Sunday, September 29, 2013

A Bomb on Wall Street

Soldiers and police establishing line at door of the Morgan Bank while bodies of the victims are lying in front of the Sub Treasury. From loc.gov

Does any remember where they were on September 29, 2008? I was working in a tan cubicle at Wells Fargo, trying my best to eaves drop on conversations to find out what the heck was going on.

Does anyone remember why the Dow Jones Industrial Average dropped 778 points on that fateful Monday? I won't make you wait for it. Congress failed to approve Secretary Paulson's proposed bailout of the big banks. (A few days later they capitulated, and the Dow regained 115 points on the news).

But it wasn't just stocks in free fall. The 1-year Treasury bill also fell that day, to near zero, "meaning investors were willing to accept no return just for the assurance that they would get their money back," explained the New York Times. It's funny, because five years later investors are willing to accept even less of a return (green line in chart below).


One could say that Congress' failure to pass the bailout "dropped a bomb" on Wall Street. But that would be merely metaphoric. In September 1920, a real bomb was dropped on Wall Street, killing 38.

We still don't know who is responsible for this bombing. Historians believe it was carried out by Galleanists, a group responsible for a series of attacks the previous year. These anti-capitalists were, among other things, angry over the lives lost in World War I. Recall from a previous Banker's Notes that the war was financed in part by JP Morgan Jr.

This bomb, carried by a horse-drawn wagon (the horse was also killed), was placed near JP Morgan's office, however, none of the Morgan crew were injured. Most of the fatalities were people from "lowlier stations, clerks and holders of similar places" reported the Sun, who also described the scene (warning: the below quotation is gruesome).

"Lying queerly and awkwardly huddled in front of the Assay Office were six human bodies or what was left of them. In just as grotesque scrawls four more bodies lay against the heavy wall of JP Morgan's. Down in the gutter before the Schulte cigar store, 36 Wall St., lay three more. Trying to crawl five men and women were flopping on the steps of the Sub-Treasury. A hand hung limply over the cornice that crowns the high front of the Morgan office. A woman still alive (she was screaming) was jammed against the Assay office door. Later men went to her assistance and fell back sickly, because she had no arms."


Sunday, September 22, 2013

War is a fearful thing



Before "Super Storm" Sandy, there was The Great New England Hurricane of 1938. Also nicknamed "the Long Island Expressway" and "the Yankee Clipper", this Category 3 storm traveled 47 mph from Long Island to Rhode Island, Vermont, New Hampshire and Quebec, claiming 682 lives (Sandy killed 268).

Meteorology has come a long way since 1938. When the Great Hurricane hit, residents had no warning. Standing in her yard discussing the storm with her neighbor, Mrs. Fred Carlson of North Easton was killed by a shower of bricks from the her falling chimney. In East Hampton, a newspaper boy was electrocuted by a downed wire while making his rounds. Ten women in Mispaumicut, Rhode Island drowned when a wave engulfed a cottage in which they were attending a church social.

The storm was so severe, it permanently reshaped the land. Gone, too, were centuries old trees. The famed East Hampton locust and elms, many planted before the Revolutionary War, were uprooted and tossed against homes and cars. The Times reported their destruction brought "tears to the eyes of some of the older residents."

The storm's devastation was dwarfed only by the conflict brewing on the other side of the Atlantic. On September 24, Chancellor Hitler issued his memorandum demanding the Sudeten area of Czechoslovakia be returned to the German race, or he will take it by force. Eventually, his demands were met. Reich Bankers, however, were not impressed. The New York Times reported:

"Serious bankers here were infuriated by Chancellor Hitler's memorandum to Czechoslovakia as they considered it to be an absurd piece of vanity. Although he gained more territory than he expected, he lost prestige, they feel."

Prime Minister Neville Chamberlain still worried about the prospect of war.

"Armed conflict between nations is a nightmare to me. But if I were convinced that any nation had made up its mind to dominate the world by fear of its force, I should feel that it must be resisted. Under such domination life for people who believe in liberty would not be worth living; but war is a fearful thing and we must be very clear before we embark on it that it is really the great issues that are at stake."

View remarkable footage of the 1938 hurricane and its aftermath from WSJ.com.


