The Patriarch Joseph P. Kennedy

he built the last great american dynasty

As I was reading the biography of Joseph Patrick Kennedy — The Patriarch by David Nasaw, the most interesting part to me especially regarding the earlier years of Joseph Kennedy was certainly the way in which he accumulated his wealth. While he was not poor by any means when he first started out, his rise to wealth and power is one for the history books and makes for a riveting read.

Joseph Kennedy is most known today for being the father of John Fitzgerald Kennedy (JFK), one of America’s most beloved Presidents who was assassinated in 1963 while in office. While Joseph Kennedy isn’t a famous historical figure today due to being outshined by his children—such as President John F Kennedy; Attorney General and Senator Robert F Kennedy; and Senator Ted Kennedy— he was famous for being one of America’s richest and most politically influential men from the 1920s to 1940s.

I first heard of Joseph Kennedy due to him being the inaugural chairman of America's Securities and Exchange Commission (SEC), which was created in the aftermath of the 1929 stock market crash to enforce laws against market manipulation. At the same time however, Kennedy made millions (billions in todays money) from insider trading during the Roaring 20s in the stock market. Later he would short the market during the Great Depression and make tremendous profits. He was also rumoured to have profited from American prohibition by being involved in illegal smuggling of alcohol during the Great Depression.

Franklin Delano Roosevelt’s appointment of Kennedy was gravely frowned upon even by his most ardent supporters. However Kennedy with his vast business experiences and wealth helped to ease the concerns of Wall Street as the SEC went about to regulate the wild west of Wall Street. As the first Chairman of the SEC, Kennedy helped enact many new regulations for financial securities and imposed restrictions on the selling of securities by board members, essentially making insider trading illegal, which is hilarious.

While Kennedy would remain influential in America first for his fame in Hollywood as a successful businessman and later as the rich friend of FDR who served as Chairman of the SEC, Maritime Commissioner, and Ambassador to Great Britain at the onset of WWII, his fall would come in the form of supporting Neville Chamberlain’s policy of appeasement, isolationism, and being publicly pessimistic about the outcome of WWII for the Allies. While this was the right position to take, Kennedy would remain stubborn and remained loyal to his appeasement beliefs even after Chamberlain resigned and Winston Churchill waged war against Adolf Hitler with FDR’s support. Until the very end, he would not trust Winston Churchill, and his various attempts to promote appeasement would be politically costly and remove him from the history books for picking the wrong side. This reminded me a bit of the legacy of Charles Lindbergh, who actually was a friend of Kennedy.

Kennedy would commit political suicide by talking behind FDR's back, making his own opinions heard instead of representing Washington's view at a critical moment during US-UK relations and fight back against the President for petty reasons. In the end, FDR summarised the thought process behind Ambassador Kennedy best.

“Roosevelt explained to his son-in-law that Joe Kennedy was an unreliable ally, and would always be—not because he was ambitious, which he was, not because he enjoyed wielding power, which he did, but because all he cared about was preserving the fortune he had accumulated and handing it on to his children. “The truth of the matter,” Roosevelt continued, “is that Joe is and always has been a temperamental Irish boy, terrifically spoiled at an early age by huge financial success; thoroughly patriotic, thoroughly selfish, and thoroughly obsessed with the idea that he must leave each of his nine children with a million dollars apiece, when he dies (he has told me that often). He had a positive horror of any change in the present methods of life in America. To him, the future of a small capitalistic class is safer under a Hitler than under a Churchill. This is sub-conscious on his part and he does not admit it.”

Anyway, in this post, I will seek to find out exactly how Joseph P. Kennedy made his wealth and answer the questions of whether his methods were legal and moral. I will also go deeper into why I am so fascinated by this character in history and what I learnt from reading this biography.

Origin

Joseph Patrick Kennedy was born into a political family in East Boston, Massachusetts. His father, Patrick Joseph Kennedy, was an important figure in the Democratic Party in Boston and served in both the Massachusetts House of Representatives and the state Senate. Throughout the book, he is described as the sort of man who prefers to work in the background and was incredibly honest. Quite a contrary to what his son's reputation would become but I am getting ahead of myself here.

