink Georgia marble and built around anawe-inspiring white-marble Roman atrium, and, according toSaunders, it would stand for a thousand years. Unfinishedthough it was, the Pink Palace was like nothing Memphis hadever seen before. Its grounds were to include a private golfcourse, since Saunders liked to do his golfing in seclusion. Eventhe makeshift estate where he and his wife and four childrenwere camping out pending completion of the Palace had itsown golf course. (Some people said that his preference forprivacy was induced by the attitude of the local country clubgovernors, who complained that he had corrupted their entiresupply of caddies by the grandeur of his tips.) Saunders, whohad founded the Piggly Wiggly Stores in 1919, had most of thestandard traits of the flamboyant American promoters—suspectgenerosity, a knack for attracting publicity, love of ostentation,and so on—but he also had some much less common traits,notably a remarkably vivid style, both in speech and writing,and a gift, of which he may or may not have been aware, forcomedy. But like so many great men before him, he had aweakness, a tragic flaw. It was that he insisted on thinking ofhimself as a hick, a boob, and a sucker, and, in doing so, hesometimes became all three.
This unlikely fellow was the man who engineered the last realcorner in a nationally traded stock.
THE game of Corner—for in its heyday it was a game, ahigh-stakes gambling game, pure and simple, embodying a goodmany of the characteristics of poker—was one phase of theendless Wall Street contest between bulls, who want the priceof a stock to go up, and bears, who want it to go down.
When a game of Corner was under way, the bulls’ basicmethod of operation was, of course, to buy stock, and thebears’ was to sell it. Since the average bear didn’t own any ofthe stock issue in contest, he would resort to the commonpractice of selling short. When a short sale is made, thetransaction is consummated with stock that the seller hasborrowed (at a suitable rate of interest) from a broker. Sincebrokers are merely agents, and not outright owners, they, inturn, must borrow the stock themselves. This they do bytapping the “floating supply” of stock that is in constantcirculation among investment houses—stock that privateinvestors have left with one house or another for tradingpurposes, stock that is owned by estates and trusts and hasbeen released for action under certain prescribed conditions,and so on. In essence, the floating supply consists of all thestock in a particular corporation that is available for trading andis not immured in a safe-deposit box or encased in a mattress.
Though the supply floats, it is scrupulously kept track of; theshort seller, borrowing, say, a thousand shares from his broker,knows that he has incurred an immutable debt. What hehopes—the hope that keeps him alive—is that the market priceof the stock will go down, enabling him to buy the thousandshares he owes at a bargain rate, pay off his debt, and pocketthe difference. What he risks is that the lender, for one reasonor another, may demand that he deliver up his thousandborrowed shares at a moment when their market price is at ahigh. Then the grinding truth of the old Wall Street jingle isborne in upon him: “He who sells what isn’t his’n must buy itback or go to prison.” And in the days when corners werepossible, the short seller’s sleep was further disturbed by thefact that he was operating behind blank walls; dealing only withagents, he never knew either the identity of the purchaser ofhis stock (a prospective cornerer?) or the identity of the ownerof the stock he had borrowed (the same prospective cornerer,attacking from the rear?).
Although it is sometimes condemned as being the tool of thespeculator, short selling is still sanctioned, in a severelyrestricted form, on all of the nation’s exchanges. In itsunfettered state, it was the standard gambit in the game ofCorner. The situation would be set up when a group of bearswould go on a well-organized spree of short selling, and wouldoften help their cause along by spreading rumors that thecompany back of the stock in question was on its last legs.
This operation was called a bear raid. The bulls’ mostformidable—but, of course, riskiest—counter-move was to try fora corner. Only a stock that many traders were selling shortcould be cornered; a stock that was in the throes of a realbear raid was ideal. In the latter situation, the would-becornerer would attempt to buy up the investment houses’
floating supply of the stock and enough of the privately heldshares to freeze out the bears; if the attempt succeeded, whenhe called for the short sellers to make good the stock they hadborrowed, they could buy it from no one but him. And theywould have to buy it at any price he chose to ask, their onlyalternatives—at least theoretically—being to go into bankruptcy orto jail for failure to meet their obligations.
In the old days of titanic financial death struggles, when AdamSmith’s ghost still smiled on Wall Street, corners were fairlycommon and were often extremely sanguinary, with hundredsof innocent bystanders, as well as the embattled principals,getting their financial heads lopped off. The most famouscornerer in history was that celebrated old pirate, CommodoreCornelius Vanderbilt, who engineered no less than threesuccessful corners during the eighteen-sixties. Probably hisclassic job was in the stock of the Harlem Railway. By dint ofsecretly buying up all its available shares while simultaneouslycirculating a series of untruthful rumors of imminent bankruptcyto lure the short sellers in, he achieved an airtight trap. Finally,with the air of a man doing them a favor by saving themfrom jail, he offered the cornered shorts at $179 a share thestock he had bought up at a small fraction of that figure. Themost generally disastrous corner was that of 1901 in the stockof Northern Pacific; to raise the huge quantities of cash theyneeded to cover themselves, the Northern Pacific shorts sold somany other stocks as to cause a national panic with world-widerepercussions. The next-to-last great corner occurred in 1920,when Allan A. Ryan, a son of the legendary Thomas FortuneRyan, in order to harass his enemies in the New York StockExchange, sought to corner the stock of the Stutz MotorCompany, makers of the renowned Stutz Bearcat. Ryanachieved his corner and the Stock Exchange short sellers wereduly squeezed. But Ryan, it turned out, had a bearcat by thetail. The Stock Exchange suspended Stutz dealings, lengthylitigation followed, and Ryan came out of the affair financiallyruined.
