The first attempt at a stock corner in the United States came at the birth of the American stock market, occurring even before the New York Stock Exchange had been established. Instead, it occurred in trading at Philadelphia. In 1792, Philadelphia was both the capitol and the financial center of the United States. Consequently, it is not surprising that politics and finance intermixed to create the nation’s first financial panic and the first time the government stepped in to save the markets from themselves.
Alexander Hamilton and the Bank of the United States
The Bank Scrip Bubble
Scrip on the Bank of the United States, which represented rights to buy full shares of stock, initially sold for $25 on July 1, 1791. To complete ownership, payments of $75 were due on December 31, 1791, $100 on July 1, 1791, $100 on December 31, 1792 and $100 on July 1, 1793. One-quarter of the payment had to be in gold, but the remaining three-quarters could be made in U.S. government bonds. By allowing three-fourths of the payment to be made in United States debt securities, the prices of U.S. government bonds immediately rose in price. U.S. government debt had been reorganized in October 1790 into the Sixes and Threes, at which point the Sixes traded at 70, and by July 31, 1791, the Sixes were trading at 100. Since Hamilton had taken over as Secretary of the Treasury, U.S. government bonds had risen in price from 25 back to par at 100. Fully-paid shares in the Bank of the United States were issued in August 1791, and they rose in price from 530 to 740 by the end of August, only to fall back to 524 by early October. Trading also occurred in the scrip of the Bank of the United States, which represented shares that had not been fully paid for (these later became half shares and three-quarter shares as payments became due). The scrip went on an even wilder ride, rising from 25 at the beginning of August to 249 on August 12, 1791, falling to 165, rising again to 207 on August 22, then sliding back to 121 by September 16. The speculation became known as the Bank Scrip Bubble of 1791. Within weeks of the issuance of Bank shares, the nation had gone through its first stock market bubble and crash.
The charter creating the Bank of the United States had set up the Sinking Fund Commission composed of Vice President John Adams, Secretary of State Thomas Jefferson, Attorney General Edmund Randolph, Chief Justice John Jay, and Secretary of the Treasury Alexander Hamilton, charged with resolving financial crises. The Bank Scrip Bubble provided the Commission their first test.
Hamilton met with fellow members of the Treasury’s Sinking Fund Commission and persuaded them to authorize purchases of government securities in the market place to keep the prices of stocks and bonds from collapsing. Hamilton worked with William Seton, the cashier of the Bank of New York, to authorize the purchase of $150,000 of public debt in New York to be covered by government revenues. By September 12, Hamilton’s intervention had not only stabilized the market, but had also laid the groundwork for his cooperation with the Bank of New York, which would later be crucial in ending the Panic of 1792.
Duer and the “Six Percent Club”
The Society for Establishing Useful Manufactures (SUM) was established in 1791 to promote industrial development along the Passaic River in New Jersey, founding the city of Patterson in the process. The goal was to use the Great Falls of the Passaic River as a power source for grist mills. The company was the idea of Assistant Secretary of the Treasury Tench Coxe, and was charted in New Jersey under Hamilton’s direction as a type of public-private partnership. Hamilton asked William Duer, who had sided with Hamilton in The Federalist Papers, writing in support of the United States Constitution under the alias of “Philo-Publius,” to become governor and chief salesmen for the SUM. Duer was instrumental in helping to raise $500,000 in capital for the new company. William Duer was not only a master salesman, but a speculator as well. When Hamilton discovered that Duer had been a driving force in the “scripomania” which had driven the Bank Scrip Bubble, he sent Duer a letter admonishing him for speculating in bank scrip. Like any plunger, his failure in the Bank Scipr Bubble only motivated him to invest on a larger scale and to try and have greater control over the market to insure success. Duer organized a pool along with Alexander Macomb, a wealthy land speculator who had purchased the largest piece of property from the state of New York, and with other owners of shares in the Bank of the United States. They were known as “The Six Percent Club” since shares in the Bank of the United States paid a 6% dividend. Their goal was to try and corner the market before the next distribution of shares in July 1792 and sell the shares to European investors at a profit. Duer and the others bought the shares on time, in essence buying options, rather than buying full shares, so they could maximize their profit through leverage. The Bank of the United States finally opened in December 1791, and made use of its capital by making loans and issuing banknotes. This increased the money supply and helped to feed new speculation in bank shares and U.S. 6% bonds. The wild ride in shares of the Bank of the United States continued. Shares rose in price from 524 to 680 on October 26, 1792, fell back to 528 on December 17, 1791 and rose to 712 on January 4, 1792. Since the U.S. Government Sixes could be used to buy shares, their price rose in sympathy with the increase in the price of the Bank of the United States, rising to 129 on March 5, 1792.
