Ritz With A Shvitz

Luxury on the Lower East Side

Postcard with architect's rendering of Libby's Hotel and Baths; courtesy of the New-York Historical Society

THE STOCK MARKET WAS UP. Businesses were enjoying record profits. Developers were constructing new buildings at an unprecedented pace. Yet in the midst of this prosperity lay the seeds of an economic crisis. Mortgage companies, taking advantage of abundant capital, began offering a new type of investment – the mortgage-backed security. It mattered little to these companies whether the recipients of the loans would be able to repay.

When the borrowers started defaulting, the problems began. Investors in these now worthless securities were hit hard. Small investors lost their life savings, while banks and other financial institutions lost incomprehensibly large sums, and some failed. Bank failures contributed to overall financial instability, the stock market went into free fall, and the nation sank into a deep economic crisis.

Summer of 2008? No, summer of 1928. If the scenario above sounds eerily familiar, it’s because it is. Economists and politicians alike frequently compare our current economic crisis to the Great Depression. Although most students of that era study the Dust Bowl, the stock market crash, and the bank failures, the role of the mortgage debacle is largely ignored.

In the 1920s, unscrupulous mortgage companies financed the construction of grand edifices all over the country. Many went into bankruptcy and foreclosure. Libby’s, a twelve-story luxury hotel on New York’s Lower East Side, long demolished and almost completely forgotten, is one.

Today, two depressions in the sidewalk at the corner of Chrystie and Delancey Streets in New York City’s Lower East Side are all that remain of Libby’s Hotel and Baths. Libby’s began as a dream. Built as Manhattan’s first (and so far only) all-Jewish luxury hotel, it opened its doors in 1926 as a glamorous palace whose opulent baths, ornate swimming pool, modern gym, and comfortable lounges were available to the entire community. Libby’s lasted only three years. Its demise is a saga of greed, betrayal, and corruption. This 1920s story could easily have taken its place among today’s headlines.

Libby’s was the brainchild of an energetic dreamer named Max Bernstein. When Max was 11, he and his family emigrated from the once-thriving city of Slutzk, Russia. They arrived on the Lower East Side in 1900 and found a community whose streets pulsated with life – sing-song voices of newsboys chanting sensational headlines, pushcart vendors hawking wares, and tenement dwellers socializing on stoops. Tragically, within a year of the family’s arrival, his mother Libby died. On the night of her funeral, Max ran away from his home and slept in a small park, alone and despondent. Years later, Max would recall that sad night, saying that his dream of building a hotel began precisely then. He had a vision of a palatial hotel rising on that very spot, at the corner of Chrystie and Delancey Streets. It would rise above the run-down tenements, an oasis of calm and beauty in the bustling and gritty Lower East Side. The hotel would be named Libby’s, after a “Jewish mother who died in the blossom of her days.”

As Max grew older, he began to pursue his dream. He opened a tiny candy store, then a series of restaurants, each bigger than the last, every one of them named Libby’s. In May 1921, Max began selling stock at ten dollars a share to finance his much more ambitious project, Libby’s Hotel and Baths. By December, he had acquired land on the corner of Chrystie and Delancey Streets, which was advertised as nothing less than the yidishe mittenmark – the “Jewish heart” of the East Side.

Max invested an extraordinary amount of time, energy, and money in an extensive advertising campaign, predominantly in the many Yiddish-language dailies that thrived in the immigrant community. He publicized every stage of the building process, from the demolition of the tenements, to the cornerstone laying, to the construction of the building. He promised that the grand twelve-story tower would be “a model of beauty and modern architecture,” the equal of the grandest hotels in America. The campaign was so effective that when Libby’s Hotel and Baths had its preview opening on the afternoon of April 25, 1926, a crowd of 20,000 converged for the occasion.

The New York Times joined its Yiddish counterparts in covering the event. All the newspapers described a cold rain that pelted people who waited hours for the doors to open. This was an opportunity for the investors, many of whom were average working people who owned only one share, to inspect their new $3 million edifice. Although only about 3,000 stockholders were admitted, the rest of the crowd, to quote the Jewish Morning Journal, “beleaguered the door hoping to catch a glimpse of America’s first Jewish hotel and the greatest Russian-Turkish baths in the world.”

Inside, stockholders and their guests crowded into the spectacular lobby, whose richly colored plaster ceiling, supported by fluted marble columns, rose two stories above the carpeted terrazzo floor. As Max Bernstein, president of Libby’s Hotel and Baths, proudly stepped forward, Joseph Cherniavsky’s Hassidic Jazz Band launched into a spirited rendition of “The Libby’s March,” a song Max had commissioned for the occasion. The spectators burst into thunderous applause and cheers of “Hoorah! Hoorah! Hoorah!,” showering Max with flowers.

Libby’s seemed to be off to a brilliant start. Like the neighborhood around it, the hotel brimmed with energy and activity. It boasted meeting rooms, ballrooms, and two kosher restaurants. Max hosted Ha-Ko’ach, the European champion Jewish soccer team from Vienna. He held annual charity events and offered neighborhood children swimming lessons. He started the first Yiddish-language radio broadcast in May 1926. The Libby’s Hotel Radio Show featured famous Yiddish entertainers, bands, theater stars, and history’s first live, on the air, Jewish wedding. Max publicized this event as a chupeh mit ale pitshevkes – a wedding with all the trimmings, and a million listening guests.