P.J. Kennedy didn't really inherit any wealth from his Irish Catholic immigrant father Patrick Kennedy and thus he made his wealth from scratch. As the only surviving male of his family, he started work at fourteen and became a successful businessman with a whiskey importing business and multiple liquor stores. His business and political connections would serve as the foundation for Joseph Kennedy and allow him to have a proper formal education and later go on to Harvard.

Bank President

After graduating from Harvard, Kennedy would work at the Columbia Trust Bank where his father was a co-founder and held a significant share of due to his influence in the East Boston political scene. At age 25, he borrowed money from family and friends to buy out shares from other shareholders and became the largest shareholder. He would then make himself bank president and paraded himself in the local newspapers for being the youngest bank president in the country. In reality, 'Bank President' as a title sounded cooler than it actually was when one came to realise the miniature scale of the family owned bank in East Boston.

"Columbia Trust had been founded in 1895 and controlled since then by a small group of East Boston stockholders, P. J. Kennedy among them. When in late 1913 the largest of the stockholders died, the founders were faced with the choice of either raising the money to purchase his stock or becoming minority owners of their own bank. Joe volunteered to help raise the funds. He successfully borrowed from family members, including his relatively well-off uncles on his mother’s side, and Eugene Thayer, who was president of the Merchants Bank of Boston, and used these loans to purchase bank stock, much of it in his own name. With control of more bank shares than anyone else, he had himself elected bank president and promoted family friend and mentor Alfred Wellington to the position of treasurer and vice president. He then brought in two new directors whom he could count on to support him."

Kennedy would then embark on his journey as a stock speculator and would personally manage the bank assets through the tumultuous market conditions and Wall Street shenanigans that began at the onset of World War I. As the markets fluctuated throughout 1914, Kennedy was involved in a number of real estate and stock market dealings. While he had already been giving himself the most favourable loans when applying for mortgages and for personal stock market investments, he was generous enough to extend this preferential treatment to his real estate customers when they were applying for mortgages and loans. The book recounts various tales of Kennedy giving himself loans to buy stocks and benefit from the stock market boom of late 1914 and 1915.

The Columbia Trust Bank would serve as a solid financial foundation for Kennedy and as the economy and bank grew he would further leverage his real estate and stock market holdings with loans. Even in his later dealings in Hollywood and Wall Street, Kennedy would continue to use the bank assets as his personal bank account for all sorts of reasons. While that may seem like it would cross many regulatory lines in today’s world of finance, it was certainly not all that illegal a hundred years ago. However, Kennedy made an effort to ensure that only he knew about this special arrangement, and everything was done behind closed doors for added measure.

"In December 23, 1920, he wrote Ethel Turner, the assistant treasurer of Columbia Trust, who acted as his personal secretary and accountant, outlining the parameters of the deal “so that your records may be clear.” The financial manipulations were so complicated and the terms of the $20,000  loan from Columbia Trust so shaky that he asked Miss Turner to “kindly destroy the letter” after she had read it and executed his instructions."

“In the years to come, Kennedy’s biographers, in attempting to find out how he financed his early ventures, would leap to the conclusion that his investment capital came from bootlegging operations. This, as we shall see later, was not true. Columbia Trust, which the Kennedy family would hold on to until 1945, was his primary source of investment capital in the early years. Kennedy also funded his investments with loans from Shawmut, where Bob Potter was vice president; from Brookline Trust, where E. B. Dane was president; and from Chase National in New York City, where Eugene Thayer had been named president. His initial loan from Chase National was $85,000 for three months, which he renewed every three months for the next year. When Thayer left Chase National in early 1921, after what appears to have been a breakdown of some sort, Kennedy still owed $77,500 on his loan. Thayer visited the loan officer and “asked him to put the soft pedal on for you, and I think they will.” With Thayer’s help, Kennedy got another two months to pay off the three-month loan he had taken out fifteen months earlier.”

"Relying on the coffers of Columbia Trust and borrowing from other banks was a risky way to do business—and Kennedy knew it. As long as he was able to juggle collateral and loans, moving paper from one account to another, one bank to another, he could survive. His experience as an assistant bank examiner was invaluable in this regard. He knew precisely how far he could go without calling attention to himself or his bank”

SEC Chairman

He's just like me for real. Anyways, back to the issue at hand. The real question is this. Was all this legal? Absolutely f*cking yes.