Duer got others to invest with him, reportedly including a madam from one of the city’s brothels, who probably kept the money hidden in one of the well-worn beds, and cosigned notes with merchants to raise capital. Duer even withdrew $292,000 from the treasury of the SUM for personal investments and expenses to allow him to buy even more shares, an act that would later lead to his downfall.
With the shares overvalued, a number of shorts formed a bear raid to push the stock price lower. The bears were led by Governor George Clinton of New York, an ally of Thomas Jefferson who was opposed to the Bank of the United States and to Alexander Hamilton. Anything Clinton could do to embarrass the bank or cause it to fail would help Jefferson and his cause. Clinton and his clique sold short all the stock they could to Duer.
The Panic of 1792
By March, the banks started to face a credit crunch. Clinton and his clique began to withdraw large amounts of money from the city’s banks to create a credit shortage. Moreover, it was springtime when farmers began withdrawing money from the banks to pay for the crops they were planting. Oliver Wolcott, the comptroller of the currency, had discovered the deficiency of $292,000 at the SUM, which Duer acknowledged, and demanded repayment. Wolcott called upon the U.S. attorney in New York to sue Duer for the long overdue debt. Duer appealed to Alexander Hamilton to intercede on his behalf, but Hamilton refused, and on March 9, 1792, Duer failed to meet payments on some of his loans and Duer’s paper pyramid collapsed. With Duer and his pool no longer able to buy shares in the Bank of the United States, the price of the stock began a precipitous decline. On March 23, Duer took refuge in the New York city jail. Duer was soon joined in jail by two other members of the “Six Percent Club,” Walter Livingston (who is buried at Trinity Churchyard near Wall Street), who had cosigned over $200,000 of notes signed by Duer, and Alexander Macomb, who defaulted on $500,000 in stock he had purchased from the bears. By mid-April, with the Six Percent Club defaulting and the price of Bank of the United States stock collapsing, the country suffered its first financial panic. This delighted Secretary of State Jefferson, Governor Clinton and his allies, who were opposed to Hamilton’s attempt to centralize the finances of the United States. They would turn the Panic into political capital which they would use to undercut Alexander Hamilton. In response to the crisis, many banks tightened their credit, and in March and April, money began flowing to farmers to provide funding for their crops. From December 29 to March 9, cash reserves for the Bank of the United States decreased by 34%, prompting the bank to not renew nearly 25% of its outstanding 30-day loans. In order to pay off these loans, many borrowers were forced to sell securities they had purchased, which caused the price of stocks to fall sharply. The price of Bank of the United States half shares collapsed from 203 on March 3 to 146 on March 21 while the price of U.S. Sixes fell from 129 to 95. The price of stock in the Society for the Establishment of Useful Manufactures fell from 136.5 on February 8 to 30 on March 13, 1792. Duer had perpetrated the young nation’s first financial Panic and stock market crash, and he paid the price. Duer spent the rest of his life in debtor’s prison where he died on May 7, 1799.Hamilton Steps in a Second Time
For a second time, Hamilton and the Sinking Fund Commission authorized the government to buy up government bonds to support their price and slow the collapse in prices. On March 26, and with only Jefferson dissenting, the commission authorized $100,000 in open-market purchases of securities to offset the credit crunch that was occurring.To get out of the financial crisis, Hamilton had the Bank of New York take several measures. Hamilton encouraged the bank to take loans collateralized by government securities, but to lend at seven percent instead of six.
Jacob Little was the first and one of the greatest speculators on Wall Street. He engineered the first successful stock corner on the New York Stock Exchange in 1835, and was known as “Ursa Major,” or “the Great Bear of Wall Street.” Like any bear, he was loathed by the bulls, but through his stock operations, he became one of the richest men in the United States. Although Little is now mostly forgotten, his speculative expertise laid the foundation for Jay Gould, Daniel Drew, Jesse Livermore and others who followed in his footsteps.
Jacob Little was born in 1794. His father was a man of large wealth and distinction who was ruined financially in the War of 1812. Little’s father helped Jacob get a position with Jacob Barker, one of the leading merchants of New York. In 1822, Little started his own business as an exchange specie broker, dealing in banknotes issued by private bank, where he gained a “reputation as an honest, energetic, and successful broker.” Jacob Little opened his own brokerage house in 1834 in the old Exchange Building in Wall Street, and for the next twenty-five years, Jacob Little & Co. dominated Wall Street.
