HUGE financial losses in the United States spark fears in Europe. A credit crisis ensues. Soon the fear spreads to Wall Street, where the biggest banks fight off rumors of insolvency amid a broader economic panic, and Washington is forced to step in. The market swoons. If this sounds familiar, it should. Except we’re not talking about the subprime mortgage crisis, or the deal brokered by the Treasury Department last week with three American banking giants to cough up $75 billion for a fund aimed at stabilizing the global credit market, or Friday’s 366-point drop in the stock market.
In fact, it’s a brief history of the Panic of 1907, which culminated exactly 100 years ago today.
Back then, losses stemming from the San Francisco earthquake the year before hammered British insurers and eventually forced government officials on this side of the Atlantic and none other than J. P. Morgan himself to come to the rescue. On the night of Oct. 21, 1907, the legendary tycoon summoned the country’s leading financiers to his Murray Hill mansion to help finance a bailout.
“This is where the trouble stops,” Mr. Morgan famously declared. He succeeded. By early 1908, the panic had passed.
Today, it’s J. P. Morgan again ”” the firm, not the man ”” along with Citigroup and Bank of America that are trying to fix things, with prodding from Henry M. Paulson Jr., the secretary of the Treasury, and, as the former head of Goldman Sachs, something of a latter-day tycoon.
Very insightful – both into the machinery of finance but also into the soul of men who control them.