The Rag

Bucket shops, big stores, and GameStop

Pete Sirbu was vacationing in Hot Springs in the spring of 1925 when he met a man up on the Hot Springs Mountain summit overlook. The man’s name was J.C. Hall, a local, who told Sirbu he had a car and would drive him around town to show him all the spa had to offer. They spent the day driving around the countryside, out to the lake, through the hustling and bustling downtown. They talked about their families, their jobs, the state of the world. They became fast friends.

When they returned to Sirbu’s hotel and parked the car on Central Avenue, Sirbu noticed a long black wallet on the sidewalk. He picked it up and examined its contents. About $50 in cash and a number of papers and letters. Hall looked through the letters and was alarmed at what he read. The owner of this wallet was a man named Franklin who was a “confidential agent” of something called the “International Exchange” - a $200 million conglomerate that trafficked in inside information about publicly traded companies and employed agents like Franklin around the country to exploit that information in so-called “bucket shops.”

Bucket shops were small stock exchanges located around the country in those days where no actual stock or commodities were exchanged. Rather, they were shops were “investors” made bets with one another on the prices of stocks and commodities. These bucket shops were rampant throughout the turn of the century. Anyone with access to a tickertape machine and a chalkboard could open one up and fleece the suckers. While some heralded bucket shops as a way for small-timers who couldn’t afford to invest on Wall Street (back then you needed to have a minimum of 10% and purchase a minimum of 100 shares) to get in on the stock market game, the truth is they were crooked as hell. Bucket shop operators could easily manipulate the markets by purchasing or shorting stocks in the actual market to affect the prices that their customers were betting on. As the bucket shop market grew (eventually rivaling the size of the capitalization of the actual stock and commodity markets) the shenanigans that went on had a ripple effect through Wall Street, eventually contributing directly to the Bank Panic of 1907. By the time Pete Sirbu showed up in Hot Springs, bucket shops had been outlawed in the United States. But in Hot Springs, Arkansas, there were plenty of things on offer that weren’t exactly legal. And bucket shops joined illegal brothels, saloons, and casinos up and down Central Avenue.

As Sirbu and Hall looked through Franklin’s wallet, a man showed up frantically looking for something. Believing him to be Franklin, Hall suggested to Sirbu that they pocket the $50 and split. Sirbu was an honest man, however. He returned the wallet to the man. Grateful, Franklin offered each of the men $1,000. He didn’t have the money, however. He would make it for them in the bucket shop with a play he was instructed to make for his employers when he was in town - one of two he needed to make before he left town. Sirbu and Hall accompanied Franklin to the bucket shop, a brokerage office bustling with clerks, brokers, and board-markers, all sporting tailored suits and passing back and forth large stacks of cash as someone reads from a tickertape machine and other staff constantly update a large chalkboard with stock symbols and numbers. Sirbu was surely awed by the level of play in the bucket shop. This was no proletarian shop with ten dollar bills being passed around by cotton farmers in literal buckets like he had possibly seen back home in Missouri. This was big time.

Only this wasn’t real at all. Franklin had steered Sirbu into a “big store,” a fake brokerage office staffed entirely by actors. Even Hall was in on it. He had been tipped off to Sirbu’s presence in Hot Springs by a steer man for a commission and their meeting on the mountain wasn’t chance - it was all a part of the con. Sirbu was in the midst of what confidence men called “the rag.”

The 1920s were real salad days for America’s community of con artists. It was during this period that small time hustlers, liars and thieves developed the two major schemes that were known in the underworld as “the big con.” A big con is an elaborate ruse, one that can involve dozens of confederates and sometimes take weeks of work, all to set up one mark for a large amount of money - a touch - often of five or six figures. Before the big con, most confidence men trafficked in short cons - the duke, the high pitch, the engineers daughter, the big mitt. But as con men started getting more organized, and as Americans after the war got more free with their money, mobs of con men came together to put on these detailed large-scale productions.

The two major big cons were “the wire,” a horse racing scam popularized in the film “The Sting,” and “the rag,” a similar ruse that involved stock speculation instead of horse racing. The development of the rag was due to both an increased interest in the stock market and a sense that some marks would trust a promise of a “sure thing” in the stock market over a “sure thing” at the racetrack. Not to mention some people would simply be easier to get into a bucket shop than a bookmaker’s.

Sirbu listened as Franklin detailed how the play would work. He said his conglomerate were planning to use their considerable bankroll in New York to push the price of a particular stock high, so he was instructed to bet on it at the bucket shop. It couldn’t lose. Franklin made his bet, and they watched the board as the marker erased the numbers and scribbled in new ones, higher and higher. After collecting his winnings, he offered Sirbu and Hall their tip for returning his wallet. Hall, however, asked if Franklin could let them in on the other play he was supposed to make before leaving town. Franklin agreed, so long as they didn’t tell anyone else. Hall asked if he had enough time to get to the bank to get more money, and Franklin assured him that there was enough time. This was all an act, of course, put on for Sirbu’s benefit. Surely Sirbu wouldn’t sit back and watch Hall and Franklin get rich and not get in on it himself. He, too, would go to the bank to get more money to add to the kitty. How could he be this lucky?

