Learning from History: The Panic of 1907 & its "bailout"

[Hannah Bell]

History can be instructive in our present circumstances, but what you learn from it depends on what kind of history you read.

For example, the standard, textbook histories of the Panic of '07 goes like this:

"On Oct. 17, 1907, panic began to spread on Wall Street after two men tried to corner the copper market....Wall Street was paralyzed...runs on several large banks... New York City ...on the brink of bankruptcy... The man who saved the day was J.P. Morgan, who brought together leading financiers and banks to bail out the ailing market. That was all in the days before a centralized banking system — and the Federal Reserve — were created to prevent widespread financial catastrophes."

http://www.npr.org/templates/story/story.php?storyId=14004846


http://www.npr.org/templates/common/image_enlargement.php?imageResId=14006382


In the standard histories, JP Morgan plays the role of savior of the financial system. Interestingly, he'd played a similar role in the Panic of 1896.

This is the history we learn in school, the simplistic "good guys/bad guys" history that forms the middle-class world view.

But in more serious histories, Morgan emerges with his halo somewhat tarnished.


At the turn of the 20th century, the Heinze brothers had managed to get the better of bigger, richer players in the copper mining industry - the Rockefellers, owners of what became Anaconda Copper. The Heinzes played dirty - but no dirtier than the Rockefellers.

F. August Heinze used some of his profits to open a bank in NY, & developed it into a financial network which cut into the action of established interests - like JP Morgan.

There's good evidence that Morgan, Rockefeller & other interests joined forces to take out the presumptuous newcomers. The Panic of 1907 was the fallout.


The Morgan-Rockefeller combination undertook a rumor campaign to undermine confidence in Heinze's banking network, & collapsed the Heinzes' copper corner by manipulating the market, precipitating bank runs, a stock market crash & liquidity crisis.

Then Morgan-led damage control was selectively applied to restore the system, while utterly destroying Heinze's network & associates.


The standard history, where Morgan is painted a savior, emphasizes his mobilization of private capital to preserve liquidity & confidence.

However, between $25-$70 million of the capital used came from the federal government. Morgan determined how much money would be used & in which institutions - the same czar-like role Paulson asked for in his first bailout proposal in our present crisis.


In the standard history, Morgan's selfless role as savior is emphasized. But the Morgan-Rockefeller interests profited in a number of ways.

1. The failure of the Heinze's corner & finances ended the 30-year "Copper Wars," leaving the Rockefellers in control.

2. The destruction of Heinze's banking interests removed a number of Morgan's competitors.

3. The extension of loans to other troubled institutions brought money & influence.

4. Assets lost by other players were bought up on the cheap.


In addition to the millions in bailout money from the public purse, the following interests contributed at least:

1. NY banking trusts: $25 million
2. Morgan interests (Morgan-Stillman): $13 million
3. Rockefeller: $10 million
4. First National (George F. Baker): $2 million
5. Kuhn, Loeb: $500,000

Kuhn, Loeb eventually merged with Lehman Brothers, now absorbed by Barclays.

Today, Citigroup (merger of Stillman & Baker's banks), JPMorgan Chase (merger of Morgan & Rockefeller's Chase-Manhattan), & Bank of America (west-coast origins) reportedly hold 1/3 of US deposits.

With more mergers on the way...


The 1907 "Bankers" Panic led to the creation of the Federal Reserve in 1913, with Morgan associates in leading roles.

http://query.nytimes.com/gst/abstract.html?res=9D04EED6103EE033A25750C0A9649D946697D6CF

Though it was designed to forestall future panics, it failed to do so just 16 years later, in 1929. And today, public money is again requested to stop meltdown.

Understandably, some wonder how much of a "reform" the Fed really was, considering how many of its key people, most notably Greenspan, are directly responsible for our present crisis.


So if the masters of the universe in 1907 were willing to precipitate a panic to further their own interests in 1907 - are things so different today? If the role of the Fed is not so much to stop financial meltdowns as to give some players more opportunity to manipulate the money supply - should we blindly trust those folks when they say they've got a wonderful plan for us?



http://eh.net/encyclopedia/article/moen.panic.1907

http://fraser.stlouisfed.org/docs/meltzer/talles90.pdf

http://www.24hgold.com/printarticle.aspx?pagedest=163141&langue=en&viewarticle=True

"Copper King at War" Sarah McNelis

[ColbertWatcher]

1. Brilliant as usual Hannah! Thank you for posting! n/t

[Name removed]

2. Deleted sub-thread

Sub-thread removed by moderator. Click here to review the message board rules.

[girl gone mad]

3. I was looking for a quote..

I think it may have been from JP Morgan.

It was something like.. the key to controlling the economy was to make sure the masses were always fighting amongst each other over social issues so the bankers could sneak through whatever legislation they deemed necessary.

I don't think I paraphrased it well, but I've thought about that quote from time to time since Bush was elected.

[pnorman]

16. Could this be it?

"I can hire one half of the working class to kill the other half."
--19th century robber baron Jay Gould

pnorman
PS: I've just Google-bookmarked this thread, for later research

[TexasObserver]

4. Good comments.

And the nutcase who is taunting you has a compulsive need to pick fights. He's clueless, about all topics equally.

