Free The Go-Go Years by John Brooks

mollified,Jackson did not mail the letter. (But neither did he destroy it. He still has it, the almost illegible scrawl testifying eloquently to his emotional state at the time.) A couple of days later a delegation of S.E.C. men—headed by none other than Silver, one of the inquisitors at the hearing—came to the Amex floor and spent the entire trading day watching the Jackson-Segal operation, trade by trade. It turned out to be an unusually lively day for them, because one of the stocks in which they specialized, Mead Johnson, was fluctuating wildly on conflicting rumors about a new contraceptive product, calling for particularly risky and fast-footed specializing. All day, the S.E.C. men watched without comment. After the close that afternoon, they declared themselves convinced that Jackson and Segal were honest, and flatly asked them to become allies of the S.E.C. in the reform of the Amex. With a lack of enthusiasm that in the circumstances must be considered understandable, Jackson and Segal agreed.
    â€œNow, what do you know about what’s going on upstairs?” Silver asked his new allies, when they were all gathered on the Amex floor, late that afternoon after the janitors had swept up and everyone else had gone home.
    In fact, one of the things that was going on upstairs just then was the surreptitious retyping, with significant emendations and deletions, of the minutes of certain recent meetings of the Amex Board of Governors. But Jackson and Segal, of course, did not know this. Indeed, they told the S.E.C. men that they knew nothing of what the Amex administration was doing and could only promise to cooperate with the S.E.C. in its investigation in any way they could. The following week, Jackson made good this promise by going to Washington and, in a long session with the S.E.C. at its headquarters, giving his views on what reforms were needed.
    So at last, painfully, the federal investigators came to believe in the existence of a minority element within the Amex that, if encouraged, might be able to bring about reform from within. Much later, S.E.C. officials would say that until the day when their delegates came to the Amex floor and reached an understanding with Jackson and Segal, the agency had been onthe verge of exercising its legal prerogative to padlock the executive offices of the Amex and take over its operation in toto. Such a seizure, representing socialism rampant in one of the last bastions of free capital, would have been a crushing, perhaps fatal blow not just to the Amex but to all of Wall Street.
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    In October, the rest of the Street finally came to realize that it would be caught in a backlash from the Amex scandal. Wall Street at its highest level took action, forming a securities-industry committee to review the Amex’s rules, policies, and procedures and make recommendations. Its membership was a cross section of top-echelon Wall Streeters, including the president of Merrill Lynch, the managing partner of Paine Webber, the senior partner of Goodbody, the president of Clark Dodge, and, as chairman, the formidable Gustave Levy, senior partner of Goldman, Sachs. The Amex, meanwhile, went on its bumbling way. A meeting of the remnants of the Young Turks, intended for regrouping and for planning a new offensive, was scheduled for the day following the announcement of the Levy committee. Reilly, getting wind of the meeting, arranged to have its location changed from someone’s private office to the Amex governors’ room, invited all Amex members to attend, and, as a final touch of irony, called in the press. Just as he had planned, the well-reported meeting fell flat in a morass of platitudes about unity. Even Jackson, thus mousetrapped, found himself saying, “Let us close ranks, forget personal feelings, and save our Exchange.” Over the subsequent days, though, he resumed his defiant contacts with the press, giving his version of the state of affairs at the Amex