Monday, July 29, 2013

Jul 29 (2013) Music and Banking: Thank you Janis Ian!

Illustration shows "J.P. Morgan" as a huge piper, playing a pipe labeled "Merger", leading a pack of diminutive corporate investors labeled "Ship Owner, Bank Pres., Wall Str. Operator, Rail R. Magnate, Broker, [and] Corpor[a]tion Lawyer" followed by the general populace, among them a "Reporter" with a large-frame camera balanced on his knee. In the background, European countries show their displeasure. From

This week I'm learning the art of songwriting.

Today, my songwriting teacher Janis Ian (she wrote At Seventeen, among other greats), reminded me how the seemingly disparate arts of music and banking are indeed connected. Both play a very important role in building community, she explained, and have for a long, long time. "In ancient Rome, there were two things that kept the vast empire together: money and music."

Thanks for the inspiration, Janis!

Friday, July 26, 2013

Jul 28 (1844) The Masked Battery of the Loco-Foco Strategy

The above cartoon is taken from the Library of Congress, and was first published on July 28, 1844. For a full description, click here.

The Locofoco Party was a radical wing of the Democratic Party, organized in New York City in 1835. It was made up primarily of reformers who opposed state banks, monopolies, paper money, tariffs, and generally any financial policies that seemed to them antidemocratic and conducive to special privilege.

Originally named the Equal Rights Party, the group became known as the Locofocos, after a type of match. During a legislative session, Democratic Party regulars in New York turned off the gaslights in an effort to stop the reformers from legislating. The radicals responded by lighting candles with the new self-igniting friction matches known as locofocos and proceeded to nominate their own slate (loco as in "locomotive" meaning "move" and foco from the Italian "fouco" meaning "fire").

Never a national party, the Locofocos reached their peak when President Van Buren urged and Congress passed the Independent Treasury Act in July 1840. This fulfilled the primary Locofoco aim: complete separation of government from banking. The Independent Treasury Act was law until 1921.

Jul 26 (1925) Died: William Jennings Bryan, Early Supporter of Govt Guaranteed Deposits

William Jennings Bryan 1900 campaign poster

Monetary policy was a hot topic in the late 19th century, in part because of the free silver movement headed by the charismatic politician William Jennings Bryan, who died on this day in 1925.

At 36, he was the youngest-ever presidential candidate. At the 1896 Democratic National Convention, he delivered one of the most famous campaign speeches in US history--"The Cross of Gold"--a diatribe against the gold standard. Nonetheless, he lost all three Presidential races he ran.

On whether the government should guarantee deposits, Bryan was staunchly in favor. He thought it could even increase the character of the banking industry. In a 1908 piece published in the  Pensacola Journal entitled "Why Not Make the Depositor Secure?" Bryan wrote:

"It has sometimes been objected that the guaranty system would bring into the banking system a lower class of men, and reduce the average in character. On the contrary, the guaranty of deposits, I submit, would, if it made any difference in this respect, bring into the banking system a better class of men, and raise, if that is possible, the average of character."

Thursday, July 25, 2013

Jul 25 (1907) Bank Robbery Foiled: "I want $1000 and I want it quick"

 Police guarding a New York bank in 1908. From George Grantham Bain Collection (Library of Congress)
In a series about falling crime rates worldwide, The Economist recently commented that armed bank robberies have become so rare they are all but extinct (though bank fraud cases are on the rise).

Not so in 1907, when bank robberies were front page news. An attempt on a Mechanics Bank of Brooklyn, NY, however, was foiled because the teller was skilled in banking fundamentals. Then as now, good bankers know their customers. The New York Sun reported on this day in 1907:

"Edwin A. Khol, a paying teller, and George Blage, an assistant bookkeeper, were in the front the of building when the [armed robbers] entered. Mr. Kohl was at the first window and as he looked up at the strangers one of them handed him a pass book through the grated window and demanded $1000. The paying teller looked at the pass book and noticed that it belonged to William Neumann, the secretary of the H.C. Bohack Company, a grocery concern which has stores all over Brooklyn...

As the paying teller was well acquainted with Neumann he decided immediately that something was wrong and asked the man if the book was his. The man nodded his head and said:

'Yes, and I want $1000 and I want it quick.'

Taking in the situation at a glance, the assistant bookkeeper, Mr. Balge, found Sgt. Mahoney walking the streets in citizens clothes and quickly told him of the situation. With Policeman John C. Boehm, the three hastened to the bank building and on reaching the rear room the [armed robbers] jumped to their feet but made no attempt to fight."

Wednesday, July 24, 2013

Jul 24 (1935) Dust Bowl Heat Wave: Woody Guthrie wonders "will I always be a dust bowl refugee?"

