Wall Street’s First Collapse

Speculators caused a stock market crash in 1792, forcing the federal government to bail out New York bankers— and the nation

Wall Street’s first bubble swelled burst in the spring of 1792, exerting a profound effect on American politics and society. Nine years after the Treaty of Paris and the acknowledgement of the former colonies— independence, both Europe and America lay in turmoil. The French Revolution was showing its first symptoms of radical violence. In March an assassin’s bullet felled Sweden’s King Gustav III, who had called for a crusade against France. In the United States, President Washington struggled to fight a war against British-backed Indians in the Midwest.Read more »

The Federal Debt

And how it grew, and grew, and grew…

The federal government was still in the process of establishing itself in 1792 and did not have a good year financially. Total income was only $3,670,000, or 88 cents per capita. Outlays were $5,080,000. The budget deficit therefore amounted to fully 38 percent of revenues. The next year, however, the government sharply reduced expenses while enjoying increased tax receipts and showed its first budget surplus.Read more »

Credit Card America

How we became a nation of instant, constant borrowers

In 1987 Robert Townsend charged $100,000 on his fifteen personal credit cards to finance the production of a major motion picture, Hollywood Shuffle. It was a big risk, a desperate gamble that the movie would be successful and pay off the bills. It worked. Most Americans go through life making credit-card gambles these days, though on a much smaller scale, charging their clothes, furnishings, vacations, toys, and more in the hope that they’ll have the time and ultimately the money to pay it off.Read more »

The Day Wall Street Turned Into Orchard Street

As long as there have been bankers and brokers, there have been people asking what would happen if they had to earn an honest living

On October 26, 1911, the old Life magazine published a cartoon entitled “When We All Get Wise.” The implication of the cartoon, of course, was that if the ordinary people of the country would “just say no,” this time to bankers, brokers, and capitalists, Wall Street would collapse, and all those people would have to go out and start earning an honest living for a change. John D. Rockefeller would have to give golf lessons to get by. Swift and Armour would be back to selling meat at retail (buying it from whom? one wonders).Read more »

Understanding The S&L Mess

At its roots lie fundamental tensions that have bedeviled American banking since the nation began

Bank failure is as American as apple pie. The first American failure took place in Rhode Island in 1809, when a bank capitalized at forty-five dollars issued eight hundred thousand dollars in bank notes, a sum equal to more than seventeen thousand times the resources behind it. In the 1990s the latest bank failure, alas, almost certainly took place less than a week before you began reading this article, as another savings and loan association was taken over by the government. Read more »

Credit and Discredit

S & L scandals, junk bonds, defaults—the pattern is familiar to anyone who knows about U.S. banking between 1830 and 1855.

My files bulge of late with stories that tell unedifying tales of cupidity and stupidity in world and national credit markets. There is the S & L scandal—the story of how hundreds of savings and loan institutions failed through unsound investments, while supposed regulators looked the other way. The bill for their “bailout” climbs toward some new megabuck horizon, it seems, every time there is a fresh disclosure.Read more »

The Founding Wizard

Two hundred years ago the United States was a weakling republic prostrate beneath a ruinous national debt. Then Alexander Hamilton worked the miracle of fiscal imagination that made America a healthy young economic giant. How did he do it?

One price of political greatness is to be forced to campaign even long after death. The Founding Fathers, particularly, have been constantly dragged from their graves for partisan purposes. The shades of Washington, Jefferson, Hamilton, and Madison have been invoked right up to the present by American politicians seeking to add luster to their own political agendas. Read more »

The Magnitude of J. P. Morgan

It cannot be measured in dollars alone. It involved a kind of personal power no man of affairs will ever have again.

On the night of Thursday, October 24, 1907, nearly every important banker in New York was meeting in J. P. Morgan’s exquisite private library, located next to his house at the northeast corner of Madison Avenue and Thirty-sixth Street. In the magnificent East Room, with its three tiers of inlaid wood and glass cabinets containing the printed masterpieces of the world, the bankers sought a way to end the financial panic that held Wall Street, and thus the country, in its grip. Read more »


Banking as we’ve known it for centuries is dead, and we don’t really know the consequences of what is taking its place. A historical overview.

For the last several years congressional committees and presidential task forces have been nattering back and forth about what should be done to change the legal order that establishes and specifically empowers and regulates the nation’s banks. They have dealt with their subject as a collection of technical problems they could solve: a bit of oil here, a tightened bolt there, a replacement for a blown gasket—and the old machine will be as good as new. But, in fact, our banking problems are systemic: we need a new machine.Read more »

American Gold

Solid-gold coins were legal tender for most of the nation's history. In their brilliant surfaces we can see our past fortunes.

NOWADAYS MONEY SEEMS to have become a pure idea, a universally agreed-upon fiction conveyed by pieces of paper, plastic cards, computers, and coins made of nearly worthless metal. But until just fifty-one years ago, money meant solid gold, that precious, rare, beautiful, glamorous, and nearly indestructible element which had stood throughout history as the invulnerable guarantee of financial security.Read more »