After retrieving all he could from the bank, $60,000 in crisp $100 bills, he returned to meet up with his confidants. And here’s where the sting comes in - you need to be a member to bet at this particular bucket shop. So Franklin will take Hall and Sirbu’s money and place the bets for them. Sirbu sees Hall hand over his stacks of cash to Franklin, so he has no reason to fear handing over his own. Franklin then excuses himself as he ducks into the bucket shop. Sirbu is so excited about the millions he’s about to make, he doesn’t even notice that Hall has copped a heel and disappeared as well. He quickly knew that he had been taken off and went to the police. But if he had entered the bucket shop to investigate for himself, he’d have found nothing but an empty suite. The entire mob had lit a rag and split.

There are more elaborate versions of the rag, including one where the mark is allowed to bet his own money, but just like in the famous scene from The Sting, he’s told to bet long when he should have bet short. And every version of the rag, the wire, the fight store, the last turn or the flat store were played in Hot Springs in those days. Hot Springs was known the world over as a hotbed of con mobs. There were a number of permanent “stores” in operation in Hot Springs since the turn of the century. One of these was the Indiana Club, where Ed Spears operated a permanent store for a version of “the last card” con - where a mark believes they are betting on a rigged card game in cahoots with a crooked dealer - except at the Indiana Club Spears ran the con with a gaffed roulette wheel. In 1912, Spears famously took the Indy 500 driver for $20,000. The case made national news, and Spears and "The Brass Kid” were arrested and eventually made it to the Supreme Court (they lost). It wasn’t Spears’ first time in the papers. He was notorious for almost being killed during the Flynn-Doran gunfight of 1899. But Ed Spears was known in the American underworld in the 1920s as an inside man, someone who was always on call near the big store, ready to receive grifters and con mobs from anywhere who were steering their marks into Hot Springs. The bogus card rooms, bookmakers, and bucket shops around town weren’t run by any one mob. They were permanently available for short-term lease to anyone who needed them, and they stayed busy.

The stock market crash of 1929 lead to a drying up of business for cons who specialized in the rag. But by the 1930s Hot Springs still had their fill of con artists using the town as a base of operations. They weren’t the big con mobs of the old days. They were mostly short con artists, pickpockets, petty thieves, phony horse touts, and other assorted riff raff and scoundrels. Mayor Leo McLaughlin, facing a public perception that Hot Springs was a town where tourists were being taken off by everyone from the dealers in the casinos to the strangers they met on the street, took a hard line against confidence men. Prior to the horse racing meet of 1937, he instructed his police that the ball and chains should be “oiled up for pickpockets and confidence men who have begun to arrive to prey on Hot Springs’ winter visitors.” Those who were arrested were shackled to the ball and chains, given push brooms, and made to sweep the streets. “We’ll work these men down on Central Avenue where everyone can get a good look at them,” McLaughlin said. And hundreds of people did. Crowds gathered to gawk and take photos with the humiliated grifters.

Ironically, one of McLaughlin’s own confidants and a member of his own political machine was probably well known to the shackled con men. Ed Spears was still living large in Hot Springs, now a bookmaker and still a political powerbroker. In 1946 Spears would make headlines one more time when he was arrested for stealing voter affidavits at gunpoint at McLaughlin’s urging (a story I detail in my book The Vapors). Though Spears would be convicted by the grand jury, he wouldn’t have to wear any ball and chain.

As for Pete Sirbu, he never got his money back, and Franklin and Hall were never apprehended. He wasn’t the first mark to be touched by the rag in Hot Springs, and he wouldn’t be the last.

Stock speculation - both legitimate and otherwise, has been in the news a lot lately with the public fixation on the wild swings in the stock price of the video game retailer GameStop. There are some real parallels between the debate around current retail stock brokerages like Robinhood and the bucket shops of old. I wanted to let my readers know that I dipped my toe in the waters of the GameStop waters and wrote a feature about an unknown but important player in the saga, Kentucky beach volleyball coach Mike McCaskill. You can either read my story at The Ringer by clicking here, or listen to this special bonus episode of my podcast Gamblers by clicking here, or both! And if you enjoy it, as always, please share it.

Also in case you didn’t see this news, The Vapors was optioned for a TV series. So keep your fingers crossed that you’ll get to see Hazel Hill on screen one day.

To the moon,

David