Along the highway near Bakersfield, California. Dust bowl refugees, pic from

Today in 1935, temperatures reached 104 degrees in Chicago, marking the peak of the Dust Bowl heat wave.

A 2012 paper published in the American Economic Review found that the Dust Bowl had both short and long-term economic consequences. The author, Richard Hornbeck, attributes most of the eventual rebound to the local economies adjusting to a reduced population. Heavily eroded areas recovered at most 25% of their productive use.

Credit constraints driven by weak banks, numerous bank failures, and reduced land values didn't help. Alternative farming enterprises--such as cultivating livestock--required large capital investments, and farmers had a hard time finding banks willing or able to lend.

Woody Guthrie must have sensed the long-term consequences of the Dust Bowl when he wrote in 1940:

I'm a dust bowl refugee,
I'm a dust bowl refugee,
I wonder will I always be
A dust bowl refugee?

Listen to the entire song here.

Tuesday, July 23, 2013

Jul 23 (1885) U.S. Grant Succumbs to Cancer: "Up to the rebellion, Europe believed our republic a rope of sand"

 Illustration shows the body of Ulysses S. Grant lying in state in front of an angel joining the hands of two female figures, one labeled "North" and the other labeled "South" under the heading "Let Us Have Peace"; Mars sits on the left and "Clio" sits on the right, with an incense burner between them.

The 18th President and Union general Ulysses S. Grant died on this day in 1885. A two-term President, he enforced civil rights laws for African-Americans and Native-Americans as well as financial conservatism for the nation. His veto of the "Inflation Bill"--which denied a bank bail-out during the Panic of 1873--was unpopular, but it recast the Republican Party as one that stood for fiscal restraint.

While dying of throat cancer, Grant wrote his memoir which today is praised by military generals and literary critics alike. In it he argued the Civil War ultimately made us stronger.

"It is probably well that we had the war when we did. We are better off now than we would have been without it...Our republican institutions were regarded as experiments up to the breaking out of the rebellion, and monarchical Europe generally believed that our republic was a rope of sand that would part the moment the slightest strain was brought upon it. Now it has shown itself capable of dealing with one of the greatest wars that was ever made, and our people have proven themselves to be the most formidable in war of any nationality."

Further Reading 
Ulysses S. Grant Presidential Library of Mississippi State University
Personal Memoirs of US Grant
Grant, a biography by Jean Edward Smith
Watch a biography of Ulysses S. Grant on PBS' American Experience

Monday, July 22, 2013

July 4 - A day of celebration and commemoration: Lift your eyes to the great tracts of life yet to be conquered in the interest of peace"

The Great Union 1913 commemorating the 50th anniversary of the Battle of Gettysburg
The 4th of July marks the day in 1776 when the United States Declaration of Independence was adopted by the Second Continental Congress,

in 1803, theLouisiana Purchase was announced to the American people,

in 1826, both President Thomas Jefferson and John Adams passed away,

in 1827, slavery was abolished in New York State,

in 1833, the Iowa Territory was organized,

in 1886, the people of France offered the Statue of Liberty to the United States,

and 100 years ago today, President Woodrow Wilson addressed veterans of the Battle of Gettysburg in the Great Reunion of 1913.

"Friends and Fellow Citizens. I need not tell you what the Battle of Gettysburg meant...but fifty years have gone by since then, and I crave the privilege of speaking to you for a few minutes about what those fifty years have meant...The day of our country's life has but broadened into morning. Do not put uniforms by. Put the harness of the present on. Lift your eyes to the great tracts of life yet to be conquered in the interest of peace, of that prosperity which lies in the people's hearts and outlasts all the wars and errors of men. Come let us be comrades and soldiers yet to serve our fellow men in quiet counsel, where the blare of trumpets is neither heard nor heeded and where things are done which make blessed the nations of the world in peace and righteousness and love."

Jul 22 (1916) Market St. Bombing, San Francisco: "The blare of fifty bands drowned the cries of the injured"

Preparedness Parade, San Francisco, 1916, courtesy of Shaping San Francisco

With the Boston bombings fresh in my memory, it shocked me to learn that a surprisingly similar bombing occurred on Market St. in San Francisco on this day in 1916.

At 2:06 PM, a suitcase filled with explosives--including a pipe filled with metal slugs designed to act as shrapnel--exploded on a crowd of parade-goers.

The Preparedness Parade was sponsored by the Chamber of Commerce, and was part of a nationwide campaign supposed to inspire patriotic feeling as the country entered the European conflict (aka World War I).

The day before the event, San Francisco newspapers had received a warning from "The Determined Exiles from Militaristic Government." The warning called business owners cowards for sponsoring a parade that encouraged a war they would never have to fight.

The powerful blast killed ten people and injured forty, but according to the New York Tribune, did not stop the parade.

