Bail Out

While I enjoyed all my economics courses at THE, I had been feeling that I didn't understand the financial system as well as I ought, so a few weeks ago, I picked up Ron Chernow's book, The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance. It has been interesting to read history we covered in American/World/Diplomatic History, but from the financial side rather than the pure historical side. I was struck by this passage that I ran across today discussing the Panic of 1873 which Chernow attributed to scandals in the railroad industy followed rapidly by the failure of the financial house of Jay Cooke.

The failure ignited a full-blown Wall Street Panic. For the first time since its formation, the New York Stock Exchange shut its doors for ten days. The corner outside the exchange became a wailing wall of ruined men. Diarist George Templeton Strong noted that "the central focus of excitement was, of course, at the corner of Broad and Wall Streets. People [were] swarming on the Treasury steps looking down on the seething mob that filled Broad Street." [footnote omitted]...Five thousand commercial firms and fifty-seven Stock Exchange firms were dragged down in Cooke's maelstrom, a cataclysmic experience for a generation of Americans."To my parents and to the outside world," financial journalist Alexander Dana Noyes would later recall, "the fiancial crash of September 1873 had been as memorable a landmark as, to the community of half a century later, was the panic of October 1929." [Footnote omitted. Emphasis added.]

By today's standards, Wall Street looked almost pastoral: Trinity Church was the tallest structure, and street lamps on the cobblesonte streets stood high than many buildings. The six-story Drexel building soared above its neighbors. Yet after Jay Cooke's failure, it was popularly seens as the street of sin, a place responsible for corrupting the manners and morals of a pristine frontier nation. Not for the last time, America turned against Wall Street with puritanical outage and a sense of offended innocence. Thomas Nast's cartoons in Harper's Weekly showed heaps of slaughtered animals in front of Trinity Church, the church itself scowling, with the words MORAL, I TOLD YOU SO emblasoned on its steeple.

I wonder if those in Wall Street and in DC today understand the pure anger that Main Street has been expressing for the past week over being asked to bail out Wall Street. It will be interesting to see how this crisis and the political response in DC affect the upcoming elections.

[Any opinions expressed on this blog are solely those of author, and are not intended to represent themselves as speaking on behalf of any politician, political party, or any other organization.]