Then, as at other times, the game of Corner suffered from adifficulty that plagues other games—post-mortem disputes aboutthe rules. The reform legislation of the nineteen-thirties, byoutlawing any short selling that is specifically intended todemoralize a stock, as well as other manipulations leadingtoward corners, virtually ruled the game out of existence. WallStreeters who speak of the Corner these days are referring tothe intersection of Broad and Wall. In U.S. stock markets, onlyan accidental corner (or near-corner, like the Bruce one) isnow possible; Clarence Saunders was the last intentional playerof the game.
SAUNDERS has been variously characterized by people whoknew him well as “a man of limitless imagination and energy,”
“arrogant and conceited as all getout,” “essentially afour-year-old child, playing at things,” and “one of the mostremarkable men of his generation.” But there is no doubt thateven many of the people who lost money on his promotionalschemes believed that he was the soul of honesty. He wasborn in 1881 to a poor family in Amherst County, Virginia, andin his teens was employed by the local grocer at the pittancethat is orthodox for future tycoons taking on their first jobs—inhis case, four dollars a week. Moving ahead fast, he went onto a wholesale grocery company in Clarksville, Tennessee, andthen to one in Memphis, and, while still in his twenties,organized a small retail food chain called United Stores. He soldthat after a few years, did a stint as a wholesale grocer on hisown, and then, in 1919, began to build a chain of retailself-service markets, to which he gave the engaging name ofPiggly Wiggly Stores. (When a Memphis business associate onceasked him why he had chosen that name, he replied, “Sopeople would ask me what you just did.”) The stores flourishedso exuberantly that by the autumn of 1922 there were overtwelve hundred of them. Of these, some six hundred and fiftywere owned outright by Saunders’ Piggly Wiggly Stores, Inc.;the rest were independently owned, but their owners paidroyalties to the parent company for the right to adopt itspatented method of operations. In 1923, an era when agrocery store meant clerks in white aprons and often a thumbon the scale, this method was described by the New YorkTimes with astonishment: “The customer in a Piggly WigglyStore rambles down aisle after aisle, on both sides of which areshelves. The customer collects his purchases and pays as hegoes out.” Although Saunders did not know it, he had inventedthe supermarket.
A natural concomitant of the rapid rise of Piggly WigglyStores, Inc., was the acceptance of its shares for listing on theNew York Stock Exchange, and within six months of that eventPiggly Wiggly stock had become known as a dependable, ifunsensational, dividend-payer—the kind of widows’-and-orphans’
stock that speculators regard with the respectful indifferencethat crap-shooters feel about bridge. This reputation, however,was shortlived. In November, 1922, several small companies thathad been operating grocery stores in New York, New Jersey,and Connecticut under the name Piggly Wiggly failed and wentinto receivership. These companies had scarcely any connectionwith Saunders’ concern; he had merely sold them the right touse his firm’s catchy trade name, leased them some patentedequipment, and washed his hands of them. But when theseindependent Piggly Wigglys failed, a group of stock-marketoperators (whose identities never were revealed, because theydealt through tight-lipped brokers) saw in the situation aheaven-sent opportunity for a bear raid. If individual PigglyWiggly stores were failing, they reasoned, then rumors could bespread that would lead the uninformed public to believe thatthe parent firm was failing, too. To further this belief, theybegan briskly selling Piggly Wiggly short, in order to force theprice down. The stock yielded readily to their pressure, andwithin a few weeks its price, which earlier in the year hadhovered around fifty dollars a share, dropped to below forty.
At this point, Saunders announced to the press that he wasabout to “beat the Wall Street professionals at their own game”
with a buying campaign. He was by no means a professionalhimself; in fact, prior to the listing of Piggly Wiggly he hadnever owned a single share of any stock quoted on the NewYork Stock Exchange. There is little reason to believe that atthe beginning of his buying campaign he had any intention oftrying for a corner; it seems more likely that his announcedmotive—the unassailable one of supporting the price of thestock in order to protect his own investment and that of otherPiggly Wiggly stockholders—was all he had in mind. In anycase, he took on the bears with characteristic zest,supplementing his own funds with a loan of about ten milliondollars from a group of bankers in Memphis, Nashville, NewOrleans, Chattanooga, and St. Louis. Legend has it that hestuffed his ten million-plus, in bills of large denomination, into asuitcase, boarded a train for New York, and, his pocketsbulging with currency that wouldn’t fit in the suitcase, marchedon Wall Street, ready to do battle. He emphatically denied thisin later years, insisting that he had remained in Memphis andmasterminded his campaign by means of telegrams andlong-distance telephone calls to various Wall Street brokers.
Wherever he was at the time, he did round up a corps ofsome twenty brokers, among them Jesse L. Livermore, whoserved as his chief of staff. Livermore, one of the mostcelebrated American speculators of this century, was thenforty-five years old but was still occasionally, and derisively,referred to by the nickname he had earned a couple ofdecades earlier—the Boy Plunger of Wall Street. Since Saundersregarded Wall Streeters in general and speculators in particularas parasitic scoundrels intent only on battering down his stock,it seemed likely that his decision to make an ally of Livermorewas a reluctant one, arrived at simply with the idea of gettingthe enemy chieftain into his own camp.