Sunday, September 15, 2013

Lehman Brothers Wasn't Always the "Bank of Evil"

Emanuel Lehman, co-founder of Lehman Brothers

Since 2008, September 15 has become a day that lives in financial services infamy. It's the day the fourth largest bank in the United States filed for Chapter 11 bankruptcy protection, the largest bankruptcy filing in US history. The announcement caused the Dow Jones Industrial Average to lose 500 points (the largest single point drop ever at the time), and spread financial panic throughout the world. At the time of its filing, Lehman Brothers had  $768 billion in debt and $639 billion in assets.

As the Lehman crisis unfolded, the Wall Street Journal reported that executives at a Lehman subsidiary Neuberger Berman (acquired in 2001) sent an e-mail suggesting that the Lehman top brass forgo multi-million dollar bonuses to "send a strong message to both employees and investors that management is not shirking accountability for recent performance."

Lehman Brothers Director George Herbert Walker IV (cousin of George W. Bush) shot down the Neuberger proposal. According to emails released by the House Committee on Oversight and Government Reform, he wrote to his executives "sorry team. I am not sure what's in the water at Neuberger Berman. I'm embarrassed and I apologize."

Reports like these made Lehman a symbol of the financial crises, recklessness and greed; the quintessential "Bank of Evil" (as depicted in Despicable Me).

It wasn't always so. Lehman Brothers began as a dry goods store in Alabama in 1844, founded by three sons of a cattle rancher. They capitalized on cotton's high market value be accepting raw cotton as payment for merchandise, eventually becoming a successful commodities trading business.

After the Civil War, they moved to New York City and helped found the New York Cotton Exchange (today part of the IntercontinentialExchange).

Throughout his life, founder Emanuel Lehman was known as a great philanthropist, especially to the most disadvantaged members of society. When he died in 1907, his gift of $150 thousand ($3.750 million today) established a school for "the crippled children of the ghetto," according to the New York Tribune.

According to the New York Times, on his 70th birthday he gave $100 thousand ($2.8 million today) to the Hebrew Orphan Asylum of New York. Upon receiving the gift, the trustees of the Asylum went to Mr. Lehman's home to thank him:

"We have come tonight to congratulate you on your birthday and to tender you a token of our regard by presenting you with a loving cup. Bright and untarnished as its metal is your reputation, in business and social life. Beautiful as it lines and shape are your known qualities as father, brother, and friend in the family circle and in the larger world. 

The depth, width and size of the cup, however, are entirely too small to hold a scintilla of the love, affection, and esteem your family, colleagues, friends and neighbors harbor for you."

Sunday, September 8, 2013

JP Morgan Jr Fights for his Life with the Help of a Powerful Wife

MORGAN, J.P., JR. from LOC.gov

In September 2013, Syria dominates the headlines, as the US contemplates entering another foreign entanglement. At least President Obama doesn't have to worry about the big banks financing foreign governments, as President Woodrow Wilson did in 1914.

John Pierpont "Jack" Morgan, Jr. was born on September 7, 1867. He inherited his father's banking empire, by all accounts big shoes to fill. He made his mark through international investments, particularly his role in financing World War I.

Following its outbreak, he made the first loan of $12 million to Russia, and in 1915, a loan of $50 million to France. By 1915, his firm was the official purchasing agent for the British government, buying cotton, steel, chemicals and food, in exchange for a 1% commission on all purchases. Having a financial stake in the Allies' success, he advocated strongly for US military involvement, a position which made him the target of assassins.

He miraculously survived an attempt on July 14, 1915.  The confessed attacker, Frank Holt (aka Eric Muenter), wielded a gun as well as PhD in philosophy from Cornell. The polished and shrewd assailant was hailed by the New York Tribune as "one of the most remarkable criminals in New York." (Though New York police captain Thomas Tunney said "he looks like a boob.")

Holt managed to shoot Morgan twice, in the hip and groin. Morgan survived, in part, because of his wife's heroics, Jane Norton Morgan. The Tribune described the scene.

"As [Holt] reached the landing on the second floor Mrs. Morgan opened a door and emerged into the hallway. Directly behind her was her husband. She saw Holt with a pistol in either hand. Screaming she hurled herself upon him, only to be brushed aside by Mr. Morgan who grappled with the intruder just as the pistol spoke. 

Physically Mr. Morgan is a giant; his assailant is slim, almost anemic. Holt went to the floor the banker on top wrestling to get the pistol that was in his assailant's right hand. Mrs. Morgan tore the other revolver from Holt's left hand just as her husband threw the weapon to one side and began pounding the man head's against the floor...

The butler had picked up a huge lump of canal coal which be banged on Holt's head with all his might. That took the fight out of the intruder, and in a few minutes he was trussed up like a turkey and awaiting police."