While Kennedy still had to dodge some laws and find loopholes, as evidenced by his secrecy about the whole getting-loans endeavour, most of it was common practice at the time and would remain legal until the 1929 stock market crash and subsequent Great Depression. In 1934, the FDR administration would regulate Wall Street as part of its New Deal program to prevent another stock market crash through stringent financial regulation and outlawing market manipulation.

FDR would appoint his friend and campaign donor Joseph Kennedy to Chairman of the SEC. Kennedy worked tirelessly for months to bring about new regulations and enforce these policies under the Glass-Steagall Banking Act of 1933, Securities Act of 1933, Securities Exchange Act of 1934 and more.

For amusement sake, let’s look deeper into these laws, particularly the Glass-Steagall Act of 1933. By let’s look deeper, I mean ask a Large-Language-Model to find laws that Kennedy would have broken. For example, Section 20 prohibits banks from being affiliated with firms that engaged in securities trading and Section 16 limited the types of securities national banks could deal with.

As mentioned previously, Kennedy would have without a doubt breached these laws through his practice of using bank loans for personal investments and favouring loans to his associates. He would also been barred from making speculative investments with depositors money. To be frank, anyone with a basic idea of how financial regulations work know that what Kennedy was doing would be illegal in today’s modern financial word and you don’t need to do research to figure that out.

Anyways, Kennedy as master of insider trading and market manipulation, used these practices to make himself one of America's richest men and then quickly turned to the other side to regulate them with an iron fist at the onset of the Great Depression. This was because of his deep fears that the Great Depression would lead to a socialist revolution in America which would end the free market and capitalistic America that had made him incredibly wealthy. He was also afraid for the personal well-being of himself, his nine children and his nine trust funds he hoped will leave each Kennedy child with enough wealth to last generations. His personal experiences certainly helped make the regulations of the SEC robust and and shaped financial systems for generations to come.

Moving on from his time as Bank President and the legality of that operation which Kennedy would make illegal during FDR’s first term, let’s focus on his time in Hollywood.

Hollywood

In 1926, Kennedy started off in Hollywood as a complete outsider and in what little press he got, he was mentioned as president of a small bank in the Boston area. Kennedy's skill was not in production of films or directing but in making the business more cost efficient through elaborate structuring. He learnt this from his time as assistant general manager of Fore River, a Bethlehem Steel shipyard in Massachusetts, during World War I and as Bank President of Columbia Trust Bank.

In modern terms, what Kennedy was doing at Hollywood is akin to what private equity or investment banking firms do today. He identified undervalued production studios, made large investments, cut unnecessary costs using his connections, restructured companies through mergers, gave himself a tidy salary and stock and then finally once the act was done, sold the shares for a large profit.

The descriptions of Kennedy's dealings in Hollywood are fascinating from a financial perspective due to how simple and primitive it seems relative to todays complex markets but the main ideas stay the same. What Kennedy did in 1920s was identify a rapidly growing market during the greatest bull market of his time and grow to become an industry titan. Kennedy used his keen eye for undervalued assets, understanding of corporate structures, using innovative new technologies at the time like sound systems, and strategic sales to make himself incredibly wealthy. To be more specific, it is estimated that he was worth about $5 million in 1925 and $50 million in 1930. These figures would be $90 million and $940 million today adjusted for inflation. However, I despise using inflation calculators and so to put his wealth into perspective, let's use the rich list.

From this newspaper published in 1925, we can see that the richest man 'Mr Henry Ford' of Ford Motors was worth $600 million. Kennedy was worth $5 million then. Therefore, he was worth more like $1.75B in 1925. In 1930, J.D. Rockefeller was the richest man and worth $900 million. Thus, Kennedy was worth around $12B in 1930. However, another way of measuring would be proportional to America's GDP. Kennedy was 0.005% compared to the GDP in 1925. He was 0.05% compared to the GDP in 1930. Thus he was worth $1.4B in 1925 and $15B in 1930.