On the first day of his duel with the bears, Saunders,operating behind his mask of brokers, bought 33,000 shares ofPiggly Wiggly, mostly from the short sellers; within a week hehad brought the total to 105,000—more than half of the200,000 shares outstanding. Meanwhile, ventilating his emotionsat the cost of tipping his hand, he began running a series ofadvertisements in which he vigorously and pungently told thereaders of Southern and Western newspapers what he thoughtof Wall Street. “Shall the gambler rule?” he demanded in oneof these effusions. “On a white horse he rides. Bluff is his coatof mail and thus shielded is a yellow heart. His helmet isdeceit, his spurs clink with treachery, and the hoofbeats of hishorse thunder destruction. Shall good business flee? Shall ittremble with fear? Shall it be the loot of the speculator?” OnWall Street, Livermore went on buying Piggly Wiggly.
The effectiveness of Saunders’ buying campaign was readilyapparent; by late January of 1923 it had driven the price ofthe stock up over 60, or higher than ever before. Then, tointensify the bear raiders’ jitters, reports came in from Chicago,where the stock was also traded, that Piggly Wiggly wascornered—that the short sellers could not replace the stock theyhad borrowed without coming to Saunders for supplies. Thereports were immediately denied by the New York StockExchange, which announced that the floating supply of PigglyWiggly was ample, but they may have put an idea intoSaunders’ head, and this, in turn, may have prompted acurious and—at first glance—mystifying move he made inmid-February, when, in another widely disseminated newspaperadvertisement, he offered to sell fifty thousand shares of PigglyWiggly stock to the public at fifty-five dollars a share. The adpointed out, persuasively enough, that the stock was paying adividend of a dollar four times a year—a return of more than7 percent. “This is to be a quick proposition, subject towithdrawal without prior notice,” the ad went on, calmly buturgently. “To get in on the ground floor of any big propositionis the opportunity that comes to few, and then only once in alifetime.”
Anyone who is even slightly familiar with modern economic lifecan scarcely help wondering what the Securities and ExchangeCommission, which is charged with seeing to it that all financialadvertising is kept factual, impersonal, and unemotional, wouldhave had to say about the hard sell in those last twosentences. But if Saunders’ first stock-offering ad would havecaused an S.E.C. examiner to turn pale, his second, publishedfour days later, might well have induced an apoplectic seizure.
A full-page affair, it cried out, in huge black type:
OPPORTUNITY! OPPORTUNITY!
It Knocks! It Knocks! It Knocks!
Do you hear? Do you listen? Do you understand?
Do you wait? Do you act now?…Has a new Daniel appeared and the lions eat him not?
Has a new Joseph come that riddles may be made plain?
Has a new Moses been born to a new Promised Land?
Why, then, asks the skeptical, can CLARENCE SAUNDERS … be sogenerous to the public?
After finally making it clear that he was selling common stockand not snake oil, Saunders repeated his offer to sell atfifty-five dollars a share, and went on to explain that he wasbeing so generous because, as a farsighted businessman, hewas anxious to have Piggly Wiggly owned by its customers andother small investors, rather than by Wall Street sharks. Tomany people, though, it appeared that Saunders was beinggenerous to the point of folly. The price of Piggly Wiggly onthe New York Stock Exchange was just then pushing 70; itlooked as if Saunders were handing anyone who had fifty-fivedollars in his pocket a chance to make fifteen dollars with norisk. The arrival of a new Daniel, Joseph, or Moses might bedebatable, but opportunity certainly did seem to be knocking, allright.
Actually, as the skeptical must have suspected, there was acatch. In making what sounded like such a costly andunbusinesslike offer, Saunders, a rank novice at Corner, haddevised one of the craftiest dodges ever used in the game. Oneof the great hazards in Corner was always that even though aplayer might defeat his opponents, he would discover that hehad won a Pyrrhic victory. Once the short sellers had beensqueezed dry, that is, the cornerer might find that the reams ofstock he had accumulated in the process were a dead weightaround his neck; by pushing it all back into the market in oneshove, he would drive its price down close to zero. And if, likeSaunders, he had had to borrow heavily to get into the gamein the first place, his creditors could be expected to close in onhim and perhaps not only divest him of his gains but drivehim into bankruptcy. Saunders apparently anticipated thishazard almost as soon as a corner was in sight, andaccordingly made plans to unload some of his stock beforewinning instead of afterward. His problem was to keep thestock he sold from going right back into the floating supply,thus breaking his corner; and his solution was to sell hisfifty-five-dollar shares on the installment plan. In his Februaryadvertisements, he stipulated that the public could buy sharesonly by paying twenty-five dollars down and the balance inthree ten-dollar installments, due June 1st, September 1st, andDecember 1st. In addition—and vastly more important—he saidhe would not turn over the stock certificates to the buyers untilthe final installment had been paid. Since the buyers obviouslycouldn’t sell the certificates until they had them, the stock couldnot be used to replenish the floating supply. Thus Saundershad until December 1st to squeeze the short sellers dry.
Easy as it may be to see through Saunders’ plan byhindsight, his maneuver was then so unorthodox that for awhile neither the governors of the Stock Exchange norLivermore himself could be quite sure what the man inMemphis was up to. The Stock Exchange began making formalinquiries, and Livermore began getting skittish, but he went onbuying for Saunders’ account, and succeeded in pushing PigglyWiggly’s price up well above 70. In Memphis, Saunders satback comfortably; he temporarily ceased singing the praises ofPiggly Wiggly stock in his ads, and devoted them to eulogizingapples, grapefruit, onions, hams, and Lady Baltimore cakes.
