Blood Feud

CCLXVII

Although Juan Trippe had temporarily stymied Joe Kennedy in his role as head of the U.S. Maritime Commission, Kennedy was never one to take a cocked snook lightly, and he set about undercutting Trippe’s eroding authority in the Pan Am boardroom with a vengeance.

After Trippe had returned from Hyannisport with the tale of his awful meeting with Kennedy, the Board of Directors finally authorized his attempt to purchase American Export Airlines. Pan Am stock was offered for AEA’s assets, including the three big VS-44s. The heads of AEA agreed to the purchase, but then Kennedy’s C.A.A. stepped in to disallow the merger on the basis of dusty antitrust regulations. To back up its argument against the merger the C.A.A. leaked a “confidential” memorandum on Pan Am’s business practices. It was damaging, particularly since it seemed so evenhanded. In truth, it had been written by Grover Loening at Joseph Kennedy’s request, and was pointedly designed to discredit Pan American by damning its success with faint praise:

Pan Am’s international monopoly, so went the memo, was based on Trippe’s unquestioned talent in “ably and consistently present[ing] such a complicated and delicate foreign diplomatic situation . . . [that] the State Department . . . welcome[s] the simplicity of having only one company [ ] to deal with. [C]ompetition of any kind (the memo asserted) [will] ruin these . . . relations [and] Mr. Trippe successfully ma[kes] it appear that only he [can] handle such delicate matters. To . . . foreigners Pan American has represented that they [a]re the only authorized foreign airline in this country . . . Pan American gets all the ballyhoo, and has ably made use of it,” the memo summed up. “A great talking point for further monopoly.” But, it concluded, “The American public doesn't want monopolies. Let it give Trippe and his wonderful airline the highest praise but not prohibit other Americans from having a chance to show what they can do.”

At the same time unpleasant rumors began to sweep the markets about Pan Am’s lack of liquidity, which had been a closely held secret until then. Trippe was in a fury. He knew, as did the rest of his unhappy Board of Directors that the leaks had to have come through Grover Loening or one or more of the other men who’d walked out. 

Soon it became difficult for Pan Am to arrange even a short-term bridge loan at anything less than triple-digit interest. Larger loans for capital improvements just stopped existing. 

Juan Trippe’s chickens were coming home to roost. His years of secret dealings, his habitual silence, his convoluted fiscal arrangements, and the bizarre table of organization he’d designed for the airline began to weigh heavily against him. As pressure for accountability rose against the airline from outside, the inside pressure on Trippe kept pace. And this was where Juan Trippe’s lack of bonhomie began to tell, for he had few real allies and even fewer friends on the Board of Directors. The company had started out with Trippe’s own Country Club set in the boardroom, old acquaintances mostly, who had given the airline cash infusions in its early days. Of that group, of men with names like Rockefeller, only Sonny Vanderbilt, his old college chum, was left.  

Once Pan Am had gotten established, he had brought on industry titans like Donald Douglas and Grover Loening and Sherman Fairchild. He had asked railroad tycoons and shipping magnates, and investment bankers to sit on his Board, and their names alone had kept the regulators at bay and the banks lending freely. For Trippe, it was all good. He took notes during board meetings and then tossed them away at meeting’s end. Nobody seemed to mind as long as the airline was thriving. 

By the close of the 1930s, the era of the Great Depression, Pan Am was the largest and most prestigious airline in the world, with 54,000 miles of routes, 126 aircraft, 145 ground stations, and more than 5,000 full-time employees. It served landing sites in 47 separate countries. It was, in a phrase, world-conquering. And it was also, as they had recently found out, broke.

Of the Pan Am Board of Directors in 1939, none of them (save Whitney) had any personal loyalty to Trippe, and when the scales fell from their eyes they were collectively furious. They had been stunned at the Gordian knot that Trippe had made of the corporation’s inner workings and were still struggling to untie it when Kennedy declared his covert war on Pan Am. Although Juan had won the first skirmishes in that war, Joe Kennedy had more power --- and he was meaner. Again, the Board demanded explanations from Juan. And again, Juan pleaded ignorance or engaged in doubletalk, or simply stayed silent. Someone nicknamed him “The Mummy,” and the name stuck. 

About the only thing everyone was sure of was that Trippe wasn’t bilking the airline, and that was largely because he saw it as his own creation. Forensic accountants wanted tens of thousands of dollars to delve into the company’s fiscal records. They were paid and everyone came away more confused. Trippe had made documents disappear by the boxcar load during the Black Committee hearings, and they had never reappeared. It seemed the only thing the Board could do to restore investors’ faith in Pan Am was to offer up a sacrifice.  

Joe Kennedy got what he really had wanted all along. On March 14, 1939, Juan Trippe was dismissed as Chairman of the Board of Pan American Airways.

A Long Walk on a Short Pier (Part Two)

CCLXVI

Joseph P. Kennedy had been born in 1888 into a family which had already risen to local political prominence in Boston. His father P.J. was both a politician and a saloon owner, and made a significant income from both sources, enough to send his son to private school and then on to Harvard. When he married Rose, it was a dynastic move --- her father, “Honey Fitz” Fitzgerald was the long-time Mayor of Boston.

