In 2016 , the Museum of American Finance began a research project to investigate what happened to the firms of this historic syndicate . Starting with the 205 firms listed on the Ford Motor Company IPO tombstone , the project reconstructs a genealogy of each bank focusing on its origin and demise . Given that the majority of the syndicate participants were private partnerships , consistent comparative financial data is difficult to obtain , but other characteristics of the community can be analyzed from existing sources .
For instance , the project studies the social origins of the founders , when the family of the founders ceased to be members of the firm , when the firm became a corporation and / or went public , as well as when and why it disappeared . Aggregated , the individual narratives form an empirical dataset from which one can analyze certain overarching patterns regarding the consolidation and change in the American banking community in the 20th century .
In forthcoming issues of Financial History , we will present the genealogies of specific firms and the larger findings , but first , we revisit the history of the IPO itself . How did it come about and why did it happen when it did ? Who were the main actors involved in the deal , and how did they come together ? Why , for example , was San Francisco bank Blyth & Co . the manager of the syndicate , even though Goldman Sachs was the dealmaker ? These are the questions to which we now turn .
The Ford Motor Company Initial Public Offering ( 1956 )
In 1932 , during the Great Depression , Congress passed the Revenue Act , which dramatically increased tax rates . Estate tax rates rose to 45 % and exempt amounts were also reduced . In 1934 , through an amendment proposed by Senator Robert La Follette ( WI ), Congress increased the estate tax again . For net estates more than $ 10 million , the tax levy became 60 %. Lest wealthy individuals try to evade the tax , Congress also assessed high taxes on gifts . By 1935 , the exemption for estate tax was cut again , and the top rate increased to 70 %.
Knowing that their deaths would lead to substantial taxes , Henry Ford ( 1863 – 1947 ) and his only son , Edsel ( 1893 – 1943 ), created the Ford Foundation in 1936 , endowing it with almost 90 % of the Ford Motor Company ’ s stock , or 3,089,908 shares of non-voting “ A ” stock . Voting rights resided “ solely in 172,645 outstanding shares of “ B ” stock , all of which [ were ] owned by members of the Ford family and their interests .”
Though the Ford Foundation was technically a philanthropic endeavor , the Fords also used it to safeguard family control of the Ford Motor Company . According to Dwight Macdonald , author of Ford Foundation : The Men and the Millions , “ If Edsel and Henry Ford had left their Ford stock to Edsel ’ s children instead of to the Ford Foundation , their heirs would have had to sell most of the shares they had inherited in order to pay the inheritance tax .” Until the Revenue Act of 1950 , the profits that went to the foundation were also tax-free .
When Edsel Ford died of stomach cancer in 1943 at the age of 49 , his oldest son , Henry Ford II ( 1917 – 1987 ), inherited his position on the board of trustees of the Foundation . After a brief struggle over the leadership of the Ford Motor Company , Henry II also assumed presidency of the company in 1945 . Two years later , Henry Ford passed away , and his remaining shares of Ford Motor Company stock were allocated to his family ( voting ) and to the Ford Foundation ( non-voting ). By that time , the Foundation ’ s endowment was substantial , but its income was limited to the dividends from the Ford Motor Company ’ s stock .
The Foundation was also never entirely sure if the dividends would deviate from expectations , which affected their ability to make grant promises and plan program activities . Wanting to access the principal of its capital , the Foundation decided to sell one-third of its company stock in 1954 .
At that time , Ford Foundation ’ s president was H . Rowan Gaither , Jr . ( 1909 – 1961 ). Born in Mississippi , Gaither grew up in Portland and San Francisco , where his father had been a bank examiner and a founder of a small regional bank called the Pacific National Bank . He attended the University of California as an undergraduate and law student . After practicing law in San Francisco , he worked for the Massachusetts Institute of Technology ’ s Radiation Laboratory ( 1942 – 1945 ).
In 1948 , Gaither became chairman of the Rand Corporation , a private organization created during World War II to further the research and development of military planning . While at Rand , he was introduced to Henry Ford II by Karl Compton , president of MIT , who was a trustee of the Ford Foundation . In 1948 , Ford II asked him to lead an investigation on what the Foundation should do with its inheritance . In 1953 , Ford II tapped Gaither to become president of the Ford Foundation , and by 1954 , the Foundation began to investigate the possibilities of a stock sale .
A major issue with the sale had to do with voting rights . Gaither and the foundation felt that the stock could not be sold without voting rights , and so did the New York Stock Exchange . Without exclusivity , however , the family risked losing control over the company , so a compromise had to be made . In 1954 , the finance committee of the foundation ’ s board of trustees met almost 20 times to study how to sell the stock and determine how much the family would be compensated for giving up its exclusive rights .
At the time , the members of the finance committee included Gaither ; James F . Brownlee , a partner in J . H . Whitney & Co . ( a private bank founded by Whitney heir , Jock H . Whitney ); John J . McCloy , former Assistant Secretary of War and chairman of Chase Manhattan Bank ; and Charles Edward Wilson , former chairman of General Electric ( GE ) and chairman of W . R . Grace & Co . — a multi-national shipping and industrial manufacturer — who acted as chairman of the committee .
The son of a Protestant-Irish bookbinder , Charles Edward Wilson ( 1886 – 1972 ) was born in New York City and raised by his widowed mother . At the age of 12 , he began working as an office boy at the Sprague Electrical Works , which became a subsidiary of GE in 1903 . He became president of GE in 1939 . Wilson ’ s
www . MoAF . org | Fall 2017 | FINANCIAL HISTORY 13