On Mon, Nov 22, 2010 at 11:29 PM, CeJ <jann...@gmail.com> wrote: > As I posted before, it's deja vu all over again when you get down to > what human relations create such crises. > JP Morgan himself was caught up in helping to create the crisis, > although he went down in history as one of those guys who helped > overcome it. BTW, I don't necessarily agree with the smithsonianmag's > analysis of what 'caused' the current meltdown. However, I will point > out that a lot of the same things were said about the main players in > 1907-8--that they were mysterious, behind-the-scenes people only > acting out of self-interest, that what they did was out of control, > that because of technological innovation in finance and banking, too > much was being done in very little time and it was out of control.
^^^^^ Yeah "out of control" is really deja vu all over again of "Modern bourgeois society, with its relations of production, of exchange and of property, a society that has conjured up such gigantic means of production and of exchange, is like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells." They just can't help themselves. Interesting that you mention Morgan. I'm still fascinated by that chapter, titled "Bailout is the name of the game" in that book by that rightwing Tea Party type G. Edward Griffin , _The Creature from Jekyll Island_. It _can_ be fairly said to predict the bailouts. Anyway, I believe Morgan dominated the founding of the Fed. It's really no big surprise. The Fed was founded to keep enriched the biggest banks in the first place- dog bites man. > > > > http://www.u-s-history.com/pages/h952.html > > Social Issues > > In the summer of 1907, the American economy was showing signs of > weakness as a number of business and Wall Street brokerages went > bankrupt. In October, the respected Knickerbocker Trust in New York > City and the ¹Westinghouse Electric Company both failed, touching off > a series of events known as the Panic of 1907. > > In the wake of the initial business collapses, stock market prices > plummeted and depositors made a massive run on the nation’s banks. The > U.S. Treasury pumped millions of dollars into weak banks in the hope > of saving them, but the string of collapsed institutions lengthened. > > In a reprise of his role during the second Cleveland administration > when the gold standard was under assault, J.P. Morgan acted to restore > order. He summoned the leading bankers and financial experts to his > home where they set up shop in his library. Over the course of the > next three weeks, Morgan and his associates labored to channel money > from the strong institutions to the weaker ones in an effort to keep > them afloat. > > The joint effort of the government and the business leaders improved > conditions markedly over the course of several weeks. While the crisis > passed, the finger-pointing began. Reform elements of both political > parties believed that the American banking system was fundamentally > flawed and needed wholesale change. Business leaders, however, held > that Roosevelt's progressive legislation had upset the natural order > of the economy and the government should stop its meddling. > > Following the Panic of 1907, the reform elements gradually gained the > upper hand. An emerging consensus affirmed that thorough bank reform > was necessary to provide badly needed currency elasticity (a major > issue in the Panic) and the general soundness of the banking system. > Congress responded by passing stop-gap legislation, the > Aldrich-Vreeland Act (1908), until more thorough actions could be > prepared. > > With the passing of the Owen-Glass Federal Reserve Act of 1913, the > Federal Reserve System was created. The "Fed" was designed to be > flexible and responsive to the economy and independent of politics. > The Fed has evolved through the years by implementing many strict > checks and balances. New departments, the General Accounting Office, > GAO, and the Office of Management & Budget, OMB, were created to audit > the Fed and most other government departments. As a result, the > American economy, and American society are more stable. > > See other Theodore Roosevelt domestic activity. > > 1: Westinghouse Electric was the victim of foul business practices by > J.P. Morgan. Morgan controlled General Electric and Thomas Edison’s > Direct Current, (DC) electrical patents. He contended with > Westinghouse Electric, who controlled Nicola Tesla’s Alternating > Current, (AC) electrical patents. Morgan and Edison strove for control > of all electrical power in America. Edison used deceptive > demonstrations of the supposed increased dangers of AC and Morgan had > spread rumors in Wall Street that Westinghouse was insolvent, causing > Westinghouse stock to collapse, along with the stock of the > Westinghouse backers. > > > http://www.smithsonianmag.com/history-archaeology/1907_Panic.html > > What was the Panic of 1907, and what caused it? > The Panic of 1907 was a six-week