The Man Who Made the Movies by Vanda Krefft

Author:Vanda Krefft
Language: eng
Format: epub
Publisher: HarperCollins

CHAPTER 41

Siege

The two-month reprieve turned out to be meaningless. Instead, the Fox companies entered a state of financial siege. There was no money anywhere for them.

Just as the commercial bankers had, investment bankers rejected Fox’s pleas for help. At Halsey, Stuart, which had a preferential financing agreement with the Fox companies, president Harry Stuart did have seemingly friendly conversations with Fox for three days shortly before November 15. The urgent matter was to raise the $26 million to take back the Loew’s shares from the brokers and bankers; that would keep the stock safe until the Justice Department approved the acquisition and financing for a Fox-Loew’s merger could proceed. On the fourth day, according to Fox, Stuart whiplashed. In Fox’s telling, he attacked Fox’s character as duplicitous, berated him for “reckless” behavior in buying the $20 million Gaumont chain—a purchase that Fox believed Stuart had enthusiastically supported—and announced, “We are no longer your bankers. Go where you like. We don’t care.”

Several years later, Fox still felt the sharp sting: “From time to time during my career, I had been humiliated in one way or another. At least, I thought I had been humiliated. But never in all my life had I received such humiliation as I did that day from Mr. Stuart. He seemed to gloat at the fact that I was in difficulty.”

Stuart’s attitude was not entirely incomprehensible. At the time of these meetings, more ominous clouds were gathering over the nation’s financial outlook. On Monday, November 11, without any particular spur of bad news, the stock market tumbled violently downhill as sell orders targeted such supposed strongholds of industry as U.S. Steel, Westinghouse, General Electric, and AT&T. Wall Street brokers were mystified. They had assumed that their weak margin accounts had already been eliminated and that, as of the previous Friday, the market had stabilized. The logical explanation seemed to be that Monday’s huge sell-off reflected a deep crisis of confidence. That is, over the weekend, rank-and-file investors had decided to run away even though they didn’t have to, and buyers refused to step in. More steep losses followed on Tuesday and Wednesday. Regarding this early to mid-November period, John Kenneth Galbraith would write, “Of all the days of the crash, these without doubt were the dreariest.”

Investment trusts such as Halsey, Stuart’s Corporation Securities, formed in part at Fox’s insistence, were especially hard hit. Moreover, Fox had still not given Halsey, Stuart the promised $1 million back payment. In perspective, it was probably more remarkable that Stuart managed to speak calmly to Fox for three days than that he finally erupted on the fourth day.

Believing himself released from Halsey, Stuart’s preferential contract and on the advice of John Otterson, Fox approached Dillon, Read and Co., the bankers for Loew’s, Inc. In one day, a Dillon, Read partner drew up an $85 million financing plan that sounded to Fox “like Aladdin and his wonderful lamp.” The mirage collapsed just as soon as Fox asked Dillon, Read for a $500,000 loan to make a payment due the next day for some theaters he’d bought earlier.

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