Railroads Transform the Stock Market
When Little entered the stock market in 1834, it was going through tremendous changes. Until the 1830s, most of the listed stocks were in insurance companies and banks. Most finance companies were small, had a limited number of shares outstanding, and their shares traded infrequently. Speculative activity was limited. In the 1820s and 1830s, shares in railroads began to dominate the stock market since they needed large amounts of capital to fund their operations. The first exchange-listed railroad, the Baltimore and Ohio Railroad, started trading in 1828. Whereas railroads weren’t even represented on the NYSE in 1825, by the 1840s, they represented around ninety percent of the volume of the exchange. With the growth in share size and volume, speculators like Little were able to jump into the market and seize opportunities that didn’t exist until the 1830s. Little had a fanatical obsession with the market. He would often work twelve hours at his office speculating on stocks, only to spend another six hours at night buying and selling banknotes issued by private banks. Little played both sides of the market, shorting stocks he felt were overpriced, trying to corner stocks the shorts were selling, or going long during a bull market. Little could remember every transaction he made, and attended to every detail of his transactions. He even delivered stock he sold personally to make sure there was no mistake in the transaction. Until Jacob Little arrived on the scene, most speculators used inside information to make their fortunes, but Little relied upon predicting the future direction of stocks and manipulating stocks to reap his fortune. Little was an inveterate gambler, but one who wanted the cards stacked in his favor. The spirit of Jacob Little was summed up when he said, “I don’t care what happens, so long as I am in it.” To understand Little’s involvement in the stock market, you have to understand how the stock market of the 1830s differed from the market today. Of course, there was no CNBC or ticker tape, telegraph or telephones, all trading was done on the floor of the exchange. Shares were not traded all day long as they are today. Instead there was a morning session and an afternoon session. During each session, a representative of the exchange would run through each of the listed stocks. Traders could only buy and sell when a stock was announced. When the representative of the Exchange arrived at Erie, for example, he would offer to buy or sell shares at set prices. Traders would respond by offering to buy and sell shares. Then the exchange moved on to the next stock. Continuous trading in stocks did not exist. You had two chances each day to trade a stock. That was it. Each and every transaction was written down, and published in The New York Times, The New York Herald or another newspaper the following day. If you go to a copy of The New York Times from the 1850s, you can see a record of every transaction that took place on the stock exchange. Shares were sold short either through borrowing shares directly from an owner, or more often through selling options on the stock. In the 1830s, options were not derivatives ruled by Black-Scholes mathematical formulae calculated on computers with a fixed premium. Instead, someone would offer a customer the opportunity to buy or sell the stock to them at a fixed price to be delivered at the request of the buyer at any point in the next six months. If you look at the record of transactions published in The New York Times, you can see the notation of the time period the buyer had the option to buy or sell the stock as well as the agreed upon price. Since this was how foreign exchange transactions and moving money between cities were carried out, this methodology seemed natural to people on the floor of the exchange.Little and Morris: The First Corner
Little’s first coup occurred in his corner of the Morris Canal and Banking Company in 1835. There had been an attempt to corner the stock of the First Bank of the United States in 1792 by William Duer and Alexander Macomb, but the attempt had failed, leading to the Panic of 1792. The Morris Canal was a 107-mile canal, established in 1822, that stretched across northern New Jersey from Phillipsburg on the Delaware River to Jersey City on the Hudson River. The canal lowered the cost of moving coal from Pennsylvania to New Jersey and iron ore from New Jersey back to Pennsylvania. It took only four days to move goods from one end of the canal to the other, but when railroads were able to move goods the same distance in five hours, the canal could no longer compete. Rather than make a tender offer for outstanding shares, as is done today, raiders had to buy up all existing shares of a company to own it. Little determined to do this for the Morris Canal and in the process, he cornered shares of the company. Little and his group of New Jersey traders ended up owning all of the outstanding shares, and shorts had to buy their stock from Little in order to cover their short positions. The price of Morris Canal stock went from $20 in February 1834 to $185 in January 1835. Little could have asked for more from the cornered shorts, but if he had, the shorts would have had to sell shares in other companies to raise the capital to cover their shorts which could have destabilized the market as a whole. The spike in price caused by the corner is visible in the graph below.