"Though the bomb blew a big gap in the crowd, turning the throng of men, women, and children into shambles, the parade continued. The blare of fifty bands drowned the cries of the injured and the bodies that strewed the pavement and sidewalk were quickly carried away."

Image is from Shaping San Francisco and

Sunday, July 21, 2013

May 26 (1896) Dow Jones Industrial Average is formed; "The market is not like a balloon plunging hither and thither"

Dow Theory Generates a Buy Signal

On this day in 1896 Charles Dow and Edward Jones first published their index of twelve industrial companies in the Wall Street Journal. Though only one company remains of the orignal twelve (GE), and the index is now thirty, mostly non-industrial companies, the Dow Jones Industrial Average remains the primary proxy of economic performance. The Dow index has grown from a low of 28 in the summer of 1896, to a high of 15,388 on May 21, 2013, an increase of 53,969%

Dow's first index--called the Dow Jones Average and published in 1884--was primarily railroad companies. He theorized that in well-functioning markets, if there's a run up in transportation stocks, there must be a corresponding bull market in industrials.  If the indices did not move together, change is in the air.

This idea became a central component of the Dow Theory, which is still studied and used today.

In his book Scientific Stock Speculation, Mr. Dow offers this advice.

"The best way of reading the market is from the standpoint of values. The market is not like a balloon plunging hither and thither in the wind. As a whole it represents a series of well considered effort on the part of far-sighted and well-informed men to adjust values to such values as exist or which are expected to exist in the not too remote future. The thought with great operators is not whether a price can be advanced, but whether the value of the property which they propose to buy, will lead investors and speculators six months hence to take stock at figures ten to twenty points above present prices...

To know values is to comprehend the meaning of movements in the market."

Image from InvestorPlace.

Friday, July 19, 2013

Jul 20 + 21 (2013) Dear Banker's Notes Readers

Dear Banker's Notes Readers:  This weekend I will be hiking in the California backcountry, with no access to internet.

If you have thoughts about Banker's Notes, the below statement, requests for topics, or just wanna share, please email me!

Happy summer to all!  Banker's Notes will be back on Monday July 22, 2013.


Jul 19 (1905) Summer Doldrums:"The market became listless and dull"

Illustration shows a fashionably dressed young woman sitting on the edge of a pool, fishing. 1904

Sometimes, it's just too darn hot to work, a phenomenon in the finance industry known as the "summer doldrums." Such was the case on July 19, 1905, when the Los Angeles Herald ran the headline "Dies Like Flies in Eastern Heat."

"Early in the day the heat wave invaded the stock exchange and its effect was quickly apparent on the traders. Many of the leading operators deserted the floor and the market became listless and dull."

Banker's Notes could not find a significant financial event that occurred on July 19. Is it the summer doldrums? Have I become listless and dull? Alas, let's cool off with some Shakespeare.

Sonnet LVI

Sweet love, renew thy force; be it not said
Thy edge should blunter be than appetite,
Which but to-day by feeding is allayed,
To-morrow sharpened in his former might:
So, love, be thou, although to-day thou fill
Thy hungry eyes, even till they wink with fulness,
To-morrow see again, and do not kill
The spirit of love, with a perpetual dulness.
Let this sad interim like the ocean be
Which parts the shore, where two contracted new
Come daily to the banks, that when they see
Return of love, more blest may be the view;
 As call it winter, which being full of care,
 Makes summer's welcome, thrice more wished, more rare.

Thursday, July 18, 2013

Jul 18 (2008) Paul Krugman Predicts "a prolonged period of flat performance"

When it comes to predicting the future, give Paul Krugman some props. On this day in 2008, the Nobel-prize winning economist and New York Times blogger posted a prescient entry entitled "L-ish Economic Prospects."

With IndyMac Bank recently failed and housing prices in free fall, it was clear that the economy was in bad shape. (Well, it was not clear to John McCain's economist who were calling the financial events a "mental recession.") But the worst was yet to come. Lehman Brothers, Fannie and Freddie, AIG, and 465 banks were still alive, and the unemployment rate was an enviable 5.8%.

In his July 2008 post, Krugman predicted hard times for the next President.

"It’s true that some prognosticators still expect a 'V-shaped' recovery in which the economy springs back rapidly from its slump. On this view, any day now it will be morning in America. But if the experience of the last 20 years is any guide, the prospect for the economy isn’t V-shaped, it’s L-ish: rather than springing back, we’ll have a prolonged period of flat or at best slowly improving performance...staying depressed well into 2010, if not beyond — plenty of time for the public to start blaming the new incumbent, and punish him in the midterm elections. 

To avoid that fate, Mr. Obama — if he is indeed the next president — will have to move quickly and forcefully to address America’s economic discontent. That means another stimulus plan, bigger, better, and more sustained than the one Congress passed earlier this year. It also means passing longer-term measures to reduce economic anxiety — above all, universal health care. 