To round out the weekend, let's celebrate the birthday of singer-songwriter Jimmie Rodgers, born on September 8, 1897 by listening to his 1933 classic "California Blues."

 


The Week That Was (in Banker's Notes)

Sep 6 Thoreau Leaves Walden
Sep 5 Born: Paul Volker
Sep 4 Peekskill Riots
Sep 3 Born: George Hearst
Sep 2 Rock Springs Massacre

Visit www.bankersnotes.com

Friday, September 6, 2013

Sep 6 (1847) H.D. Thoreau Leaves Walden Pond: "Men will believe what they see. Let them see."

Thoreau's cove, Lake Walden, Concord, Mass. From loc.gov

I awoke feeling philosophical. Perhaps I was feeling connected to Henry David Thoreau who, on this early Fall day September 6, 1847, left his cabin at Walden Pond to live with his friend Ralph Waldo Emerson.

Thoreau was a great man of letters (though perhaps not a fan of cashiers at banks). Below is an excerpt from a correspondence with Harrison Gray Otis Blake of Worcester, MA on the importance of simplicity.

I do believe in simplicity. It is astonishing as well as sad, how many trivial affairs even the wisest man thinks he must attend to in a day; how singular an affair he thinks he must omit. When the mathematician would solve a difficult problem, he first frees the equation of all incumbrances, and reduces it to its simplest terms. So simplify the problem of life, distinguish the necessary and the real. Probe the earth to see where your main roots run. 

I know many men who, in common things, are not to be deceived; who trust no moonshine; who count their money correctly, and know how to invest it; who are said to be prudent and knowing, who yet will stand at a desk the greater part of their lives, as cashiers in banks, and glimmer and rust and finally go out there. If they know anything, what under the sun do they do that for? Do they know what bread is? or what it is for? Do they know what life is?

Every man's position is in fact too simple to be described. I have sworn no oath. I have no designs on society, or nature, or God. I am simply what I am.

I know that I am. I know that the enterprise is worthy. I know that things work well. I have heard no bad news. As for positions, combinations, and details, what are they? In clear weather, when we look into the heavens, what do we see but the sky and the sun? If you would convince a man that he does wrong, do right. But do not care to convince him. Men will believe what they see. Let them see. - Henry David Thoreau, 1848

Wednesday, September 4, 2013

Sep 4 (1949) Peekskill Riots: "Paul Robeson he’s the man that faced the Ku Klux Klan"

Hecklers shout at people arriving on the grounds of a former golf club to hear the Paul Robeson concert. Mr. Robeson was a football player, a singer, a lawyer -- and an unrelenting advocate of socialism. It was that association, no doubt exacerbated by his race, that brought on the mobs and soon the cancellations of dozens of concerts elsewhere and the destruction of his career. Courtesy of NYTimes

If you thought the Klu Klux Klan was a Southern thing, anti-war and civil rights protests a '60s thing, Labor Day a BBQ thing, remember the Peekskill Riots, which occurred on September 4, 1949. The rioting took place at a Paul Robeson concert at a golf club in Cortlandt Manor, Westchester County, New York.

The celebrated performer had recently appeared before the House Committee on Un-American Activities to oppose a bill that required Communists to register as foreign agents. To a crowd at the Golden Gate Ballroom in Harlem he said:

"I will be loyal to America of true traditions; to the America of the abolitionists, of Harriet Tubman, of Thaddeus Stevens, of those who fought for my people's freedom, not of those who tried to enslave them. And I will have no loyalty to the Forrestals, to the Harrimans, to the WallStreeters..."

The concert itself was free from violence, but the aftermath was far from peaceful. Concertgoers had rocks thrown at them by an angry mob that chanted "go on back to Russia, you niggers" and "white niggers." The violence was mostly attributed to New York members of the Klu Klux Klan as well as chapters of the Veterans of Foreign Wars and American Legion. As police stood by, over 140 people were injured and numerous vehicles were severely damaged .

Folk singers Woody Guthrie and Pete Seeger were in Peekskill. Pete Seeger talks about his experience here. Guthrie wrote "My Thirty Thousand" about the event, his lyrics excerpted below.

Paul Robeson he’s the man
That faced the Ku Klux Klan
On hollow grove’s golfing ground
His words come sounding!
And all around him there
To jump and clap and cheer
I sent the best, the best I had
My thirty thousand

Each eye you tried to gouge,
Each skull you tried to crack,
Has a thousand thousand friends
Around this green grass!
If you furnish the skull someday
I'll pass out the clubs and guns
To the billion hands that love
My thirty thousand!