Early in March, though, he ran another financial ad, repeatinghis stock offer and inviting any readers who wanted to discussit with him to drop in at his Memphis office. He alsoemphasized that quick action was necessary; time was runningout.
By now, it was apparent that Saunders was trying for acorner, and on Wall Street it was not only the Piggly Wigglybears who were becoming apprehensive. Finally, Livermore,possibly reflecting that in 1908 he had lost almost a milliondollars trying to get a corner in cotton, could stand it nolonger. He demanded that Saunders come to New York andtalk things over. Saunders arrived on the morning of March12th. As he later described the meeting to reporters, there wasa difference of opinion; Livermore, he said—and his tone wasthat of a man rather set up over having made a piker out ofthe Boy Plunger—“gave me the impression that he was a littleafraid of my financial situation and that he did not care to beinvolved in any market crash.” The upshot of the conferencewas that Livermore bowed out of the Piggly Wiggly operation,leaving Saunders to run it by himself. Saunders then boarded atrain for Chicago to attend to some business there. At Albany,he was handed a telegram from a member of the StockExchange who was the nearest thing he had to a friend in thewhite-charger-and-coat-of-mail set. The telegram informed himthat his antics had provoked a great deal of head-shaking inthe councils of the Exchange, and urged him to stop creating asecond market by advertising stock for sale at a price so farbelow the quotation on the Exchange. At the next station,Saunders telegraphed back a rather unresponsive reply. If itwas a possible corner the Exchange was fretting about, he said,he could assure the governors that they could put their fearsaside, since he himself was maintaining the floating supply bydaily offering stock for loan in any amount desired. But hedidn’t say how long he would continue to do so.
A week later, on Monday, March 19th, Saunders ran anewspaper ad stating that his stock offer was about to bewithdrawn; this was the last call. At the time, or so he claimedafterward, he had acquired all but 1,128 of Piggly Wiggly’s200,000 outstanding shares, for a total of 198,872, some ofwhich he owned and the rest of which he “controlled”—areference to the installment-plan shares whose certificates hestill held. Actually, this figure was open to considerableargument (there was one private investor in Providence, forinstance, who alone held eleven hundred shares), but there isno denying that Saunders had in his hands practically everysingle share of Piggly Wiggly then available for trading—and thathe therefore had his corner. On that same Monday, it isbelieved, Saunders telephoned Livermore and asked if he wouldrelent long enough to see the Piggly Wiggly project through bycalling for delivery of all the shares that were owed Saunders;in other words, would Livermore please spring the trap?
Nothing doing, Livermore is supposed to have replied, evidentlyconsidering himself well out of the whole affair. So the followingmorning, Tuesday, March 20th, Saunders sprang the traphimself.
IT turned out to be one of Wall Street’s wilder days. PigglyWiggly opened at 75?, up 5? from the previous days’ closingprice. An hour after the opening, word arrived that Saundershad called for delivery of all his Piggly Wiggly stock. Accordingto the rules of the Exchange, stock called for under suchcircumstances had to be produced by two-fifteen the followingafternoon. But Piggly Wiggly, as Saunders well knew, simplywasn’t to be had—except, of course, from him. To be sure,there were a few shares around that were still held by privateinvestors, and frantic short sellers trying to shake them loosebid their price up and up. But by and large there wasn’t muchactual trading in Piggly Wiggly, because there was so little PigglyWiggly to be traded. The Stock Exchange post where it wasbought and sold became the center of a mob scene astwo-thirds of the brokers on the floor clustered around it, afew of them to bid but most of them just to push, whoop, andotherwise get in on the excitement. Desperate short sellersbought Piggly Wiggly at 90, then at 100, then at 110. Reportsof sensational profits made the rounds. The Providence investor,who had picked up his eleven hundred shares at 39 in theprevious autumn, while the bear raid was in full cry, came totown to be in on the kill, unloaded his holdings at an averageprice of 105, and then caught an afternoon train back home,taking with him a profit of over seventy thousand dollars. As ithappened, he could have done even better if he had bided histime; by noon, or a little after, the price of Piggly Wiggly hadrisen to 124, and it seemed destined to zoom straight throughthe lofty roof above the traders’ heads. But 124 was as high asit went, for that figure had barely been recorded when arumor reached the floor that the governors of the Exchangewere meeting to consider the suspension of further trading inthe stock and the postponement of the short sellers’ deadlinefor delivery. The effect of such action would be to give thebears time to beat the bushes for stock, and thus to weaken, ifnot break, Saunders’ corner. On the basis of the rumor alone,Piggly Wiggly fell to 82 by the time the Exchange’s closing bellended the chaotic session.
The rumor proved to be true. After the close of business, theGoverning Committee of the Exchange announced both thesuspension of trading in Piggly Wiggly and the extension of theshort sellers’ delivery deadline “until further action by thiscommittee.” There was no immediate official reason given forthis decision, but some members of the committee unofficiallylet it be known that they had been afraid of a repetition of theNorthern Pacific panic if the corner were not broken. On theother hand, irreverent side-liners were inclined to wonderwhether the Governing Committee had not been moved by thepitiful plight of the cornered short sellers, many of whom—as inthe Stutz Motor case two years earlier—were believed to bemembers of the Exchange.