If you ask me, there isn’t much suspense in this year’s election: barring some extraordinary mistakes, Mr. Obama will win. Assuming he wins, the real question is what he’ll make of his victory."

I'm tempted to ask, Mr. Krugman, any thoughts on interest rates?

Wednesday, July 17, 2013

Jul 17 (2008) WaMu Places Hold on Failed IndyMac Checks, Then Fails Itself

Customers line up in front of an IndyMac Bank branch after it suffered one of the biggest bank closures in U.S. history (Credit: Bariel Bouys/AFP/Getty Images)

On this day in 2008, the LA Times reported Washington Mutual (WaMu) was placing longer-than-normal holds on IndyMac checks citing fraud concerns, making a bad situation for IndyMac customers worse.

Five days prior, IndyMac had been taken over by the Federal Deposit Insurance Corporation (FDIC) which had shutdown operations before the bank's regular closing time. The media seized upon images of terrified customers lining up outside locked branch doors. Thousands of IndyMac customers ended up losing millions in uninsured deposits. At $7 billion, the IndyMac failure was the largest loss ever for the agency.

But both banks had large exposures to high-risk mortgages on the West Coast, and WaMu itself was hemorrhaging deposits and on the brink of collapse. The FDIC was ultimately saved from WaMu's failure--the largest in US history--because Jamie Dimon and JP Morgan agreed to acquire all of its assets and liabilities in September 2008, absorbing losses that would normally have fallen to the FDIC.

In December of that year, the New York Times reported on the loan approval process at WaMu.

"As a supervisor at a Washington Mutual..John D. Parsons was accustomed to seeing baby sitters claiming salaries worthy of college presidents, and schoolteachers with incomes rivaling stockbrokers’. He rarely questioned them. A real estate frenzy was under way and WaMu...was all about saying yes.

Yet even by WaMu’s relaxed standards, one mortgage four years ago raised eyebrows. The borrower was claiming a six-figure income and an unusual profession: mariachi singer.

Mr. Parsons could not verify the singer’s income, so he had him photographed in front of his home dressed in his mariachi outfit. The photo went into a WaMu file. Approved."

Monday, July 15, 2013

Jul 15 (1979) Jimmy Carter Delivers Malaise: "Human identity is no longer defined by what one does but by what one owns"

On this day in 1979, President Jimmy Carter delivered his "Crisis of Confidence" speech. Written by Hendrik Hertzberg and Gordon Stewart, it is often referred to as his "malaise" speech, though that word is never actually spoken. 

Carter spent much of the address blaming the problems of the day--energy, unemployment, inflation--on the American spirit. Whether true or not, a flurry of articles and op-eds afterward indicated that was not something Americans wanted to hear.

In a 2008 piece in US News & World ReportKevin Mattson provided a more seasoned reflection on its historical importance.

"What Carter really did in the speech was profound. He warned Americans that the 1979 energy crisis – both a shortage of gas and higher prices – stemmed from the country's way of life. 

'Too many of us now tend to worship self-indulgence and consumption. Human identity is no longer defined by what one does but by what one owns,' the president said. 

Consumerism provided people with false happiness, he suggested, but it also prevented Americans from re-examining their lives in order to confront the profound challenge the energy crisis elicited... 

Despite [failures] Carter left behind a way of talking about the country's promise and its need to confront what is undoubtedly one of its biggest challenges – to solve the energy crisis in a way that takes seriously both our limits and our greatness."

Sunday, July 14, 2013

July 14 (1969) US Discontinues High Denomination Bills: Bad News for Savers?

On this Bastille Day in 1969, the Federal Reserve Bank officially discontinued large denomination bills, namely the $500, $1,000, $5,000, and $10,000.

Today, as in 1969, greenbacks are issued in seven denominations of $1, $2, $5, $10, $20, $50, and $100.

This may not be good news for savers. A 2009 study by Priya Raghubir and Joydeep Srivastava found large denominations of money led to lower spending, as breaking a bill accentuates the "pain of paying."

Correspondingly, people spend even more when cash isn't part of the transaction, i.e. when payments are made with credit cards, gift cards, even debit cards. The more "transparent" the payment outflow, the greater the aversion to spending, and cash is the most transparent form of payment.

So, if you're looking to save more and spend less, a good place to start may be cutting up your credit card(s), and exchanging your Washingtons for Benjamins.

Further Reading
NPR Interview: Why We Spend More Using Credit Cards vs. Cash
American Psychological Association: How Spending Affects How Much You Spend Spend Cash and Save

History of Large Denomination Bills

Saturday, July 13, 2013

Jul 13 (1864) Happy Bday John Jacob Astor IV!

