William O. Douglas

by Bruce Fenton

William O. Douglas’ father died when William was 6, and from that point on he worked to help support his mother. At twelve he was stricken with polio and told he would never walk again—something his indomitable spirit would not allow him to accept, for soon he was hiking in the mountains near his home.

At 18 he went off to college, living four years in a tent while he both worked full-time and went to school, graduating with honors. Penniless, he worked as a shepherd. He took a herd of sheep to Chicago, where he hopped freight and rode the rails into New York with 6 cents in his pocket to enroll at the Columbia Law School. But first, he had to get a job to pay for school and support his mother.

When law school was completed, Douglas attracted the attention of President Franklin D. Roosevelt, and was appointed to the newly formed Securities and Exchange Commission (SEC), and by 1937 became chairman. In 1939, Douglas was nominated to the U.S. Supreme Court by Roosevelt where he will be forever remembered for his liberal opinions on freedom.

Today, we all live with another of his legacies as a result of his role with the SEC. The SEC was organized to administer three Acts: the 1933 Act, which regulated the offer and sale of securities; the 1934 Act, which regulated stock exchanges and various practices of brokers; and the 1935 Act, which called for the dissolution of public utility holding companies. Later, the 1934 Act was amended to allow—under general supervision of the commission—the self-government of brokers and dealers in the over-the-counter market. The self-governing organizations became known as the NASD and the OTC market became the NASDAQ.

At the time, Douglas was concerned with the fact that less than one percent of the total number of stockholders held fifty percent of all securities listed on stock exchanges. He made it his mission to see that the large percentages of stockholders on the small side were protected. In his book, Go East Young Man, he describes the situation as reminding him of the “golden-mantled ground squirrel in the Cascades who is the anchor man in the food chain. He is to predators what hamburger is to man. His enemies are many… in the capitalistic system the unsophisticated small stockholder is the ground squirrel… hamburger for predators!”

As a jurist, Douglas could be counted on to protect the rights of the small and the weak. His was the opinion that “man’s age-long effort has been to be free. And we can keep that freedom only if we are self-reliant enough to be free. We cannot become self-reliant if our dominant desire is to be safe and secure; under that influence we could never face and overcome the adversities of this competitive age.”

Bruce Fenton is a financial consultant, a writer, and the president and founder of Atlantic Financial Inc. Bruce welcomes inquiries, comments, and questions. He can be reached by contacting The Fenton Report.