Despite all this, Saunders, in Memphis, was in a jubilant,expansive mood that Tuesday evening. After all, his paperprofits at that moment ran to several million dollars. The hitch,of course, was that he could not realize them, but he seems tohave been slow to grasp that fact or to understand the extentto which his position had been undermined. The indications arethat he went to bed convinced that, besides having personallybrought about a first-class mess on the hated Stock Exchange,he had made himself a bundle and had demonstrated how apoor Southern boy could teach the city slickers a lesson. It allmust have added up to a heady sensation. But, like most suchsensations, it didn’t last long. By Wednesday evening, whenSaunders issued his first public utterance on the Piggly Crisis,his mood had changed to an odd mixture of puzzlement,defiance, and a somewhat muted echo of the crowing triumphof the night before. “A razor to my throat, figuratively speaking,is why I suddenly and without warning kicked the pegs fromunder Wall Street and its gang of gamblers and marketmanipulators,” he declared in a press interview. “It was strictlya question of whether I should survive, and likewise mybusiness and the fortunes of my friends, or whether I shouldbe ‘licked’ and pointed to as a boob from Tennessee. And theconsequence was that the boastful and supposedly invulnerableWall Street powers found their methods controverted bywell-laid plans and quick action.” Saunders wound up hisstatement by laying down his terms: the Stock Exchange’sdeadline extension notwithstanding, he would expect settlementin full on all short stock by 3 P.M. the next day—Thursday—at$150 a share; thereafter his price would be $250.
On Thursday, to Saunders’ surprise, very few short sellerscame forward to settle; presumably those who did couldn’tstand the uncertainty. But then the Governing Committee kickedthe pegs from under Saunders by announcing that the stock ofPiggly Wiggly was permanently stricken from its trading list andthat the short sellers would be given a full five days from theoriginal deadline—that is, until two-fifteen the followingMonday—to meet their obligations. In Memphis, Saunders, farremoved from the scene though he was, could not miss theimport of these moves—he was now on the losing end ofthings. Nor could he any longer fail to see that thepostponement of the short sellers’ deadline was the vital issue.
“As I understand it,” he said in another statement, handed toreporters that evening, “the failure of a broker to meet hisclearings through the Stock Exchange at the appointed time isthe same as a bank that would be unable to meet its clearings,and all of us know what would happen to that kind of abank.… The bank examiner would have a sign stuck up on thedoor with the word ‘Closed.’ It is unbelievable to me that theaugust and all-powerful New York Stock Exchange is a welcher.
Therefore I continue to believe that the … shares of stock stilldue me on contracts … will be settled on the proper basis.”
An editorial in the Memphis Commercial Appeal backed upSaunders’ cry of treachery, declaring, “This looks like whatgamblers call welching. We hope the home boy beats them toa frazzle.”
That same Thursday, by a coincidence, the annual financialreport of Piggly Wiggly Stores, Inc., was made public. It was ahighly favorable one—sales, profits, current assets, and all othersignificant figures were up sharply over the year before—butnobody paid any attention to it. For the moment, the realworth of the company was irrelevant; the point was the game.
ON Friday morning, the Piggly Wiggly bubble burst. It burstbecause Saunders, who had said his price would rise to $250a share after 3 P.M. Thursday, made the startlingannouncement that he would settle for a hundred. E. W.
Bradford, Saunders’ New York lawyer, was asked whySaunders had suddenly granted this striking concession.
Saunders had done it out of the generosity of his heart,Bradford replied gamely, but the truth was soon obvious:
Saunders had made the concession because he’d had to. Thepostponement granted by the Stock Exchange had given theshort sellers and their brokers a chance to scan lists of PigglyWiggly stockholders, and from these they had been able tosmoke out small blocks of shares that Saunders had notcornered. Widows and orphans in Albuquerque and Sioux City,who knew nothing about short sellers and corners, were onlytoo happy, when pressed, to dig into their mattresses orsafe-deposit boxes and sell—in the so-called over-the-countermarket, since the stock could no longer be traded on theExchange—their ten or twenty shares of Piggly Wiggly for atleast double what they had paid for them. Consequently, insteadof having to buy stock from Saunders at his price of $250and then hand it back to him in settlement of their loans,many of the short sellers were able to buy it inover-the-counter trading at around a hundred dollars, and thus,with bitter pleasure, pay off their Memphis adversary not incash but in shares of Piggly Wiggly—the very last thing hewanted just then. By nightfall Friday, virtually all the shortsellers were in the clear, having redeemed their indebtednesseither by these over-the-counter purchases or by payingSaunders cash at his own suddenly deflated rate of a hundreddollars a share.
That evening, Saunders released still another statement, andthis one, while still defiant, was unmistakably a howl of anguish.
“Wall Street got licked and then called for ‘mamma,’” it read.
“Of all the institutions in America, the New York StockExchange is the worst menace of all in its power to ruin allwho dare to oppose it. A law unto itself … an association ofmen who claim the right that no king or autocrat ever daredto take: to make a rule that applies one day on contracts andabrogate it the next day to let out a bunch of welchers.… Mywhole life from this day on will be aimed toward the end ofhaving the public protected from a like occurrence.… I am notafraid. Let Wall Street get me if they can.” But it appeared thatWall Street had got him; his corner was broken, leaving himdeeply in debt to the syndicate of Southern bankers andencumbered with a mountain of stock whose immediate futurewas, to say the least, precarious.
SAUNDEES’ fulminations did not go unheeded on Wall Street,and as a result the Exchange felt compelled to justify itself. OnMonday, March 26th, shortly after the Piggly Wiggly shortsellers’ deadline had passed and Saunders’ corner was, for allpractical purposes, a dead issue, the Exchange offered itsapologia, in the form of a lengthy review of the crisis frombeginning to end. In presenting its case, the Exchangeemphasized the public harm that might have been done if thecorner had gone unbroken, explaining, “The enforcementsimultaneously of all contracts for the return of the stock wouldhave forced the stock to any price that might be fixed by Mr.