Little followed up this coup with a corner on Harlem Railroad in September 1835. There were reportedly 60,000 shares of Harlem sold short, but only 7,000 shares outstanding. Little drove the price of Harlem stock up from $40 per share in March 1835 to $195 a share in September 1835. Of course, the shorts did not want to fulfill their contracts and lose heavily, so they went to the Board of the Exchange to find out if there was any flaw in the contracts that would allow them to get out of them. The Board ruled that contracts had to be fulfilled, and the price of $160 was settled upon to close out the short positions. This decision set a precedent for future corners on the Exchange, and shorts knew they would have to pay if they were caught in a corner. The effect of the corner can clearly be seen in the graph below.
With these two corners, Jacob Little became known as the “Napoleon of the Board.” Little foresaw Andrew Jackson’s campaign against the Bank of the United States and the Panic of 1837 that followed. Little went short the market and profited from its decline, whence his other nickname, the “Great Bear of Wall Street.” By one count, Little’s fortune reached $30 million, making him one of the richest men in the United States.
Two Failed Corners
The Mystery of Jacob Little
Over the course of the twenty-five years he operated on Wall Street, Jacob Little made several fortunes and went bankrupt three times. He wasn’t always bearing stocks, but also invested in state bonds and railroad bonds when he was unable to find good shorts. In the 1850s, Jacob Little & Co. was the largest brokerage house on Wall Street. That didn’t occur just because Jacob Little was a bear. Jacob Little may have speculated in railroad stocks, but he was also known as the “Railroad King” because of his large ownership of rail shares.It is hard to tell the truth about Jacob Little because a lot of the information about him is taken from reminiscences that are erroneous when you check the facts. Having the actual stock market data proves that some of the stories about Jacob Little are wrong. The examples below illustrate how the stories differ from reality.Jacob Little: Penniless Pauper or a Trader to the End?
Some sources say Jacob Little never recovered from the Panic of 1857 and died penniless, but did he? According to The Merchant’s Magazine, Little lost most of his fortune as a result of the Civil War rather than the Panic of 1857. Though his fortune was reduced, Little continued to trade in the 1860s. I personally own a stock transfer certificate, signed by Jacob Little on August 26, 1864 assigning 25 shares to H. J. Morgan and Co. If Jacob Little had been so penniless and forgotten, why would The Merchant’s Magazine devote the lead article in their June 1865 issue to the passing of Jacob Little, who died on May 28, 1865? According to the article in The Merchant’s Magazine, “The news of his death startled the great city. He had long been one of its most remarkable men. Merchants congregated to do him honor. Resolutions of enduring respect were adopted, and the Stock Board adjourned for his funeral.” The New York Stock Exchange didn’t adjourn to honor paupers.
Jacob Little was a generous man. He knew what it was like to face a stock market reversal and lose everything. When other traders lost a fortune and went to him for help, he never turned them down, but freely loaned them money. He never called in the loans, and by the time he was suspended from the exchange, Jacob little was owed hundreds of thousands by the people he had helped.
Eddie Gilbert died on December 23, 2015, four days shy of his ninety-third birthday, though few people outside of Albuquerque, noticed his passing.
This is surprising. Gilbert was once known as the “boy wonder of Wall Street” for his successful stock market trading and his takeover of E.L. Bruce in which he created the last corner on a U.S. Exchange. Gilbert also went to prison twice, was friends with Jack Kerouac, John Dos Passos and other luminaries, made and lost fortunes, and finally succeeded with his real estate business in New Mexico, becoming a multi-millionaire. Despite having one of the most colorful histories of anyone in the financial world, Eddie Gilbert doesn’t even have an entry in Wikipedia, though a cricketer, wrestler and hockey player of the same name do.
The Shorts Get Cornered, but Who Owns Bruce?
