Ponzi's Scheme_ The True Story of a Financial Legend - Mitchell Zuckoff [3]
With a maestro’s touch, Ponzi had struck a perfect balance among the forces competing to control the new American identity: altruism and avarice. Now that he was all set, he insisted, he had no need for more investors. But he would continue accepting their money out of the goodness of his heart, so they could join him and his family in savoring the finer things in life.
If there was any reason for the people of Boston to be suspicious of Ponzi, they would not find it in the morning Post. The story read with all the confidence of the advertisements the paper ran that promised disappearing dandruff to wise buyers of Petrole hair tonic, or “sunshiny” stomachs courtesy of Goldenglo tablets, or relief from chronic constipation in a tin of Fruit-a-Tives.
The closest the story came to skepticism was to mention that federal and state authorities had looked into Ponzi’s extraordinary investment plan. But the reporter defused that land mine in a single sentence, writing, “The authorities have not been able to discover a single illegal thing about it.” Ponzi could not have hoped for a more sterling endorsement.
Adding to Ponzi’s delight, below the front-page story was an ad for a prominent local bank, the Cosmopolitan Trust Company. The bank was trying to drum up new deposits by guaranteeing a generous interest rate: 5 percent a year, compounded monthly. To Ponzi, the ad was a divine gift. For months he had been comparing his promised rate of return—50 percent in forty-five days—to the paltry sum paid by banks. Here was the same comparison on the front page of the Post, the self-proclaimed “Great Breakfast Table Paper of New England.”
A working man with one hundred dollars to invest, reading that day’s Post over a bowl of Grape-Nuts, faced two choices of seemingly equal reliability but vastly different outcomes. Even in the margins of his newspaper, he could calculate that depositing his hundred dollars in the Cosmopolitan Trust Company would yield him an annual profit of five dollars and change. That was assuming the bank did not fail in these days when federal insurance for deposits was barely a whisper of an idea. Or he could entrust his hundred dollars to this Charles Ponzi fellow and watch it multiply over and again during the same year.
If he reinvested his hundred dollars plus interest after each forty-five-day period, he would walk away with more than twenty-five hundred dollars after a year. If he let it ride for a second year, he would pocket more than sixty-five thousand dollars. It was an unimaginable sum at a time when the average U.S. income was about two thousand dollars, the president of Harvard University was paid six thousand dollars, a Men’s Ventilated Raincoat could be ordered from the Sears catalog for less than twelve dollars, a can of codfish cakes for a family of three cost twenty-five cents, and the newspaper he held in his hands cost two cents. Only a fool would choose the bank’s interest over Ponzi’s.
Having read the Post and done the math, would-be investors had begun assembling on School Street long before the Locomobile had even started the trip from Lexington. They came from all corners of Boston and beyond, a miniature League of Nations, with immigrants brushing shoulders with Brahmins, Italians mingling with Spaniards, Irish alongside English, Greeks chatting with Poles. Among them were Swedes, Frenchmen, Jews, blacks, and Portuguese, new and old Americans. Kitchen maids stood alongside