[depakid]

5. Just have some experience trying to talk scientific sense

with the poster in the health forum and thouyght people should know that- because it goes to credibility.

[TexasObserver]

6. You made a personal attack on the OP, based upon another thread, a specific DU rule violation.

[depakid]

10. I think you need to o back and review that series of posts

before whinging about personal attack. ;-)

[Hannah Bell]

8. BA biology, MS Human Nutrition, RD, 2 years research experience, 6 months at a

research hospital, 3 years community hospital, 1 year community nutrition.

Those are my credentials. What are yours, science whiz?

[ColbertWatcher]

9. delete. n/t

[closeupready]

14. He wanted to free that Manson woman. So what more do you need to know.

:rofl:

[TreasonousBastard]

7. That's all well and good, but how does it apply to...

what's going on now?

If this is all a conspiracy amongst the financiers today, just who are the players and what is their game?

[Hannah Bell]

11. I think people everywhere collude, misrepresent, & hide things

where power & money is involved. So I'm pretty confident "conspiracy" plays into the present crisis. How, exactly - well, I'm an outsider, just like you. But here are some things I noticed:


1. Lehman got the big shaft - left to sink, where Bear got assistance, then not too long after, it's bailouts for everyone. On another thread, someone said that Lehman was Goldman's biggest competitor. And Goldman was in the meetings in the AIG deal.

2. Greenspan, who's culpable in many, many ways for this mess, worked for JP Morgan before he went to the Fed. Morgan seems to be emerging from this smelling like a rose, even though they were one of the early lobbyists against Glass-Steagall & first users of all this loosy-goosy finance. They also seem to be picking up assets.

3. Paulson = Goldman. Which, supposedly, was in bad shape itself, but somehow is surviving & thriving.

4. Several people who should have some insider knowledge have intimated that credit is being purposefully tightened to precipitate crisis & panic the public into supporting the bailout, e.g. Peter Defazio of Oregon said this on Hartmann's show & fingered the White House as being involved. He & some other reps have put out their own plan, which hasn't got much coverage.


So my general thought is: in a globalized world, banks need to get bigger too. The big US players pushed crisis to eliminate competitors & consolidate money & power, the better to take on overseas rivals, both as banks & as finance instruments for their associated business ventures.

Since Bush has spent his entire admin pushing us further into debt, & his dad & Reagan did the same, & they share a lot of personnel, I'd guess there are connections there as well. The Bushes have been involved with finance for a long time & got their start working for the Rockefellers 100+ years ago.

Greenspan's pawprints are on everything that's happened in finance over the last 30 years: he designed the Reagan Social Security fix that left us with a ballooning Trust Fund, which paved the way for tax cuts for the rich & the attack on SS based on "worthless IOUs", which Wall Street wanted to dump into the market...he's pumped every bubble along the way, he was involved in every step of the dismantling of Glass-Steagall - if I knew exactly who Greenspan worked for, I'd guess those folks are the ultimate movers.

And I'd guess those folks think of it as a "restructuring," with the same mentality the British Empire used to have when they changed borders in the Middle East or Africa. We're the natives. Gotta break a few eggs.

[Hannah Bell]

12. here's a thread with some discussion:

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4135149&mesg_id=4137318

[TreasonousBastard]

22. Interesting points, and you may be on to something, but...

at the moment there's no evidence of a real conspiracy. If there was a conspiracy, I would tend to think more in global terms and that TPTB are trying to manintain US hegemony and reduce the influence of foreign banks.

How they could possibly do that by ruining the US banking system and ceding international finance leadership to London is unclear. Maybe there's more to the plan yet to unfold. Perhaps it's a last ditch defensive move against some other players who are intent on reducing that US hegemony. We may never know the full details.

Anyway, yes, power and money isn't really any more complicated than a good Monopoly or Risk game-- everyone is in it for themselves, and alliances are made, and broken, for the sole reason of helping onesself win. How they get to the point they can play, and how they play are the complicated parts.

What I'm seeing from the outside is Wall Street finally making itself completely irrelevant to the real world. Investment banks exist to raise capital-- their function ever since the Dutch invented the joint stock company and stock market a few hundred years ago and the English perfected the stock market. But, lately Wall Street hasn't been nearly as interested in creating capital as it has been jerking it around and squeezing every penny of profit out of it. Since Wall Street has become counter-productive, it seems just as likely that the natural order of things is for it to collapse, and TPTB are all trying to save as much of their own asses as possible.

[baldguy]

15. The narrative which frames todays crisis is almost certainly a lie.

Isn't it just a little suspicious that it erupted just six weeks before a Presidential election, and the Bush Regime had a plan to take care of the problem all set to go? All Congress had to do was give them half the treasury with no questions & no strings.

The Bushies presented Congress was their scam, and the House correctly rejected it.

[TreasonousBastard]

20. That's a fine shiny hat you've got there.

[Norrin Radd]

13. kr

[Hannah Bell]

17. kick

[ColbertWatcher]

18. Countdown kick. n/t

[Hannah Bell]

21. thanks. :>)

[20score]

19. K&R

[crickets]

23. Big fat K&R -nt

[OakCliffDem]

24. Kick