John Francis “Honey Fitz” Fitzgerald founded a political dynasty. Mayor of Boston for decades, the Mayor (described as “pixie-like”) was both beloved and feared. He ruled his city with an iron fist in a warm velvet glove, and is responsible for the construction of Fenway Park

Once graduated, Kennedy went into investment banking and real estate speculation using his father’s and his father-in-law’s money. He was a man with an unerring sense of timing, knowing when and how much to buy, and when to get out. He slowly but surely turned the modest fortune of his clan into a multimillion dollar empire. During World War One he rose to manage Bethlehem Steel’s shipyards, culling millions of dollars more from lucrative wartime contracts. It was then that he made a friend of Franklin Delano Roosevelt, then-Assistant Secretary of the Navy.

 

Bethlehem Steel in its wartime heyday (WWII)

In the years after the war, he redoubled his fortune and then again in his previous role as an investment banker (rumors have it that he was a bootlegger during Prohibition as well). Joe Kennedy never lost money in the stock market, largely because he had a small army of inside informants. It was one of these informants, a shoeshine boy or so he claimed, that warned him of the impending Crash of ’29; over the summer of that year he converted most of his holdings to cash. He was thus virtually untouched by the Great Depression, and in fact made himself wealthier still by buying up depressed-value real estate at fire sale prices in the early 1930s. He began importing Scotch whiskey after 1933. By 1935, he was worth an estimated $180,000,000.00 ($3.21 billion in 2018 dollars).    

“Green tomatoes”: Bootleggers delivering illicit whiskey during Prohibition, the greatest social engineering failure in American history

Kennedy was also interested in movies. He bought Pathe, one of the earliest newsreel companies (they later moved into color processing) and snapped up a triad of small, struggling studios, merging them and creating Radio-Keith-Orpheum Pictures (RKO)*. At the time, theater chains normally contracted to show only the films of a particular studio, and RKO needed theaters. Kennedy approached Alexander Pantages, and offered him a tidy but undermarket sum to buy up his movie houses. Pantages’ theaters were known for their opulence and comfort. Pantages refused to sell.

Alexander Pantages (center) on trial

Not long afterward, Pantages was arrested on a charge of rape, and stood trial. Just before the jury went out, Kennedy reappeared and made Pantages a second, lower, offer. Again, Pantages refused. He was convicted, but immediately won a retrial. By this point in time, Pantages was hard up for money. His legal defense was draining him, and the bad publicity was keeping the public out of his theaters. He put Pantages Theaters up for sale, but had only one taker --- Kennedy, who swooped in and bought the whole concern for a price that was but a fraction of his original not-very-fair-market offer. As soon as Pantages sold, the girl who had claimed to have been raped recanted her story, and Alexander Pantages was exonerated. Free but broke, Pantages always and ever after claimed to have been neatly set up by Joe Kennedy, and indeed, the entire episode has his distinct claw marks all over it.

The Pantages Hollywood was only slightly more lush than most of the Pantages theatres

Now the owner of a studio, Joe Kennedy headed out to Hollywood to build a stable of performers for RKO Radio Pictures, as he called it.  Most of his interest was focused on actresses and starlets, and he bedded many of them, having a very open three year relationship with Gloria Swanson. He even brought Swanson home to meet his wife and children.  Rose said nothing.

 

Gloria Swanson. Swanson broke off her affair with Joe Kennedy when she discovered that he’d been charging all the expensive gifts he’d bought her to her own credit account

RKO soon became famous for its low-budget high-action Westerns, and for a string of musicals starring Fred Astaire and Ginger Rogers. It produced such classics as King Kong, The Hunchback of Notre Dame, Cimarron (Best Picture of 1931), Top Hat, Bringing Up Baby, and Little Women. Mostly, however, RKO was known for its mediocre output. Of the “Big Five” studios it was the red-headed stepchild, a kind of Triple-A farm club that other studios could raid for up-and-coming talent. Kennedy, who had less interest in movies than in just making money, sold out after some three years.

Joe Kennedy’s interest in Hollywood was partially motivated by his desire to remake the predominantly Jewish-owned film industry of the early 20^th century. He was a strict advocate of racialism and eugenics, an obsession for which Rosemary Kennedy paid a high price

He moved on to Washington D.C. Having backed, and raised millions of dollars for, FDR’s first Presidential campaign, the grateful President appointed Kennedy as the first Chairman of the powerful Securities and Exchange Commission (S.E.C.) when that Agency was formed in 1934.

The original members of the Securities and Exchange Commission, 1934. Kennedy is seated front and center

It was not just a patronage appointment. Kennedy knew the markets well, and over the next year created the framework for Federal regulation and control of Wall Street. Investment bankers cursed him loudly as he made insider trading (the very technique that had made him wealthy) utterly illegal (he wanted no one to copy his success it was said), and even though he created a tapestry of loopholes, most of them (not so strangely) benefited his own portfolio first and foremost.  Despite all that, Kennedy won praise for his commonsense reforms, regulations which are still in use today. The S.E.C. remains one of the most effective regulatory agencies.