The Titanic

On this day in 1864, John Jacob Astor IV was born in Rhinebeck, New York. Mr. Astor was named after his great-grandfather John Jacob Astor who was America's first multi-millionaire (as well as creator of the first trust). In the early 19th-century, Mr. Astor made his millions trading furs, opium, and New York real estate.

In the late 19th century, Mr. Astor IV also made millions in New York real estate, most notably the Waldoff-Astoria Hotel, which he built with his cousin William Waldorf Astor. (JJ's home at Astor Courts in Rhinebeck was one of the last projects of the architect Stanford White.)

Mr. Astor IV was also a Colonel in the US Army, an author, inventor, and actor. But it is his death for which he is most remembered. Returning to the US from an extended honeymoon with his 18-year old pregnant wife, the 47-year old Astor IV died on the RMS Titanic. His wife survived to give birth to John Jacob Astor VI.

In April 1912, the San Francisco Call reported a first-hand account of the disaster from Colonel Archibald Gracie, the last man saved.

"'The Conduct of Colonel John Jacob Astor was deserving of the highest praise', Colonel Gracie declared. 'The millionaire New Yorker,' he said, 'devoted all his energies to saving his young bride, nee Miss Force of New York, who was in delicate health. Colonel Astor helped us in our efforts to get her into the boat, and as she took her place Colonel Astor requested permission of the second officer to go with her for her own protection.'

'No sir,' replied the officer. 'Not a man shall go on a boat until all the women are all off.'

Further Reading
Astor family history from New York Social Diary

Friday, July 12, 2013

Jul 12 (1899, 1914) E.B. White & The Bambino Share One Day, Two Cities

On this day in 1899, author E.B. White, had completed his first day of life (born on July11).

On this day in 1914, Babe Ruth relished his first victory as a Major League Baseball pitcher. "The Bambino" started with the Boston Red Sox winning his first game on July 11.

Boston and New York featured prominently in both men's lives. Ruth started his career in Boston, but then "cursed" the city when he was traded to the New York Yankees in 1919.

White, an editor for The New Yorker, wrote the Boston poem, entitled "Boston Is Like No Other Place in the World Only More So," first published in The New Yorker in 1949. President Obama read from it at the memorial service for victims of the Boston Marathon bombings. Excerpted below.
There’s something in the Boston scene
     So innocent, so tranquil,
It takes and holds my interest
     The same as any bank will.
For Boston’s not a capital,
     And Boston’s not a place;
Rather I think that Boston is
     A sort of state of grace.
The people’s lives in Boston
     Are flowers blown in glass;
On Commonwealth, on Beacon,
     They bow and speak and pass.
No man grows old in Boston,
     No lady ever dies;
No youth is ever wicked,
     No infant ever cries.
No orthodox Bostonian
     Is lonely or dejected.
For everyone in Boston
     With everyone’s connected.
E. B. White, “Boston Is Like No Other Place in the World Only More So,” October 1, 1949

Thursday, July 11, 2013

Dueling Banks of Wall Street

40-50 Wall Street, New York, NY circa 1860

On this day in 1804, Alexander Hamilton was mortally wounded in a duel with his political rival, Aaron Burr. One of the sources of their enmity was banking.

In the late 18th century, new banks could only be chartered with a special act passed by the state legislature. In 1799, the New York legislature was controlled by the Federalists (Alexander Hamilton's party).

To get around politics, Burr convinced the Federalists (including Hamilton) to support a charter for his Manhattan Company, a water utility with a mission to provide "wholesome" water to New Yorkers. Secretly, Burr amended the charter to allow the company to also pursue commerce with its surplus capital, allowing the formation of the The Bank of the Manhattan Company (today part of JP Morgan Chase).

Feeling betrayed, in 1803 Hamilton created a rival (Federalist) bank called The Merchant's Bank of the City of New York. The two banks competed side by side, with Hamilton's Bank operating at 42 Wall St, and Burr's on 40 Wall St.

The rivalry officially ended in 1919, when the two banks merged. The Manhattan Company, with its unique charter, was the survivor--as was Burr on this day in 1804.

Further Reading
NY Times Article: The Hamilton-Burr Bank (Dec 1919)

Wednesday, July 10, 2013

Jul 10 (1832) Pres. Jackson Vetoes 2nd Bank of the United States: Wildcat Banking Begins

Political BBQ, Pres. Jackson Roasted Over Open Fire, 1834

On this day in 1832, President Andrew Jackson vetoed the charter of the Second Bank of the United States. He argued the existence of a federal bank exacerbated inequality, making "the rich richer and the potent more powerful."

If Jackson wanted to create a more equitable economic system, his veto backfired. The end of the Second Bank was the start of the Free Banking era, also known as "wildcat banking." From 1836 to 1863 (when President Lincoln signed the National Bank Act), corrupt bankers prospered through loopholes in lax banking regulations, and ordinary Americans lost their savings to numerous bank failures. An 1892 article in the Evening Herald describes the time.