Alright now that we have three different estimates of his wealth that were painstakingly found through searching the internet for sources and pleading with gpt-4o to assist me. I hope this underscores the sheer magnitude of wealth that Kennedy made in the film industry. Now let’s get into the details of what exactly he did in Hollywood.

In 1926, Kennedy acquired control of the Film Booking Office of America (FBO) which was at the time a struggling film distribution company. He focused on what he knew best which was structuring the business efficiently to cut down on production costs. He also used his negotiation skills to get better terms with theatres and cut unnecessary costs. This steadily increased the value of FBO but Kennedy’s adventures were just beginning. Later in 1927, Kennedy merged FBO with Pathé Exchange, a leading film distribution company that was more established than FBO. This further improved operational efficiency and increased market share. For his final play in the film industry, Kennedy would merge FBO and Pathé exchange with the Keith-Albee-Orpheum (KAO) theatre chain and Radio Corporation of America's (RCA) photophone division to create RKO Pictures. Through this merger, Kennedy would create one of the first vertically integrated Hollywood studios that controlled production, distribution and exhibition under one corporation.

These sections of the book were quite interesting with lots of information about the merger and how Kennedy navigated Hollywood and the press. It was interesting to see how relatively simple things were a hundred years ago when Hollywood and the film industry were quite nascent. One of the more interesting anecdotes was that Kennedy's RKO was a pioneer in sound films and used RCA's photophone technology to put them at the forefront of this rising technology in the film industry.

As would be expected of Kennedy, he would later sell his shares in RKO at a significant profit in 1930 before the market downturn and go short the market as he was expecting significant downturn after many years of prosperity and froth in the market. There are some accounts of public investors in RKO and other large investors getting really angry at Kennedy for his decision to sell his entire stake during the market downturn, especially after the stock market crash of 1929. After exiting from Hollywood completely, Kennedy would seek refuge for his newfound wealth in primarily real estate for the rest of his life.

Whiskey Imports

One rumour of Kennedy was that he made his wealth during the Great Depression by being a bootlegger to the mafia — selling illegal alcohol during prohibition. The author, David Nasaw, says that while had searched all the historical sources he could and conducted dozens of interviews to find everything he can about Kennedy, nothing pointed towards him being a bootlegger. He claims these rumours only started surfacing in the late 1960s after JFK's and JPK's death and were created by political opponents to erode trust in the powerful political family by tarnishing their reputation.

However, Kennedy did benefit from the end of prohibition which was brought about by President FDR during his first term. I love this story. While the Twenty-first Amendment (repealing prohibition) had been approved by congress, it wouldn't take effect until it had been ratified by three quarters of the states and no one knew how long it would take, however Kennedy decided to profit from this in the stock market.

“In June 1933, Kennedy joined a syndicate organised by Elisha Walker with Kuhn, Loeb; Lehman Brothers; and Walter Chrysler of the Chrysler Corporation to purchase sixty-five thousand shares in the Libbey-Owens-Ford Company, with options for tens of thousands more. With the repeal of Prohibition now set in motion, investors were lining up to purchase “repeal” stocks. One of the most popular was Owens-Illinois, which made glass bottles. Libbey-Owens-Ford was an entirely separate company, which manufactured plate glass for automobiles, not bottles, but its name was close enough to the bottle glass company to fool unwary investors.”

“The syndicate, of which Kennedy was the largest individual investor, placed its Libbey-Owens-Ford stock orders in the hands of two pool managers, who divided them into several parcels and began trading them wildly on the New York Stock Exchange. As one of the pool managers later admitted under questioning by Ferdinand Pecora before the Senate Committee on Banking and Currency, the enterprise was constructed on the correct assumption that if the pool managers pumped up volume by buying and selling shares to one another, investors would take notice and start buying shares of Libbey-Owens-Ford on the mistaken belief that they were buying shares of Owens-Illinois, the bottle manufacturer. Kennedy profited enormously from the stock pool and invested some of his profits in Owens-Illinois. He also bought sixty-three hundred shares of National Distillers at an average price of $8.64. By year’s end, after the repeal of Prohibition, National Distillers was selling at $26 a share. National Distillers specialized in blended ryes and bourbons, which could be produced domestically, as could gin and, of course, beer. Scotch whiskey would have to be imported. There was no shortage of Americans poised to compete for the right to import Scotch whiskey as soon as it was legal to do so. But none had the advantages Kennedy enjoyed. He was known in London banking circles as the American who had purchased and revitalized the British film company FBO. He was fabulously wealthy, with abundant cash to spend. He was a brilliant businessman and a consummate salesman and promoter who could be counted on to get the whiskey into the right hands—for the right price. And perhaps most important of all, he had connections to the Roosevelt administration, which would determine import duties and issue licenses.”