Saunders, and competitive bidding for the insufficient supplymight have brought about conditions illustrated by othercorners, notably the Northern Pacific corner in 1901.” Then, itssyntax yielding to its sincerity, the Exchange went on to saythat “the demoralizing effects of such a situation are not limitedto those directly affected by the contracts but extends to thewhole market.” Getting down to the two specific actions it hadtaken—the suspension of trading in Piggly Wiggly and theextension of the short sellers’ deadline—the Exchange arguedthat both of them were within the bounds of its ownconstitution and rules, and therefore irreproachable. Arrogant asthis may sound now, the Exchange had a point; in those daysits rules were just about the only controls over stock trading.
The question of whether, even by their own rules, the slickersreally played fair with the boob is still debated among fiscalantiquarians. There is strong presumptive evidence that theslickers themselves later came to have their doubts. Regardingthe right of the Exchange to suspend trading in a stock therecan be no argument, since the right was, as the Exchangeclaimed at the time, specifically granted in its constitution. Butthe right to postpone the deadline for short sellers to honortheir contracts, though also claimed at the time, is anothermatter. In June, 1925, two years after Saunders’ corner, theExchange felt constrained to amend its constitution with anarticle stating that “whenever in the opinion of the GoverningCommittee a corner has been created in a security listed onthe Exchange … the Governing Committee may postpone thetime for deliveries on Exchange contracts therein.” By adoptinga statute authorizing it to do what it had done long before, theExchange would seem, at the very least, to have exposed aguilty conscience.
THE immediate aftermath of the Piggly Crisis was a wave ofsympathy for Saunders. Throughout the hinterland, the publicimage of him became that of a gallant champion of theunderdog who had been ruthlessly crushed. Even in New York,the very lair of the Stock Exchange, the Times conceded in aneditorial that in the minds of many people Saundersrepresented St. George and the Stock Exchange the dragon.
That the dragon triumphed in the end, said the Times, was“bad news for a nation at least 66? per cent ‘sucker,’ whichhad its moment of triumph when it read that a sucker hadtrimmed the interests and had his foot on Wall Street’s neckwhile the vicious manipulators gasped their lives away.”
Not a man to ignore such a host of friendly fellow suckers,Saunders went to work to turn them to account. And heneeded them, for his position was perilous indeed. His biggestproblem was what to do about the ten million dollars that heowed his banker backers—and didn’t have. The basic planbehind his corner—if he had had any plan at all—must havebeen to make such a killing that he could pay back a big sliceof his debt out of the profits, pay back the rest out of theproceeds from his public stock sale, and then walk off with astill huge block of Piggly Wiggly stock free and clear. Eventhough the cut-rate hundred-dollar settlement had netted him akilling by most men’s standards (just how much of a killing isnot known, but it has been reliably estimated at half a millionor so), it was not a fraction of what he might have reasonablyexpected it to be, and because it wasn’t his whole structurebecame an arch without a keystone.
Having paid his bankers what he had received from the shortsellers and from his public stock sale, Saunders found that hestill owed them about five million dollars, half of it dueSeptember 1, 1923, and the balance on January 1, 1924. Hisbest hope of raising the money lay in selling more of the vastbundle of Piggly Wiggly shares he still had on hand. Since hecould no longer sell them on the Exchange, he resorted to hisfavorite form of self-expression—newspaper advertising, this timesupplemented with a mail-order pitch offering Piggly Wigglyagain at fifty-five dollars. It soon became evident, though, thatpublic sympathy was one thing and public willingness totranslate sympathy into cash was quite another. Everyone,whether in New York, Memphis, or Texarkana, knew about therecent speculative shenanigans in Piggly Wiggly and about thedubious state of the president’s finances. Not even Saunders’
fellow suckers would have any part of his deal now, and thecampaign was a bleak failure.
Sadly accepting this fact, Saunders next appealed to the localand regional pride of his Memphis neighbors by turning hisremarkable powers of persuasion to the job of convincing themthat his financial dilemma was a civic issue. If he should gobroke, he argued, it would reflect not only on the characterand business acumen of Memphis but on Southern honor ingeneral. “I do not ask for charity,” he wrote in one of thelarge ads he always seemed able to find the cash for, “and Ido not request any flowers for my financial funeral, but I doask … everybody in Memphis to recognize and know that thisis a serious statement made for the purpose of acquaintingthose who wish to assist in this matter, that they may workwith me, and with other friends and believers in my business,in a Memphis campaign to have every man and woman whopossibly can in this city become one of the partners of thePiggly Wiggly business, because it is a good investment first,and, second, because it is the right thing to do.” Raising hissights in a second ad, he declared, “For Piggly Wiggly to beruined would shame the whole South.”