With all this activity, the hotel seemed to be a huge success, but by 1928 Max was in dire financial straits. A glut of new hotels had opened in New York. Many, in order to remain solvent, began to cater to Jews, siphoning off Max’s clientele. Max might have been better able to compete if his emotional state was not already in a downward spiral; on Oct. 20, 1926, in a tragic echo of the loss that prompted Max to create the hotel, his wife Sarah died. In a later court trial, Max would testify that the grief he experienced left him unable to function.

To make matters worse, Max’s primary creditor was the American Bond and Mortgage Company (AMBAM), a once reputable business that, by the time Max became their client, had turned from financing properties to stealing them. If the company existed today, journalists would have to coin novel terminology, like “predatory lending,” or “subprime mortgages” to describe its operations. Max had a head for dreams, not for business. He had naively agreed to terms that would make it impossible to meet his financial obligations.

The beginning of the end came eight months prior to the stock market crash. In February 1929, with Libby’s $1.5 million in debt, AMBAM moved in for the kill. During the foreclosure trial, Charles C. Moore of AMBAM lied under oath, valuing Libby’s Hotel at only $1.3 million. Libby’s consequently owed $200,000 more than the creditors claimed it was worth. The foreclosure was granted, and the judge appointed Joseph Force Crater, a Tammany-connected lawyer, as the receiver who would collect the difference.

When the creditors arrived to seize the hotel, Max was not to go down without a fight. To prevent the receiver from collecting revenue from the hotel guests, Max began ousting them in front of intrigued reporters. In the words of the New York Herald Tribune: “To the vivid life of Delancey Street was added the confusion of guests being brought bodily to the street and dumped on the sidewalk with their luggage. …A dozen [police officers] from the Elizabeth Street Station…entered the hotel [and] ejected Bernstein. …They had to quiet one man who threatened to sue because he…had been left locked in the steam room.”

Libby’s was a Jewish cultural landmark and might haveremained one to this day, but while AMBAM was determined to steal Max’s property, other forces were determined to steal his legacy. The City of New York was planning to widen Chrystie Street and claimed it would replace run-down tenements with low-income housing. Mayor Jimmy Walker’s regime was notorious for steering lucrative municipal contracts like street widenings toward well-connected contractors who were reputed to offer kickbacks. These projects also benefitted property owners and other insiders with Tammany connections.

According to Joseph Crater, AMBAM may have had inside knowledge of the city’s plans, and it now focused on squeezing as much money as it could from the situation. The same AMBAM official who earlier testified that Libby’s was worth only $1.3 million now claimed it was worth $3.2 million. Through eminent domain, New York City took ownership of the property and compensated AMBAM $2.85 million. The city then demolished the buildings between Chrystie and Forsyth Streets from Houston to Canal, including Max’s beloved Libby’s Hotel and Baths.

But that was not quite the end of the story. In 1931 the American Bond and Mortgage Company was indicted for fraud. It was tried and convicted by the Federal Government in 1932 for a similar scheme involving the Mayflower Hotel in Washington, DC. AMBAM’s receiver, Joseph Force Crater, became a judge in April 1930. Four months later, he mysteriously vanished. Judge Crater’s case was America’s most famous missing person case prior to Jimmy Hoffa, and it remains unsolved to this day. Some theorists believe Crater was murdered by Libby’s investors to avenge their losses. The investigation into the judge’s disappearance uncovered corruption in Mayor Walker’s administration; Walker ultimately was forced to resign, and the reign of Tammany Hall in New York City government ended.

Chrystie Street was widened, the Depression set in, and the empty swath of land where Libby’s had stood became filled with homeless people and soup kitchens. Mayor Fiorello LaGuardia’s megalomaniacal parks commissioner, Robert Moses, turned the narrow seven-block stretch into a park, which opened with much fanfare in September 1934. And Max Bernstein moved uptown to start a real estate business. When he died on December 13, 1946, his life was summed up in a half-column New York Times obituary entitled: “MAX BERNSTEIN, 57, ONCE HOTEL OWNER…Built $3,000,000 Edifice in Slums, Only to See Memorial to Mother Razed.”

The story of Libby’s faded into obscurity until the summer of 2001, when a section of the pavement near the corner of Chrystie and Delancey Streets caved in, creating a sinkhole. The hole grew large enough to swallow an entire tree and began to encroach on city streets and the nearby senior center in Sara Delano Roosevelt Park. In those innocent days before September 11, the sinkhole seemed to be the biggest threat facing lower Manhattan.

City engineers did not know the cause, so they lowered a camera into the void. To their astonishment, 22 feet below the surface they found an intact room, complete with bookcases. When they searched records at the Municipal Archives they learned that Libby’s Hotel had once stood there and that they had discovered a room in its subbasement. In a New York Times article from September 1, 2001, New York City Parks Commissioner Henry J. Stern was quoted as saying, “It reminds me of Pompeii.”

In contrast to Pompeii, no attempt was made to reach the room or excavate it. The city engineers chose to fill it with grout, burying the room and its mysterious contents. A new tree was planted, and the park was repaved.

Today the steel skeleton of an unfinished luxury high-rise tower, its construction halted due to the economic crisis, looms over the site of Libby’s Hotel. Two new sinkholes, carefully avoided by hipsters and homeless alike, are the only reminders of the once-great Jewish Ritz with a shvitz.

Shulamith Z. Berger is the Curator of Special Collections at Yeshiva University and a tour guide for the Lower East Side Jewish Conservancy. Jai R. Zion is an artist and historian and leads history tours for the Lower East Side Jewish Conservancy.

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