For his new business venture, Kennedy would go on to recruit FDR's son, Jimmy Roosevelt, and bring him along to London to show his influence in Washington. He was awarded lucrative contracts to import whiskey and Jimmy who was just starting out in the insurance business benefitted from getting contracts to insure the imports from fire.

Kennedy's new enterprise, Somerset Importers, secured one of the first New York licenses for import of wine and spirits just days after prohibition was lifted. The company became a family cash cow with profits reaching $536,000 in 1934 and surpassing a million in 1936. Kennedy would run the company until 1946 when he sold the company so that it wouldn’t affect John F. Kennedy’s campaign for congress.

Real Estate

As mentioned earlier, after his adventures in Hollywood during the Roaring 20s, Kennedy mainly focused on real estate. One of Kennedy's more profitable real estate investments was the purchase of the Merchandise Mart for $12.5 million in 1945. The building had cost the previous owners $30 million to build. The Merchandise Mart was at the time the largest building in the world with a total area of 4 million square feet. It generated substantial rental income for the family and funded most of their lifestyle, political campaigns and endeavours for the next half a century until it was sold in 1998 for $625 million.

The Kennedy’s would also famously own valuable real estate all across the country with the main focus being their estate in Hyannis Port which is the center stage for the Kennedy family.

Musings

The Kennedy family would not be where it is today without Joseph P Kennedy and what I find so fascinating about this man is his relentless pursuit of money and power not for himself but for his children. Many other great men of history chase money and power not for others as they sometimes claim but to quench their insatiable ambition for fame, power and money. While Kennedy had those same ambitions, he fundamentally wanted his children to rise above what he achieved which is no easy task for an Irish Catholic East Bostonian man who would spread his wings across Wall Street, Hollywood and Washington.

He rose his way up from East Boston to become one of America’s richest men through timing the greatest market booms of the Roaring 20s and shorting to the depths of the Great Depression. He went into Hollywood with a mission and became one of America’s richest men in just four short years changing the film industry. He profited from insider trading and market manipulation before outlawing them through regulation as the first SEC Chairman. He was America’s Ambassador to Great Britain at the most pivotal of times as Hitler was waging war against the European continent. He was in the room where it happened corresponding with Neville Chamberlain and Winston Churchill during World War II.

However at the same time, one major theme throughout the book was his nine children. In between his adventures across the country and the world, regardless of how busy he was, he spent time focusing on each of his children. He gave them access to the best resources possible and went out of his way use his connections to give them the best life experience possible. Throughout his life, JFK spent a lot of time suffering from various illnesses and diseases and it would be Kennedy who would spend time with him while his wife took care of the other children. JFK took especially strong interests in the education of his children and pulled strings to land his sons a place at Harvard and to give them a global education by sending them across the world to learn. Throughout the book, David Nasaw constantly refers to letters that Kennedy wrote the nine kids that was always personalised and showed his care for his children. He was a man would fight against Winston Churchill and Franklin Delano Roosevelt to promote his own idea of isolationism and appeasement for the sake of his kids never having to fight in World War II.

However, just so that this post doesn’t sound like I’m writing a love letter to Joseph P. Kennedy (I am), it must be noted that this whole caring for children thing can also be part of ambition and legacy building for Kennedy. He clearly wanted his sons to become President of the United States and to become the most powerful people in the world.