Each wrinkle on your face
I know it at a glance,
You cannot run and hide
Nor duck nor dodge them.
And your carcass and your deeds
Will fertilize the seeds
Of the men that stood to guard
My thirty thousand!

Hear Paul Robeson sing "Didn't My Lord Deliver Daniel" courtesy of Smithsonian Folkways.

Monday, September 2, 2013

Labor vs. Capital in US/China Relations: Remembering the Rock Springs Massacre

Illustration shows Uncle Sam preparing a list of places in China where "Americans [have been] killed by Chinese" and a Chinese man preparing a list of places in America where "Chinese [have been] killed by Americans" including the latest incident in "Wyoming Territory". From Loc.gov

With the threat of a US default, today relations with China appear a bit strained.Time Magazine recently reported  that Chinese state news agency Xinhua is calling for, among other things, a new reserve currency to replace the dollar. In a blistering editorial, Xinhua said:

“As U.S. politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanized world. Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated, and a new world order should be put in place.”

Well, we wouldn't want to return to the world order of 1885. The Chinese Exclusion Act had passed just three years prior, and fear of Chinese immigration permeated the United States. The Exclusion Act was initially intended to last for 10 years, but was renewed in 1892 and made permanent in 1902. It was finally repealed by the Magnuson Act on December 17, 1943

Back in 1885, open animosity for the Chinese reached fatal proportions in Rock Springs, WY. White miners accused their employer, the Union Pacific Company, of showing preferential treatment to Chinese miners because the Chinese refused to join labor unions and agreed to lower wages. But instead of striking against the company, the miners attacked the Chinese workers. By days-end, at least 28 were dead and 15 injured.

After the Rock Springs riot, many white miners freely admitted to the murders, knowing their actions were supported by their community.

A report from the Daily Astorian described the scene:

"The largest coal mine in the Union Pacific system are at Rock Springs, 250 miles west of Cheyenne. The company recently imported a large number of Chinese to take the place of the white men. This afternoon the entire force of white miners, about 150 strong, organized and armed with shotguns marched to Chinatown. 

After firing a volley into the air they reloaded and ordered the Chinamen to leave. The order was obeyed at once, the Chinamen fleeing to the hills like a drove of sheep, closely pursued by the miners, who fired several volleys after the fugitives with fatal effect. 

The Chinese quarters were then set on fire, and thirty-nine houses owned by the company destroyed along with its contents. The miners next visited various mines in the camps, unearthed all the Chinamen at work therein and told them to flee for their lives. Of 400 Chinamen here this morning none remains."

Sunday, September 1, 2013

The 14th Amendment and the Debt Ceiling

 City Point, Virginia. Negro soldier guarding 12-pdr. Napoleon. (Model 1857?)

After the Civil War, the United States government was heavily in debt. Through the innovation of government war bonds, most of the debt was held by middle class Northerners, who "viewed the sanctity of the national debt as a moral legacy of the war second only to emancipation itself" (according to Eric Forner writing in Reconstruction: America's Unfinished Revolution).

Upon reunification, Republicans (mostly Northerners) feared representatives from the Confederate states would refuse to pay the Union debts.

Writing in Financial History Magazine, Franklin Noll said the threat of Union debt repudiation was a vital political weapon for the Republicans, and helped secure the passage of the 14th Amendment guaranteeing the right to citizenship, due process, and equal protection under the law. 

Noll writes adding a fourth section--providing for the security of the national debt (and the repudiation of Confederate Debt)--smoothed the way for the more controversial, civil rights elements of the Amendment.

Section 4 states:

"The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned."

Fast forward and this section is now being used in the recent debt ceiling debates. Today's Democrats (mostly Northerners) argue that by creating the possibility that the government could not repay its debts, the debt ceiling device is unconstitutional.

Legal analyst Jeffrey Rosen has argued that Section 4 gives the President unilateral authority to raise or ignore the national debt ceiling, and that if challenged the Supreme Court would agree.

President Obama disagrees. Press Secretary Jay Carney was quoted in the Huffington Post saying "this administration does not believe that the 14th Amendment gives the president the power to ignore the debt ceiling -- period."


September 1 is country singer-songwriter Conway Twitty's birthday, born in 1933.  Listen to him sing You're the Reason Our Kid's are Ugly with Loretta Lynn here.

Flannery O'Connor

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