When Rus yells at the kids to stop that racket and get off his lawn, he means it as uncontrolled noise (sorry Rus -- you're not an old curmudgeon yet but I haven't needled you in a while). In a completely different context, it means an organized conspiracy to commit extortion, or similarly a sketchy, low-input way to make a less than deserved income. A hundred years ago it was used to denote an alcohol-soaked big-city get together with an ethnic dance band; probably so named because much noise ensued for quite a while. Also known as beer rackets and growlers (after the large containers brought in to score the largest quantity of draft possible at one time), these faded away with the arrival of Prohibition and new forms of entertainment.
However, in New York, one Dickensian character known as Commodore Dutch kept them going on an annual basis for forty years; in fact it was his entire living. This Lord of the Dance fell into the racket of holding rackets after a 1900 champagne spree left him owning two saloons a total of $285. Like the scene in The Godfather wherein a supplicant asks Don Corleone for a favor, Dutch asked Boss Big Tim Sullivan for a loan to pay off this enormous debt. Big Tim didn't think that would be a good precendent, but he did give his high-living friend a franchise to run a racket (hire a band and a hall, and print tickets), which was pure gold because to sell the $1 tickets (ladies free) he could tell people that Tim was behind him. The First Gala Naval Ball was held April 30, 1901 in Everett Hall on East Fourth Street, with two dozen kegs of beer and Professor Pretzel Wolf's East Side Society Orchestra entertaining. Dutch wore an admiral's theater costume which he used (in increasing disrepair) for decades to come. Unfortunately, Big Tim lost his mind and went to a sanitarium in 1912, and the days of making enough to live on for a year with ticket sales were over.
Dutch wasn't done, however; he liked this business and so established the Original Commodore Dutch Association, spending the year making the rounds and collecting membership "dues" from people all over New York. These contributions allowed them to attend the now smaller events (eventually they would only be held in saloon back rooms, with no free beer). He said, "I haven't got a whole lot of sense but I got too much to work."
Born in 1879 in the Lower East Side in an area known as Little Germany, Dutch would never reveal his surname, saying it was too hard to pronounce, and "if you was known by your real name you didn't have no standing." The "Commodore" part of his street name was acquired from an early job steering sailors to McGurk's pub in the Bowery, wearing a pea coat for credibility. He was small, wizened, had big ears and only one tooth, but being the sole officer of a one-man charity organization, he was always neat and dapper. He was quite proud of being mentioned in Damon Runyon's and Dan Parker's newspaper columns (not flatteringly, but that was alright with him -- the publicity was useful).
Ex-prizefighters were valued friends and good impromptu bouncers; among them was Joe Madden, who said Dutch was "not an ordinary bum -- he's the fanciest bum in town!" Attending the funerals of prominent politicians, he would put the bite on Association members Al Smith and Governor Lehman; hanging around gambling tables and wistfully eyeing the cash was another good source of income.
If he had lived a century earlier in London, surely Mr. Dickens would have immortalized him; you can hardly make up a more colorful character. Wherever he is now, he's got some racket going on.
(From a 1941 New Yorker profile by Joseph Mitchell)