"The wildcat banker was ordinarily a speculator--trader without capital--a lobbyist or worse... 

A lumber shanty or a shingle mill served for a banking house, and business was confined to the exchange of flimsy notes for convertible property. When specie was demanded in return for [banknotes] the bank failed. As it had no assets to look after, the banker packed his gripsack and sought fresh fields and pastures new.

His banknotes, to the amount of scores of thousands of dollars, remained in the pockets of swindled individuals, not worth the paper on which they were printed."

Check out a great video from the Philadelphia Fed, all about the history and impact of the 2nd Bank of US!

The image is from 1834 and is available at the Library of Congress: Andrew Jackson is roasted over the fires of "Public Opinion" by the figure of Justice, over the controversy surrounding his removal of federal deposits from the Second Bank of the United States... Read the entire summary here.

Tuesday, July 9, 2013

The Bankruptcy of Millard Fillmore

On July 9, 1850, upon the death of President Zachary Taylor (who served only one year), Vice President Millard Fillmore became President of the United States. "Millard Fillmore demonstrated that through methodical industry and some competence an uninspiring man could make the American dream come true," proclaims White House historians at He served one term in which he facilitated the passage of the Compromise of 1850.

Prior to the Presidency, Mr. Fillmore was a New York senator.  In 1831, he engineered the passage of New York's first bankruptcy law, which eliminated debt imprisonment, freed debtors already in jail, and established rules for discharging debts. The federal government followed suit in 1833.

The theme of imprisonment, and debtors' prisons specifically, was a common one in the works of Charles Dickens, a contemporary of Millard Fillmore. Writing in Little Dorrit, he depicts Marshalsea Prison where Dickens' father was imprisoned in the 1820s.

"Whosoever goes into Marshalsea Place, turning out of Angel Court, leading to Bermondsey, will find his feet on the very paving stones of the extinct Marshalsea Jail. He will see its narrow yard to the right, and to the left, very little altered, if at all, except that the walls were lowered when the place got free; will look upon the rooms in which the debtors lived; and will stand among crowding ghosts of so many miserable years." 

Further Reading
Article in San Francisco Chronicle re: movement to change the name of Fillmore St
Millard Fillmore in Wikipedia
Article in NY Times regarding modern debtors prisons
The Fillmore in San Francisco

Monday, July 8, 2013

Jul 8 (1889) 1st Issue of Wall Street Journal: "For all our social discord we yet remain the longest enduring society of free men"

Vermont C. Royster. Image courtesy of the North Carolina Office of Archives and History, Raleigh, NC.

On this day in 1889, the first edition of the Wall Street Journal was published. Founded by Charles Dow, Edward Jones and Charles Bergstresser, it started as a 4-page afternoon paper selling for $0.02. Today the paper costs $2.00, and with 2.4 million daily copies is the largest newspaper by circulation in the United States. (USA Today is second with 1.7 million.)

In addition to its business and economic news, the Journal is famous for its editorial pages. One of the first editorial contributors to win a Pulitzer Prize was Vermont Connecticut Royster (yes, that's his real name).

A native of Raleigh, North Carolina and graduate of UNC Chapel Hill, Royster served for 61 years at the Journal, and earned several honors and awards. Upon receiving the Presidential Medal of Freedom, Ronald Reagan said, "Vermont Royster illuminated the political and economic life of our times." Several of his editorials are considered classics, including "And the Fair Land" which has been reprinted every Thanksgiving since 1961, and is excerpted below.

"We can all remind ourselves that the richness of this country was not born in the resources of the earth, though they be plentiful, but in the men that took its measure.

For that reminder is everywhere -- in the cities, towns, farms, roads, factories, homes, hospitals, schools that spread everywhere over that wilderness.

We can remind ourselves that for all our social discord we yet remain the longest enduring society of free men governing themselves without benefit of kings or dictators. Being so, we are the marvel and the mystery of the world, for that enduring liberty is no less a blessing than the abundance of the earth."

Further Reading
Vermont C. Royster obituary in the New York Times (1996)

Sunday, July 7, 2013

Jul 7 (1928) Happy Bday Sliced Bread! Relief to those who "have risked thumbs and tempers slicing bread"

Slicing bread at bakery. San Angelo, Texas

On this day in 1928, the Chillicothe Baking Company of Chillicothe, Missouri was the first bakery to use a machine to slice bread. To advertise the new product, the Chillicothe Bakery used the tagline "the greatest forward step in the baking industry since bread was wrapped." This evolved into the idiom "the greatest thing since slice bread," a phrase used to describe an invention intended to improve lives.

