Resurrecting a Forgotten Capitalist

In June 2013, echoes of the Roaring 20s were everywhere in Manhattan. The Great Gatsby was in movie theaters, and the film’s marketing partners—the Plaza Hotel, Brooks Brothers, and Tiffany among them—were playing up their Gatsby connections and collections. Oxford University Press got into the act, too, with the timely release of Temple University history professor David Farber’s seminal biography, Everybody Ought to Be Rich: The Life and Times of John J. Raskob, Capitalist.

Raskob is relatively unremembered today, but he shouldn’t be: He is as much an icon of that high-flying decade as F. Scott Fitzgerald’s glamorous and doomed protagonist, Jay Gatsby. Raskob was America’s leading CFO (“treasurer” in those days). Reportedly able to size up complex financials at a glance, Raskob was instrumental in the growth of two industrial giants: DuPont and General Motors.

A middle-class kid from Lockport, N.Y., a small town built around the Erie Canal, Raskob was a 21-year-old comer when he got a job as Pierre DuPont’s secretary in 1900. Within two years, he had engineered the leveraged buyout that allowed DuPont to take control of the midsized explosives business that his great-grandfather had founded a century earlier for only US$2,100 in cash. Afterward, Raskob’s facility for creative corporate finance provided the money needed to transform DuPont into one of the nation’s largest companies.

Bored with running only DuPont’s finances, Raskob turned his eye to General Motors, then a fledgling company with prospects that were rising and falling on its mercurial founder, Billy Durant. Raskob convinced DuPont’s leadership team to invest a $25 million chunk of its windfall profits from World War I in GM stock.

It was Raskob who came up the plan that became the General Motors Acceptance Corporation (GMAC) in 1919. It was the first time a carmaker offered financing to consumers, and it unlocked a wealth of demand: By the end of 1920, GMAC had loaned more than $46 million to consumers, driving sales and helping to vault GM to industry leadership. That was also the year Durant was deposed, and Pierre DuPont, Raskob, and an engineer named Alfred Sloan teamed up to lead the company.

After he stepped down from GM in the late 1920s, Raskob developed the Empire State Building, beating Walter Chrysler in the competition to erect the world’s tallest building. But Raskob’s high profile in corporate finance, his relentless boosterism of stock ownership (even as he exploited his insider status, manipulated the market, and shorted his holdings), and his vocal opposition to Franklin Delano Roosevelt’s New Deal, put him on the wrong side of history in the Great Depression. He lived until 1950, but he never again attained the celebrity he had enjoyed during the 1920s—which helps explain why Raskob is a relatively obscure figure today. David Farber has done readers of business history a valuable service in resurrecting him.