The Go-Go Years by John Brooks Page A

Kappa, at that), an M.S. from the University of California, and a Ph.D. from Duke, in1934 he went to work for the S.E.C. in a lowly job that paid $1,900 a year. Over the subsequent years, while clambering up the bureaucratic rungs, he wrote a standard text entitled Understanding the Securities Act and the S.E.C. , and in 1949 was appointed a S.E.C. commissioner by President Truman. In 1951 he made the familiar switch from low-paid government work to high-paid private-industry work that has been the bane of the S.E.C. from its beginnings, constantly draining it of talent. Never before, though, had a S.E.C. man—commissioner or staffer—left to become head of a major stock exchange. McCormick’s appointment to the Amex was hailed as the beginning of a new era in which government and the securities business would work in happy cooperation for the public good. As a booster for the Amex, McCormick was notably successful; by 1961, daily share volume had more than quadrupled in a decade, and the price of an Amex seat had jumped from $9,500 to $80,000. The scholar and bureaucrat had turned out to be a born salesman. But with the Amex’s growth, it began to appear toward the end of the decade, a certain laxness of administration had crept in. Restless at his desk, Ted McCormick was always out selling up-and-coming companies on listing their shares on the Amex, and while he was in Florida or at the Stork Club drumming up trade, sloppy practices were flourishing back at Trinity Place.
    Or so it seemed in the light of the S.E.C. report, which pointed out that as early as 1957 a federal court had enjoined the Res against further violations of the Securities Acts and further trading in the stock of Swan-Finch, and that in 1958 the elder Re had been formally accused by the Amex’s Business Conduct Committee of willfully violating the rules governing specialists. Late in 1959, this matter had finally come to a vote of the Board of Governors, which had inexplicably exonorated the Res, 18 to 5. Immediately the Business Conduct Committee had held its own meeting and showed its defiance of the Board by voting to suspend Jerry Re from trading for the month of January—a painless sentence, to be sure, since January was the month Jerry Re customarily spent in Florida.
    Curiously, or perhaps not so curiously, most of the Amexmembers had known very little of all this. “Everybody knew there was something smelly in Jerry Re’s corner of the floor, but only in general,” one of the specialists has since said. For many members, the S.E.C. complaint of 1961 provided their first knowledge of the court injunction, the vote of the governors, even the month’s supension. It also provided their first knowledge of the fact that in 1954 and 1955 McCormick had been personally involved in stock transactions with the Res. There is some irony in the fact that he had actually lost money on the transactions. Still, what he had done had certainly been, to say the least, indiscreet. Leaving aside the whole matter of the Res’ later-revealed misdeeds, for the salaried administrative head of a stock exchange to enter into deals with members of that exchange—and specialists at that—would seem to imply a perfectly clear conflict of interest. For one reason or another, only a handful of Amex members seemed to be disturbed by the revelation of McCormick’s indiscretion, or by the implication that the disciplinary actions against the Res had been largely swept under the rug. The members most disturbed were another father-and-son specialist team—or more precisely, a father-and-son-in-law specialist team. They were David S. Jackson and Andrew Segal.
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    The big men of the Street are of two kinds: those who come to it from outside with a driving urge to conquer, and those who through inheritance belong to it from the start, and therefore, because they do not need to discover it for themselves, can bring it fresh