The machine had indeed improved lives, and when it was briefly banned by the Federal Drug Administration during the second World War, some bakeries did not comply. John F. Conaboy, the New York Area Supervisor of the FDA, warned in the New York Times

"To protect the cooperating bakers against unfair advantage of those who continue to slice bread...we are prepared to take measures if necessary. Under provisions of the order willful violators may be fined, imprisoned, or even prohibited from accepting further orders for material under priority control and may even lose all rationing and priority assistance."

The unpopular ban was lifted two months later, citing no material cost savings. The New York Times reported "housewives who have risked thumbs and tempers slicing bread at home for nearly two months will find sliced loaves back on the grocery shelves tomorrow in most places." 

Further Reading
The Home of Sliced Bread Website

Saturday, July 6, 2013

Jul 6 (1785) Happy Bday US Dollar! "Surely my eyes do not deceive me -- It certainly must be a Dollar!"

On this day in 1785, the Continental Congress approved the dollar as the official monetary unit of the United States. The term "dollar" was short for Spanish milled dollar, which had the most consistent milling process and therefore uniform value of any monetary unit in circulation. The "$" symbol most likely had its origins in the Spanish dollar. Unlike the Spanish dollar, which had a nominal value of eight Spanish reals, the US dollar would be based on a decimal system.

A January 15, 1785 proposition to the Continental Congress strongly advocated for the dollar.

"Another plan has been offered, which proposes, that the money unit be one dollar; and the smallest coin is to be of copper, of which 200 shall pass for one dollar. This plan also proposes, that the several pieces shall increase in a decimal ratio; and that all accounts be kept in decimals, which is certainly by much the most short and simple mode. 

In favour of this plan it is urged, that a dollar, the proposed unit, has long been in general use. Its value is familiar. This accords with the national mode of keeping accounts, and may in time produce the happy effect of uniformity in counting money throughout the union."

The image is from the Library of Congress, entitled "Ghost of a Dollar" with this summary:

A caricature of Philadelphia merchant and financier Stephen Girard, here called "Stephen Graspall, Banker & Shaver." He stands behind a counter with a small slot in it, staring at an apparition of an 1806 Spanish dollar which hovers before him on the left. He says: "Surely my eyes do not deceive me -- It certainly must be a Dollar! -- I declare I have not seen such a thing since I sold the last I had in my Vaults at 18 per Cent Premium -- If thou art a real Dollar do drop in my till and let me hear thee Chink -- As I have been sued for payment of part of my notes in Specie I must collect some to pay them for quietness sake or the game would be up at once." Behind him hangs his signboard, advertising "Paper Wholesale and Retail. NB No foreign Bank notes taken on Deposit except such as are about 5 per cent above par."

Further Reading
Money in Colonial Times - Federal Reserve Bank of Philadelphia

Friday, July 5, 2013

Jul 5 (1934) Mrs. Lydia Lobsiger receives first FDIC check: "I don't know how to thank you men"

On July 5, 1934, Mrs. Lydia Lobsiger received the first federal deposit insurance disbursement, following the failure of the Fond Du Lac State Bank in East Peoria, Illinois. Photo: UPI

On this day in 1934, the Federal Deposit Insurance Corporation issued its first insurance disbursement to Lydia Lobsiger, after the failure of her bank Fond Du Lac State Bank in East Peoria, IL.

Established by The Banking Act of 1933, the FDIC was authorized to insure up to $2,500 in deposits, manage bank failures and liquidate their assets. As of January 1, 1934 the FDIC insured 14,000 banks. Today, the FDIC insures over 7,000 financial institutions, and individual depositors up to $250,000.

According to the New York Times, 99 percent of the 1,789 depositors of Fond Du Lac State Bank received their deposits in full thanks to the FDIC guaranty.

The check to Mrs. Lobsiger, a widow devastated by the Depression, was $1,250--her entire family fortune. A Time magazine article described the event.

A scrawny bespectacled widow in a cotton dress marched up to a cage marked 'CASH F. D. I. C. ORDERS HERE.' She then posed for photographers and said with a grin 'I don't know how to thank you men.'

Wednesday, July 3, 2013

Jul 3 (1819) Bank for Savings opens in NYC: "To encourage and assist the laboring classes to make the most of their earnings"

Thomas Eddy, New York Financier and Philanthropist

On this day in 1819, The Society for the Prevention of Pauperism, led by Thomas Eddy (pictured), successfully opened the first Bank for Savings in New York City. The mission of the Society for the Prevention of Pauperism was "to encourage and assist the laboring classes to make the most of their earnings by promoting the establishment of a Savings Bank."

According to the bank's Constitution, depositors earned a fixed rate of interest of five per cent per year on sums from five to fifty dollars and six per cent on sums larger than fifty dollars. All investments were made in Government securities of the United States and New York State, the Corporation of the City of New York and other funds as the Directors deemed expedient.

