HP: One of the more interesting stories about Sam Insull is the way he went to sell electrical utilities back to his own customers. He gets into this because, as an Englishman, he had been very worried about the coming of World War I. He was very in tune with what was going on in Europe, and because he was one of the few that said the United States had to prepare for this war, he is then appointed by the governor as the chairman of Illinois' preparedness commission to coordinate the war effort in Illinois. One of the major efforts in World War I was to sell war bonds to the American public to help pay for the War. And Insull, being a great marketing genius, set up a well-run organization to sell war bonds in Illinois.
With the coming of the end of the war, he essentially took the nameplate off of that office from war bonds and put on utility bonds. [He] used the same organization to go out into the street and sell his customers utility stock. His reasoning was that electricity was the wave of the future--you're using electricity, but you can in a sense profit from your own use of electricity by getting dividends, by being a shareholder in the company. This again went from door-to-door salesmen, which he was used to, from his selling appliances and irons from door to door into a massive stock selling at a time when most Americans were not stockholders. This was quite unusual in the 1920s for ordinary Americans to hold stock. The operation grew and grew into a massive operation, including sending circulars to all his customers, not only to pay the bills, but to buy some stock in his utility companies.
HP: After the great stock market crash of October 1929, most shares and companies plummeted very dramatically and drastically, as we all know, with the great crash of the stock market. Sam Insull, upholding a gigantic pyramid of operating and holding companies very much believed in this company, very much believed that electricity would still be used. And of course no one knew how bad the Depression would get that followed after 1929. So in the two or three years that followed the stock market crash, Sam Insull, being a great business leader, trying to put the best face on a bad time, himself bought into the notion that he could almost personally hold up not only Commonwealth Edison stock and all the other holding company stock that he was involved in, but basically personally hold up the entire American stock market. And so he pours more and more of his own personal fortune into buying stock to try and keep the price up. Of course we know now this was a losing effort but for two or three years, he very much believed in his own power to save America from the Great Depression.
After the efforts of Samuel Insull to shore up Commonwealth Edison and his other companies inevitably failed in the Great Depression, Insull is forced to come to his office and sign away the tens and scores of directorships and chairmanships and other kinds of positions he held in many, many companies. And the company was put in the hands of a very trusted businessman, James Simpson, who was at that time the Chief Operating Officer of Marshall Fields department stores. Marshall Field himself, or the family, had major interest in the Commonwealth Company. And the Commonwealth Edison Company, like other utility companies, struggled through the Depression, like everybody else, trying to maintain their financial integrity during this time.
HP: In many ways, Sam Insull became a scapegoat for the Great Depression. Franklin Delano Roosevelt in his 1932 campaign compared him with an Ishmael, as a public enemy that had been too selfish, too driven to profit and had harmed everyone else. I think the reason why he becomes a notorious scapegoat and then is indicted later by the federal government for mail fraud, of all things, was because he was such a great business leader in the 1920s. He loved the role of being a great business leader. He, along with people like Henry Ford, Firestone of the tire company, and a few others made themselves into national icons of the success of the American business enterprise. So in this way, Insull kind of set himself up for the big fall.
Why Insull, other than Ford or Firestone? They were manufacturers. They had companies that made something. Insull had had a company, Commonwealth Edison, that made electricity but he also had built up this gigantic empire, a pyramid of stocks that had collapsed and had been blamed, in a sense, for the Depression, the great stock market crash. So I think that's the focus on Insull was because of his manipulation of the stock market, the creation of these holding companies that had built like a pyramid of cars that collapsed with the Depression, and so he became a natural target that everyone knew who he was.
<< 4 >>