 

A World War II-era U.S. Maritime Commission poster

In quick succession he was appointed head of the Maritime Commission (based on his experience with Bethlehem Steel during World War I), with the mandate to begin developing a modern merchant marine. One of the Maritime Commission’s numerous subagencies was the Civil Aeronautics Authority.

Joseph P. Kennedy with his sickly son Jack, destined to become 35^th President of the United States, the first Catholic to be elected. Joe Kennedy fostered cutthroat competition amongst his brood that led to disaster. His eldest, Joe Jr., was killed when his B-17 exploded in midair during World War II; his daughter Kathleen (Kick) was killed in a civilian plane crash; he had his daughter Rosemary lobotomized; Jack (JFK) and Bobby (RFK) were both assassinated; his youngest, Ted, was involved in the Chappaquiddick Incident, in which his evening’s companion, Mary Jo Kopechne, not his wife, was drowned but he survived. Jack’s own son, John-John, a publisher, died prematurely, in yet another aircraft accident. Various other crises have given rise to the idea of a “Kennedy Curse”; some people say it is karmic payback for Joe Kennedy’s many wrongs

Kennedy was not overly knowledgeable about aviation (one of the few areas where he did not have major investments)**, but he believed that all U.S. commercial aviation needed to be managed under one set of rules. Goaded by Grover Loening, Kennedy wanted to junk Pan Am’s special status as the only U.S.-flagged international air carrier. The rules he most wanted to junk were the ones that had been written by Juan Trippe, which he derided as self-serving (blandly overlooking his own self-interested work at the S.E.C.).

 

Through Loening and through his own network of informers, Kennedy knew that Juan Trippe was in trouble, and so Kennedy treated him with the contempt he thought Trippe deserved.

The main house at Hyannisport

The story of their November 1937 meeting (as recounted by Jack Kennedy and others who were present) has a kind of theatricality to it.

Although his father had planned on being a Presidential puppetmaster, after JFK was elected Joe Kennedy was almost never consulted on major policy issues. His father had become too publicly toxic for the Kennedy Administration’s interests. Joe Kennedy later suffered a debilitating stroke that left him unable to speak

Instead of meeting with Trippe in Washington, Kennedy summoned the airline chief to Hyannisport. He told Trippe to come alone. What Trippe thought of this request --- as he framed it --- before the meeting is unclear. Perhaps he thought that Kennedy and he were having some kind of secret summit. In retrospect, it has the air of a mob hit. 

Joe Kennedy apparently didn’t think much of his two younger boys, but Bobby (RFK) proved to have the most fortitude of all the Kennedy men. He acted as JFK’s Attorney General, went after the Mafia, was instrumental in ending the Cuban Missile Crisis, and after his brother’s death he picked up the fallen standard of the New Frontier. He had an immensely powerful social conscience, something that was so woefully lacking in Joseph P. Kennedy, and ran for President on a Progressive platform of racial and economic equality for all Americans. He was cut down by an assassin’s bullet just moments after winning the California primary in June 1968

Trippe flew to Massachusetts in his private plane. When he arrived at the Kennedy Compound he was ushered into Joe Kennedy’s presence. Kennedy was relaxing on a chaise lounge. He didn’t even rise to greet his guest. After a perfunctory handshake, Kennedy said, “I want your testimony in Washington, in support of the [C.A.A. rules] amendments I’ve proposed.”

“I can’t support them.”

“I’ll give you enough time to take a slow walk out to the end of the pier there, and back again. When you come back, I want your agreement.” 

“I don’t need the time. I can’t back you.”

“Well, then get out.” 

The room froze. Rose looked mortified. Trippe strode out silently, preserving his dignity. Joe Jr. and Jack ran after him, to help him turn his plane around for liftoff from the family’s private airstrip. Whether they were lambasted by their father for their courtesy afterward is not known. 

Joe Kennedy Jr., his father’s intended heir apparent. The most malleable of all the boys,  Joe reportedly cried in his bedroom when Jack was decorated for heroism in World War II. Caught up in the usual family competition, Joe then volunteered for a secret mission that would have resulted in a medal had he lived

Kennedy’s ill-treatment rankled. Trippe went to Washington loaded for bear, arguing successfully that international air flights were part and parcel of foreign affairs and belonged in the bailiwick of the State Department. 

 

Having won that argument, he then argued that a second international carrier could be detrimental (not to mention unnecessarily duplicative) to American efforts to maintain hegemony. His concession was to abide by State Department policies --- there would be no more Square Deals with the European Powers, and no more private glad-handing of Latin American dictators. Pan Am would have to abide by Roosevelt’s new “Good Neighbor” policy south of the border.

Ultimately, he succeeded in checkmating Kennedy and in strangling AEA in its crib, but most importantly to him he made Pan American Airways America’s corporate ambassador to foreign nations. Perhaps PAA wasn’t the de jure national flag carrier, but its oversight by State made it the de facto national airline of the United States.

* RKO eventually became the property of Howard Hughes

**Trippe wanted Lindbergh to head up the CAA, but Lindbergh was still in Britain, and persona non grata among the Washington elite for his pro-Nazi sentiments (much like Joe Kennedy himself)