stretch of runs on banks in New York > City and other American cities in October and early November of 1907. > It was triggered by a failed speculation that caused the bankruptcy of > two brokerage firms. But the shock that set in motion the events to > create the Panic was the earthquake in San Francisco in 1906. The > devastation of that city drew gold out of the world's major money > centers. This created a liquidity crunch that created a recession > starting in June of 1907. > > In 2008 , is the housing market the culprit this time? > Today's panic was triggered by the surprising discovery of higher > defaults on subprime mortgages than anybody expected. This discovery > occurred in late 2006 and early 2007. A panic always follows a real > economic shock; panics are not random occurrences of market emotions. > They are responses to unambiguous, surprising, costly events that > spook investors. > > But the first cause of a panic is the boom that precedes the panic. > Every panic has been preceded by a very buoyant period of growth in > the economy. This was true in 1907 and it was true in advance of 2007. > > What are the differences between the panic of 1907 and the crisis of 2008? > Three factors stand out: higher complexity, faster speed and greater scale. > > The complexity of markets today is magnitudes higher than a century > ago. We have subprime loans that even the experts aren't sure how to > value. We have trading positions, very complicated combinations of > securities held by major institutions, on which the exposure is not > clear. And we have the institutions themselves that are so complicated > that it's hard to tell who among them is solvent and who is failing. > > Then there is greater speed: we enjoy Internet banking and wire > transfers that allow funds to move instantaneously across institutions > across borders. And news now travels at the speed of light. Markets > react immediately and this accelerates the pace of the panic. > > The third element is scale. We've just past the TARP, the Troubled > Asset Relief Program, funded at $ 700 billion. There may be another > $500 billion in credit default swaps that will need to be covered. And > there are billions more in other exposures. We could be looking at a > cost in trillions. In current dollars, these amounts may well dwarf > any other financial crisis in history. In terms of sheer human > misery,the Crash of 1929 and the Great Depression still overshadow > other financial crises, even today's. But we aren't done with the > current crisis; surely it already stands out as one of the largest > crises in all of financial history. > > Describe J.P. Morgan and how he fit into Wall Street's culture in 1907. > J.P. Morgan was 70 years old at the time of the Panic. He was in the > twilight of his extraordinarily successful career as a financier of > the boom era, the Gilded Age of American expansion from 1865 to > roughly 1900. He had engineered the mergers of firms that we would > recognize today as still dominant—U.S. Steel, American Telephone and > Telegraph, General Electric and the like. He was widely respected. In > fact, the popular press personified him as the very image of the > American capitalist. The little fellow on the Monopoly box with the > striped pants and the balding head looks vaguely like J.P. Morgan. > > He was a remarkable person. He had deep and extensive relations > throughout the financial and business communities, and this is one of > the keys to the leadership he exercised in the panic. He was a man of > action; he galvanized people. > > What did Morgan do to stop the panic? > You quell panics by organizing collective action to rescue > institutions and generally convey confidence back into the market. > Morgan was called back from Richmond, Va. by his partners when the > panic hit. He took the equivalent of a red-eye flight, attaching his > private Pullman car to a steam engine and hurtling back to New York > City overnight. He arrived on Sunday, October 20th and immediately > convened a meeting of the leading financiers at his mansion on 34th > Street. He chartered working groups to get the facts and then over the > next several weeks deployed the information to organize successive > rescues of the major institutions. He did allow some institutions to > fail, because he judged that they were insolvent already. But of the > institutions that he declared he would save, every one survived. > > > Read more: > http://www.smithsonianmag.com/history-archaeology/1907_Panic.html#ixzz164pYJDaL > > _______________________________________________ > Marxism-Thaxis mailing list > Marxism-Thaxis@lists.econ.utah.edu > To change your options or unsubscribe go to: > http://lists.econ.utah.edu/mailman/listinfo/marxism-thaxis > _______________________________________________ Marxism-Thaxis mailing list Marxism-Thaxis@lists.econ.utah.edu To change your options or unsubscribe go to: http://lists.econ.utah.edu/mailman/listinfo/marxism-thaxis
