Financial History Issue 124 (Winter 2018) | Page 17

to weather the storm of World War I and
establish its reputation as a leading firm
in the financing of the utilities industry in
California. During this time, however, the
firm encountered some upheaval at the
executive level. In 1924, Blyth and Witter
had a falling out over the eastern branch
offices. Blyth believed “that the company’s
future was in New York, but Mr. Witter,
a confirmed Californian, did not.” Witter
left the firm and founded Dean Witter &
Co. The Blyth firm retained its name until
the late 1920s.
Blyth & Co. (1929)
In 1929, right before the Crash, Blyth,
Witter & Co. made the decision to open a
brokerage business with a seat on the New
York Stock Exchange (NYSE). The new
brokerage partnership in New York was
called Blyth & Co., while the underwrit-
ing firm in California was renamed Blyth
& Co., Inc. After the Crash, however, the
firm suffered serious setbacks. It sold its
seat on the NYSE and the brokerage part-
nership was dissolved. Blyth & Co. merged
with an investment trust called Blue Ridge
Corporation, which was owned by the
Shenandoah Corporation, another invest-
ment trust created by public utility mag-
nate Harrison Williams and the Goldman
Sachs Trading Corpo ration, the invest-
ment company of Goldman Sachs & Co.
Educated as a bookkeeper and the son of a
miller-turned-banker, Williams grew up in
Ohio. Over a period of more than 20 years,
Williams built a utilities empire through a
series of holding companies, similar to that
of Samuel Insull, Thomas Edison’s former
secretary at General Electric. In 1906, he
created a holding company called Ameri-
can Gas and Electric Company, and in 1912
he created another gigantic utility hold-
ing company called Central States Electric
Corporation, which controlled Blue Ridge,
among other firms. He was introduced to
Blyth’s principals through Hugh Baker,
the president of National City Company,
the securities affiliate of the National City
Bank of New York (Baker later became the
head of Blue Ridge Corporation, 1940–45).
After the merger, the firm was called Blyth
& Co., Inc.
The Depression years were challenging
for the firm, as they were for the financial
community overall. Blyth & Co. did not
escape unscathed, as the demise of their
investment trusts demonstrates. But Blyth
& Co. benefited from the “vacuum… cre-
ated by the retirement from business of the
security affiliates of the banks” following
the passage of the Glass-Steagall Act (1933)
and the Securities Exchange Act (1934). By
1934, Blyth & Co. was able to repurchase
the 49% interest that Blue Ridge invested
in the firm’s capital, which turned out to be
fortunate for the firm because Williams’s
financial dealings were investigated in 1937
for not having revealed large losses in the
1929 Crash. Williams’ estate was subse-
quently successfully sued by Blue Ridge’s
investors after the War.
In 1935, Blyth invited Charles E. Mitch-
ell, Baker’s replacement at National City
Company, to become chairman of the
board. The son of a merchant, Mitchell
was a Massachusetts native and a graduate
of Amherst College like Blyth. He started
out working for a utility company in Chi-
cago before joining the Trust Company of
America in New York in 1906. In 1911, he
opened his own firm, C.E. Mitchell & Co.,
and in 1916 he joined the National City
Company. He was named president of
National City Bank in 1921.
Mitchell was no doubt a controversial
choice, given that he had been skewered
by the press and by Congress during the
Congressional hearings on the securities
industry in 1932–33 known as the Pecora
Hearings. During the investigation, “it was
disclosed that [Mitchell] had made illegal
stock transactions, speculated in his own
bank’s securities, and engaged in income
tax evasion.” In 1938, he had to pay back
the US government $1.4 million. Within
the financial community, however, Blyth
& Co. believed that Mitchell retained a
high level of support and that his chair-
manship, which he maintained for 20
years, would expand the national network
and reputation of the firm.
It appears that Blyth & Co. was success-
ful in climbing the ranks of the investment
banking community because by 1948,
when the Justice Department began an
investigation of price fixing in underwrit-
ing syndicates for violating the Sherman
Anti-Trust Act, the firm was identified as
one of the 17 top investment banks in the
country. Blyth & Co. was subsequently
investigated in United States v. Henry S.
Morgan et al (1948), which was certainly
a source of stress, but the ordeal ironically
added to the firm’s prestige.
Blyth & Co.’s status was further
cemented in 1956 when it entered into
negotiations with the Ford Foundation to
co-manage the sale of one-third of the
Foundation’s holding in Ford Motor Com-
pany’s common stock, the largest offering
of its size up until that point in American
history. Though Goldman, Sachs & Co.
was the leading dealmaker on the Ford sale,
the Foundation’s board of trustees finance
committee chose Blyth & Co. to “act as
chairman of the co-managing group.”
Blyth & Co.’s West Coast origins appear
to have assisted it in capturing the coveted
role of the syndicate chairman. H. Rowan
Gaither, Jr., Ford Foundation’s president,
who was himself a California native, stated
“that one of the Foundation’s chief objec-
tives [was] ‘to achieve the widest possible
distribution of the shares to the public.’”
The Ford offering signaled that Blyth &
Co. had achieved a national reputation,
but it also took place at a turning point in
the firm’s history.
The Last of the Founders
Since 1914, Blyth & Co. had been led by
its core group of founders and executives,
but by the mid-1950s they began to leave
the firm. Though he lived to know of the
Ford deal, Mitchell died in 1955. Then, in
1958, Charles Blyth retired from the presi-
dency and became the chairman of the
board. When he died the following year,
the other founders stepped in: Leib took
Blyth’s place and Shurtleff became chair-
man of the executive committee.
As the founders left, Blyth & Co. pro-
moted from within — men who started in
the firm’s branch offices and had been with
the firm for a period of decades. Despite
the firm’s ability to draw on internal tal-
ent, however, the exodus of founders and
executives had a negative impact on its
capital position. According to Shurtleff,
when the founders left the business, “there
wasn’t enough capital left in the busi-
ness to keep it a thriving concern.” This
loss also took place at a time when even
more capital was necessary to compete
effectively in the post-War economy. By
the late 1960s, it was clear that like many
others, Blyth & Co. needed more capital.
INA Corporation (1970)
In 1970, Blyth & Co. made the controversial
decision to merge with INA Corporation,
an insurance holding company created
in 1969. INA was the main owner of the
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