Gilbert began his business career in the 1950s working for Empire Millwork, which had been founded by his grandfather, and which was then headed by his father. By the 1950s, Gilbert had already spent yE. L. Bruce (Old) Stock Price, 1955-1959
Empire Millwork Corp.-E. L. Bruce Corp. (New) Stock Price, 1955-1971
Blue Monday for Bruce and Celotex
Gilbert had also gotten André Meyer from Lazard Frères involved in the Celotex takeover. In 1960, Gilbert had sold Lazard Frères $2 million in convertible debentures which could either be paid off or converted into shares of E. L. Bruce. Meyer approved of the takeover, and he and Gilbert agreed that Meyer would buy up shares of Celotex, then sell the shares to Gilbert at a profit when the takeover was consummated. Meyer redeemed half of the convertible debentures in early 1962, but since Bruce stock had doubled in price since 1960, redeeming half the convertible debentures meant that this cost E. L. Bruce $2 million which was provided through a loan from Union Planters Bank.Meyer bought 87,000 shares of Celotex, but demanded that Gilbert redeem the rest of the debentures in order that Meyer could buy an additional 163,000 shares of Celotex. Gilbert asked that the funds be held in escrow to be paid when the Celotex deal was completed, but instead, Meyer withdrew the funds from the escrow account, nearly wiping out Gilbert’s cash reserves. Gilbert had bought shares on margin, and when the stock market crashed on Blue Monday, May 28, 1962, Gilbert received margin calls on his Celotex shares. Gilbert now was cash poor, and the $500,000 in cash he had left was insufficient to meet the margin calls. If Gilbert were unable to cover the margin calls, not only would his holdings in Celotex be sold making the merger impossible, but the prices of both Celotex and E. L. Bruce would crash. E. L. Bruce Corp. would also suffer because the company owned 77,300 shares of Celotex. Gilbert directed that $1.953 million of corporate funds be used to cover his margin calls to prevent the collapse in the price of Celotex and Bruce shares. Unfortunately, he did this without first getting the approval of the board. Gilbert knew that the Ruberoid Co. was also interested in acquiring Celotex, so he contacted a friend at Ruberoid to see if they would buy out his position in Celotex. This would provide sufficient funds for Gilbert to cover the $1.953 million. Gilbert called a meeting of the E. L. Bruce board met on June 12 to discuss how he and the company would handle the $1.953 million Gilbert had taken. Since Meyer had taken out the $2 million from the escrow account, Gilbert had insufficient funds to cover the $1.953 million, but he pledged all of his resources as collateral to guarantee he would return the sum. As Gilbert had become successful, he had built up a sizeable stamp collection, purchased antiques and paintings for his home, had acquired a villa on the Riviera where he entertained, and regularly went to Monte Carlo where he would win or lose hundreds of thousands. In fact, John Brooks referred to Gilbert as “the Last Gatsby.” Unfortunately, Ruberoid called back and said they would not be interested in acquiring the block of Celotex shares, Gilbert knew he was sunk. He had ample resources, just very little cash. Not wanting to face the consequences of his actions, when Gilbert left for lunch, he booked a flight to Rio, and after resigning his position at E. L. Bruce, fled the country.The Fugitive Playboy
When Gilbert arrived in Brazil, he left behind a spacious apartment on Fifth Avenue in Manhattan, a villa on the French Riviera, a $3.5 million tax lien and $14 million in debts. When news of his flight to Brazil broke, the press went wild, and Gilbert became known as the “fugitive Playboy.” The story followed him to Brazil. Gilbert was featured in a nine-page spread in Life Magazine and was the subject of a half-hour “Eyewitness Reports” feature on CBS entitled “Refuge in Rio.” Gilbert also became the basis of a character in Louis Auchincloss’s novel A World of Profit. This was not how Gilbert had wanted to become famous.The Conrac Conspiracy
Unfortunately, Gilbert got into more trouble a few years later. In 1975, he was investing in a stock called Conrac, a communications equipment manufacturer, which he had recommended to several friends. One of his fellow traders, James Couri, bought shares on margin, and when Couri received margin calls, 20,000 shares were sold by his brokers, driving the price of the stock down from $28 to $23.375. Consequently, on December 18, 1975, the NYSE suspended trading.This led to a civil suit by the SEC against Gilbert, Couri and 17 others alleging they had obtained over 100,000 shares of Conrac to profit from manipulating the stock. Gilbert had been involved in about 75% of the transactions. No action was taken by the SEC in 1976, but in 1980, Gilbert was indicted on 34 counts of stock manipulation along with traders James Couri and John Revson and stock broker Harvey Cserhat.Gilbert Becomes a Real Estate Mogul
After being released from prison, Gilbert was forbidden from the securities market. He moved to New Mexico in 1989 and started the BGK Group in 1991 along with Ed Berman and Fred Kolber to profit from investing in real estate. By the early 1990s, commercial real estate prices had collapsed from their levels in the 1980s, in part because of the fallout from the Savings and Loan crisis.Gilbert, of course, was the deal maker for BGK. He scoured the market for underpriced office buildings and made an offer for them. If the offer was accepted, Gilbert put together a limited partnership to raise money from investors. Gilbert negotiated the pay back to the investors to maximize the return up front. Gilbert made sure that investors always got a 20% return in their first year, whether the funds came from profits or from the investors’ own capital. When BGK sold the property, the company would return all the capital to investors, and keep half of the profits for themselves. For example, BGK bought an Albuquerque, New Mexico shopping center (Plaza at Paseo del Norte) for $5.9 million in 1993. BGK raised $1.8 million and borrowed $4.3 million. The property was sold in 1998 for $17.8 million, netting a $11.4 million profit split between BGK and investors. This and other properties were bought on leverage with BGK usually borrowing around 75% of the purchase price. This time, the leverage did not blow up in Gilbert’s face. In 2010, Gilbert cashed out when BGK sold a majority stake to Rosemont Capital. Gilbert died a multi-millionaire. It is a tribute to Gilbert that he never gave up, and though he was forbidden from dealing in securities after the Conrac conviction, he was able to succeed in real estate even more than he had in the stock market. Was Gilbert a criminal, or the victim of zealous prosecutors? Was he a great salesman and a financial genius who could make money wherever he went, or did he manipulate markets in his favor? Gilbert kept his word and repaid all his debts. Most people would have given up after what Gilbert went through, but he persevered and finally ended up on top. Eddie Gilbert wasn’t just the “boy wonder of Wall Street,” but he was a wonder all around.