According to an 1896 article about the history of banks for savings, co-authored by John P. Townsend,  these institutions had become popular in the late 18th century "as Europe and America were shaken by a Vesuvius of democracy." With more freedom comes more responsibility, and savings banks allowed laborers to increase their wealth through their own efforts and ingenuity rather than through government assistance. They also encouraged all savers--the workers and the wealthy--to share in prosperity. A November 1816 notice in the New York Post explained

"among the many institutions which are established at the present day for the mitigation of human misery and misfortune, the associations termed in Europe, 'Savings Banks,' are perhaps not the least important. In London, Liverpool, and Edinburgh, they have been established and carried on with great success. The design of these associations is extremely simple. It is to effect a secure place of deposit for the earnings of the laboring part of the community: and at the same time to give them the benefit of an accumulation of interest."

Further Reading 
 Biography of Thomas Eddy from PhilanthropyRoundTable
Excerpts from Charles E. Knowles' HISTORY OF THE BANK FOR SAVINGS IN THE CITY OF NEW YORK 1819-1929
The History of Savings Banks (1896) from the Online Library of Liberty

Tuesday, July 2, 2013

Jul 2 (1777) Vermont abolishes slavery, declares independence: Rep Matt Lyon "seiz'd the tongs to ease his wrongs"

Vermont the Congressional Pugilist in 1798

On this day in 1777, Vermont legislators announced slavery abolished in the region, the first of any American territory to so do. (On this day in 1964 President Johnson signed the Civil Rights Act). On July 8, 1777, Vermont wrote equality into its Constitution.

Vermont has a long history of freedom fighting. In 1777, Vermont declared independence from both the British Empire and the United States and formed its own Republic. After fourteen years, the Commonwealth of Vermont became the14th state (the first to abolish slavery). In 1785, Vermont was the first American territory to issue its own currency called Vermont coppers.

Today, the Second Vermont Republic seeks to return it to independence. Lead by Thomas Naylor, a Duke professor of economics and author of Downsizing the USA, members believe Vermont did not join the Union to become part of an empire, and therefore seek permission to leave. The Montpelier Manifesto outlines some of their grievances, including financial firms with bad customer service and "big computer networks." 

The image, entitled "Congressional Pugilist," is from the Library of Congress, with the following description: Drawn in 1798, a crude portrayal of a fight on the floor of Congress between Vermont Representative Matthew Lyon and Roger Griswold of Connecticut. The row was originally prompted by an insulting reference to Lyon on Griswold's part. The interior of Congress Hall is shown, with the Speaker Jonathan Dayton and Clerk Jonathan W. Condy (both seated), Chaplain Ashbel Green (in profile on the left), and several others looking on, as Griswold, armed with a cane, kicks Lyon, who grasps the former's arm and raises a pair of fireplace tongs to strike him. Below are the verses: "He in a trice struck Lyon thrice / Upon his head, enrag'd sir, / Who seiz'd the tongs to ease his wrongs, / And Griswold thus engag'd, sir."

Monday, July 1, 2013

Jul 1 (1926) Economist Robert Fogel born in New York City: "You must go back to understand the process of change"

Robert Fogel with his wife Enid in 2005

On this day in 1926, revolutionary economist and Nobel laureate Robert W. Fogel was born in New York City. Fogel is best known for introducing economic analysis-- cost/benefit, depreciation, and value added considerations--into the study of history, a technique he dubbed "cliometrics."

In his 1964 classic Railroads and American Economic Growth, Fogel attacked the commonly-held belief that railroad transportation was the driver of post-Civil War growth in the United States. His analysis challenged what he called the "Axiom of Indispensability," writing "no single invention was vital for economic growth in the nineteenth century." Alternatives to rail transportation existed--namely wagons and canals. When considering all the costs, his data showed the "iron horse" probably contributed around 5% of GDP.

His figures have been debated, but the wisdom of his underlying critique remains;  so long as alternatives exist to fulfill material wants, can a single alternative truly be indispensable? Or as Ryan Avent wrote in the Economist "the broader lesson—that one has to think critically about the counterfactual in trying to assess technologies or shocks or economic policy—has been an indispensable one for me."

In a 2004 interview with Marika Griehsel, Fogel explained that with the study of economics "it's impossible not to be historical, you have to go back and look at the record, at least 30 or 40 years, sometimes 100 years, in order to understand the process of change."

Robert Fogel died on June 11, 2013. The image is from the University of Chicago: Robert Fogel with his wife Enid.

Further Reading
The Economic History Review (1969) Article by Paul David "Prof. Fogel on and off the rails"

Interview with Robert Fogel from

Robert Fogel NYT Obituary

Robert Fogel WSJ Obituary

Robert Fogel Economist Obituary


Flannery O'Connor

You shall know the truth and the truth shall make you odd.