Just which argument proved the clincher in persuadingMemphis that it should try to pull Saunders’ chestnuts out ofthe fire is hard to say, but some part of his line of reasoningclicked, and soon the Memphis Commercial Appeal was urgingthe town to get behind the embattled local boy. The responseof the city’s business leaders was truly inspiring to Saunders. Awhirlwind three-day campaign was planned, with the object ofselling fifty thousand shares of his stock to the citizens ofMemphis at the old magic figure of fifty-five dollars a share; inorder to give buyers some degree of assurance that they wouldnot later find themselves alone out on a limb, it was stipulatedthat unless the whole block was sold within the three days, allsales would be called off. The Chamber of Commercesponsored the drive; the American Legion, the Civitan Club,and the Exchange Club fell into line; and even the BowersStores and the Arrow Stores, both competitors of Piggly Wigglyin Memphis, agreed to plug the worthy cause. Hundreds ofcivic-minded volunteers signed up to ring doorbells. On May3rd, five days before the scheduled start of the campaign, 250Memphis businessmen assembled at the Gayoso Hotel for akickoff dinner. There were cheers when Saunders, accompaniedby his wife, entered the dining room; one of the manyafter-dinner speakers described him as “the man who has donemore for Memphis than any in the last thousand years”—arousing tribute that put God knew how many Chickasaw chiefsin their place. “Business rivalries and personal differences wereswept away like mists before the sun,” a Commercial Appealreporter wrote of the dinner.
The drive got off to a splendid start. On the openingday—May 8th—society women and Boy Scouts paraded thestreets of Memphis wearing badges that read, “We’re OneHundred Per Cent for Clarence Saunders and Piggly Wiggly.”
Merchants adorned their windows with placards bearing theslogan “A Share of Piggly Wiggly Stock in Every Home.”
Telephones and doorbells rang incessantly. In short order,23,698 of the 50,000 shares had been subscribed for. Yet atthe very moment when most of Memphis had becomemiraculously convinced that the peddling of Piggly Wiggly stockwas an activity fully as uplifting as soliciting for the Red Crossor the Community Chest, ugly doubts were brewing, and somevipers in the home nest suddenly demanded that Saundersconsent to an immediate spot audit of his company’s books.
Saunders, for whatever reasons, refused, but offered to placatethe skeptics by stepping down as president of Piggly Wiggly ifsuch a move “would facilitate the stock-selling campaign.” Hewas not asked to give up the presidency, but on May 9th, thesecond day of the campaign, a watchdog committee offour—three bankers and a businessman—was appointed by thePiggly Wiggly directors to help him run the company for aninterim period, while the dust settled. That same day, Saunderswas confronted with another embarrassing situation: why, thecampaign leaders wanted to know, was he continuing to buildhis million-dollar Pink Palace at a time when the whole townwas working for him for nothing? He replied hastily that hewould have the place boarded up the very next day and thatthere would be no further construction until his financial futurelooked bright again.
The confusion attendant on these two issues brought the driveto a standstill. At the end of the third day, the total number ofshares subscribed for was still under 25,000, and the sales thathad been made were canceled. Saunders had to admit that thedrive had been a failure. “Memphis has fizzled,” he reportedlyadded—although he was at great pains to deny this a fewyears later, when he needed more of Memphis’ money for anew venture. It would not be surprising, though, if he hadmade some such imprudent remark, for he was understandablysuffering from a case of frazzled nerves, and was showing thestrain. Just before the announcement of the campaign’sunhappy end, he went into a closed conference with severalMemphis business leaders and came out of it with a bruisedcheekbone and a torn collar. None of the other men at themeeting showed any marks of violence. It just wasn’t Saunders’
day.
Although it was never established that Saunders had had hishand improperly in the Piggly Wiggly corporate till during hiscornering operation, his first business move after the collapse ofhis attempt to unload stock suggested that he had at least hadgood reason to refuse a spot audit of the company’s books. Inspite of futile grunts of protest from the watchdog committee,he began selling not Piggly Wiggly stock but Piggly Wigglystores—partly liquidating the company, that is—and no oneknew where he would stop. The Chicago stores went first, andthose in Denver and Kansas City soon followed. His announcedintention was to build up the company’s treasury so that itcould buy the stock that the public had spurned, but there wassome suspicion that the treasury desperately needed atransfusion just then—and not of Piggly Wiggly stock, either.
“I’ve got Wall Street and the whole gang licked,” Saundersreported cheerfully in June. But in mid-August, with theSeptember 1st deadline for repayment of two and a half milliondollars on his loan staring him in the face and with nothinglike that amount of cash either on hand or in prospect, heresigned as president of Piggly Wiggly Stores, Inc., and turnedover his assets—his stock in the company, his Pink Palace, andall the rest of his property—to his creditors.
It remained only for the formal stamp of failure to be put onSaunders personally and on Piggly Wiggly under hismanagement. On August 22nd, the New York auction firm ofAdrian H. Muller & Son, which dealt in so manynext-to-worthless stocks that its salesroom was often called “thesecurities graveyard,” knocked down fifteen hundred shares ofPiggly Wiggly at a dollar a share—the traditional price forsecurities that have been run into the ground—and thefollowing spring Saunders went through formal bankruptcyproceedings. But these were anticlimaxes. The real low point ofSaunders’ career was probably the day he was forced out ofhis company’s presidency, and it was then that, in the opinionof many of his admirers, he achieved his rhetorical peak. Whenhe emerged, harassed but still defiant, from a directors’
conference and announced his resignation to reporters, a hushfell. Then Saunders added hoarsely, “They have the body ofPiggly Wiggly, but they cannot have the soul.”
IF by the soul of Piggly Wiggly Saunders meant himself, then itdid remain free—free to go marching on in its own erratic way.
He never ventured to play another game of Corner, but hisspirit was far from broken. Although officially bankrupt, hemanaged to find people of truly rocklike faith who were stillwilling to finance him, and they enabled him to live on a scaleonly slightly less grand than in the past; reduced to playing golfat the Memphis Country Club rather than on his own privatecourse, he handed out caddy tips that the club governorsconsidered as corrupting as ever. To be sure, he no longerowned the Pink Palace, but this was about the only evidencethat served to remind his fellow townsmen of his misfortunes.