This year started weak. So weak in fact that the first ten trading days of January were the worst in US history. The television is rife with talking heads exuberant over who they can point the finger at. “Oil,” one shouted. “Tech,” said another. A third bemoaned turbulence on the other side of the pond in European banks staring down a dry well of capital. Lastly, on February 10, 2016, Janet Yellen, the Chairman of the Board of Governors of the Federal Reserve Bank, faces tough questions from the White House on Capitol Hill, discussing the condition of the economy and interest rate hikes.
Countries all over the world feel the crunch. Venezuela, with oil declines, is near bankruptcy. Brazil is buried under a staggering amount of debt. Japan has never recaptured the magic of their 1989 highs, suffering through a perpetual twenty plus year bear market. It looks like China, the so called Sleeping Giant, fell into a coma with the Shanghai Composite dropping 50% in the last 7 months.
The first global crisis was in 1857. The market disastrously went into a free-fall, culminating in a 65% drop. Like today’s theories, economic historians still deliberate as to the cause of the crash. Was it the failure of the seemingly too big to fail Ohio Life Insurance and Trust Company from faulty loans? It could have been Europe’s declining reliance on American grain exports. The railroad industry nearly collapsed. Perhaps the panic was the result of the United States’ increasing demand of foreign imports with our own exportation severely lacking, culminating in a trade imbalance. Finally, banks raised interest rates in 1857 in an effort to keep gold reserves in check.
The question should be, are we repeating the crash of 1857? Upon a cursory glance, one would say no. But look closer and you’ll find the requisite forces are all in place.
Top analysts on Wall Street dare to whisper the word recession. Yet there’s no denying it. The secret is out (and has been out since January). The S&P 500 has declined 15% as of this writing. Market technicians frantically adjust their support levels as the markets breach lower.
But are they correct?
Since the inception of the United States, we’ve had twenty-five instances of bear markets (a 20% decline), the first in 1829 and the most recent in 2009. Since we’re on a downtrend, of which most everyone agrees, the question is how far will we drop? If you include all twenty-five of America’s bear markets, you’ll find that the average bear market is 41%.
Out of 100,000 people unemployed from the crash, on November 5, 1857, 4,000 marched on Tompkins Square shouting for the government to create an economic stimulus package for public works projects that would put the people back to work. The very next day, 5,000 protestors appeared on Wall Street, crying for the banks to free up credit again so businesses could get loans and hire employees. Sound familiar?
Speculation over the causes of the Panic of 1857 reminds me of the French journalist Jean-Baptiste Alphonse Karr who said, “plus ça change, plus c’est la même chose.” (“The more things change, the more they stay the same. ”)
- We have a commodity inflicting damage on the global economy. The oil of today was the grain of 1857.
- An entire industry is caving in upon itself. The technology sector reminiscent of the railroads of the mid-1800s.
- The banking industry, like the 1857 Ohio Life Insurance and Trust Company, both in Europe and the US, are tanking. Some are even talking about bankruptcy, mergers, buy-outs, and bailouts. After all, didn’t we learn that there is such a thing as too big to fail?
- Like 1857, interest rates are the talk of the town. Why else has Janet Yellen been on the Hill for two days straight now?