David Nasaw explores this motive of Joseph Kennedy through being an outsider. One aspect was by Kennedy being an Irish Catholic. While I am not particularly well versed in the history of Irish Catholics in America, throughout the book there are examples of the Kennedy’s facing difficulties because of their faith and stories of how they faced difficulties being taken seriously in politics because of it. Kennedy laments this fact when he is actually disappointed and saddened by the election results when John F. Kennedy wins the 1960 Presidential Election. This was because he realised from the polls that 5% of the democratic party voter base who would usually have voted democrat, didn’t vote for his boy because he was a Catholic. Kennedy was an outsider wherever he went, from Boston to Wall Street to Hollywood to Washington to London. Wherever Kennedy went, he was an outsider. He desperately wanted to join the in-crowd but to no avail. Eventually he had to create his own in-group with him at the very top. But that too came crumbling down with the Kennedy curse and the tragic death of Joe Jr. in World War II, Kick in a plane crash and President JFK and Attorney General RFK getting assassinated.

To address the question at the start of this post regarding the legality and morality of Kennedy’s wealth, it’s pretty apparent that Kennedy did not break any rules or laws when it came to making money. Kennedy did skirt the rules and exploited loopholes but none of it was illegal. Moreover, it should stated that Kennedy would have received significant backlash from various political opponents while he was working with the FDR administration should he have committed crimes to make his wealth. While Kennedy’s reputation didn’t benefit from him being wealthy, there isn’t any proof that he made his money through illegal actions.

However, a lot of his practices were certainly immoral but morality depends on who you ask about it. One can’t help but be impressed and find the whole Kennedy ordeal ironically hilarious. In my opinion, Kennedy was just an outsider who played the game brilliantly and won enough chips to become the creator of the game itself. While he had an incredible number of flaws that can’t be overlooked, that’s not really the point of this post focusing mainly on his financial history and the legacy he left behind pertaining to it.

Also it must be noted that Kennedy was a bagholder for appeasement. the man who timed the Roaring 20s and Great Depression in the stock market didn’t realise when it was time to let go of the appeasement belief and it led to his political downfall and his reputation never recovered after getting ousted as Ambassador by FDR. Maybe if his ego and selfishness hadn’t gotten the better of him, he could have gotten the Secretary of the Treasury role that he so desperately wanted and maybe even President if he waited long enough.

My admiration of Kennedy largely stems from the fact that he achieved the ideal life that I strive towards and dream about making a reality in the future. He made a lot of money so that his children would never have to work a day of their life in pursuit of money and can instead receive the best possible support to work towards creating an impact for the greater good of the community. I can’t recommend this book enough, I wish I had read this earlier when I first picked it up two years ago but maybe I would not have appreciated certain parts without some additional life experiences. Anyways, here are some concluding quotes towards the end of the book that are wonderful.

“Joseph P. Kennedy had finally, through his son, accomplished all he had hoped for. The Kennedy family had completed its four-generation journey from outsiders to insiders, but at a cost greater than Kennedy had ever imagined. The Catholic Church, its American hierarchy, and the Vatican, instead of supporting the family’s journey from East Boston to the White House, had stood in its way. And this the patriarch would not forget or forgive.”

“The (inauguration) speech was electrifying. Jack had had many collaborators, advisers, and editors—and solicited and reviewed drafts from Adlai Stevenson, John Kenneth Galbraith, and Ted Sorensen, among others. Still, the words he delivered from the Capitol steps on January 20 were his, including the one sentence that was most remarked upon at the time—and continues to be fifty years later: “And so, my fellow Americans: ask not what your country can do for you—ask what you can do for your country.” The thought was not a new one. It had been included in earlier speeches, including the acceptance speech in Los Angeles. It would be fruitless indeed—though many have tried—to figure out exactly how this particular thought got put into these particular words. The resemblance is nonetheless striking between this idea as expressed in John Fitzgerald Kennedy’s inaugural address and his father’s lifelong insistence that his children enter public service and do something worthwhile, that they devote themselves not to making money—he had done that for them—but to the greater good of the larger community.”

“As the lead-off car with the president approached the reviewing stand, Joseph P. Kennedy stood up and took off his hat in a gesture of deference to his son. “It was an extraordinary moment,” Eunice would later remark. “Father had never stood up for any of us before. He was always proud of us, but he was always the authority we stood up for. Then, just as Jack passed by and saw Dad on his feet, Jack too stood up and tipped his hat to Dad, the only person he honored that day.”