Eventually, the unfinished pleasure dome came into the handsof the city of Memphis, which appropriated $150,000 to finishit and turn it into a museum of natural history and industrialarts. As such, it continues to sustain the Saunders legend inMemphis.
After his downfall, Saunders spent the better part of threeyears in seeking redress of the wrongs that he felt he hadsuffered in the Piggly Wiggly fight, and in foiling the efforts ofhis enemies and creditors to make things still more unpleasantfor him. For a while, he kept threatening to sue the StockExchange for conspiracy and breach of contract, but a test suit,brought by some small Piggly Wiggly stockholders, failed, andhe dropped the idea. Then, in January, 1926, he learned that afederal indictment was about to be brought against him forusing the mails to defraud in his mail-order campaign to sellhis Piggly Wiggly stock. He believed, incorrectly, that thegovernment had been egged on to bring the indictment by anold associate of his—John C. Burch, of Memphis, who hadbecome secretary-treasurer of Piggly Wiggly after the shakeup.
His patience once more exhausted, Saunders went around toPiggly Wiggly headquarters and confronted Burch. Thisconference proved far more satisfactory to Saunders than hisboard-room scuffle on the day the Memphis civic stock-sellingdrive failed. Burch, according to Saunders, “undertook in astammering way to deny” the accusation, whereupon Saundersdelivered a right to the jaw, knocking off Burch’s glasses butnot doing much other damage. Burch afterward belittled theblow as “glancing,” and added an alibi that sounded like that ofany outpointed pugilist: “The assault upon me was made sosuddenly that I did not have time or opportunity to strike Mr.
Saunders.” Burch refused to press charges.
About a month later, the mail-fraud indictment was broughtagainst Saunders, but by that time, satisfied that Burch wasinnocent of any dirty work, he was his amiable old self again.
“I have only one thing to regret in this new affair,” heannounced pleasantly, “and that is my fistic encounter withJohn C. Burch.” The new affair didn’t last long; in April theindictment was quashed by the Memphis District Court, andSaunders and Piggly Wiggly were finally quits. By then, thecompany was well on its way back up, and, with a greatlychanged corporate structure, it flourished on into the nineteensixties; housewives continued to ramble down the aisles ofhundreds of Piggly Wiggly stores, now operated under afranchise agreement with the Piggly Wiggly Corporation, ofJacksonville, Florida.
Saunders, too, was well on his way back up. In 1928, hestarted a new grocery chain, which he—but hardly anyoneelse—called the Clarence Saunders, Sole Owner of My Name,Stores, Inc. Its outlets soon came to be known as Sole Ownerstores, which was precisely what they weren’t, for withoutSaunders’ faithful backers they would have existed only in hismind. Saunders’ choice of a corporate title, however, was notdesigned to mislead the public; rather, it was his ironic way ofreminding the world that, after the skinning Wall Street hadgiven him, his name was about the only thing he still had aclear title to. How many Sole Owner customers—or governorsof the Stock Exchange, for that matter—got the point isquestionable. In any case, the new stores caught on so rapidlyand did so well that Saunders leaped back up from bankruptcyto riches, and bought a million-dollar estate just outsideMemphis. He also organized and underwrote a professionalfootball team called the Sole Owner Tigers—an investment thatpaid off handsomely on the fall afternoons when he could hearcries of “Rah! Rah! Rah! Sole Owner! Sole Owner! SoleOwner!” ringing through the Memphis Stadium.
FOR the second time, Saunders’ glory was fleeting. The veryfirst wave of the depression hit Sole Owner Stores such acrushing blow that in 1930 they went bankrupt, and he wasbroke again. But again he pulled himself together and survivedthe debacle. Finding backers, he planned a new chain ofgrocery stores, and thought up a name for it that was moreoutlandish, if possible, than either of its predecessors—Keedoozle.
He never made another killing, however, or bought anothermillion-dollar estate, though it was always clear that he expectedto. His hopes were pinned on the Keedoozle, an electricallyoperated grocery store, and he spent the better part of the lasttwenty years of his life trying to perfect it. In a Keedoozlestore, the merchandise was displayed behind glass panels, eachwith a slot beside it, like the food in an Automat. There thesimilarity ended, for, instead of inserting coins in the slot toopen a panel and lift out a purchase, Keedoozle customersinserted a key that they were given on entering the store.
Moreover, Saunders’ thinking had advanced far beyond theelementary stage of having the key open the panel; each timea Keedoozle key was inserted in a slot, the identity of the itemselected was inscribed in code on a segment of recording tapeembedded in the key itself, and simultaneously the item wasautomatically transferred to a conveyor belt that carried it to anexit gate at the front of the store. When a customer hadfinished his shopping, he would present his key to an attendantat the gate, who would decipher the tape and add up the bill.
As soon as this was paid, the purchases would be catapultedinto the customer’s arms, all bagged and wrapped, by a deviceat the end of the conveyor belt.
A couple of pilot Keedoozle stores were tried out—one inMemphis and the other in Chicago—but it was found that themachinery was too complex and expensive to compete withsupermarket pushcarts. Undeterred, Saunders set to work onan even more intricate mechanism—the Foodelectric, whichwould do everything the Keedoozle could do and add up thebill as well. It will never corner the retail-store-equipmentmarket, though, because it was still unfinished when Saundersdied, in October, 1953, five years too soon for him to see theBruce “corner”, which, in any case, he would have been fullyentitled to scoff at as a mere squabble among ribbon clerks.