Surviving Black Monday

In one day, the stock market plummeted 22 percent shortly after the author became Chairman of the Federal Reserve

I’d scrutinized the economy every working day for decades and had visited the Fed scores of times. Nevertheless, when I was appointed chairman in August 1987, I knew I’d have a lot to learn. That was reinforced the minute I walked in the door. The first person to greet me was Dennis Buckley, a security agent who would stay with me throughout my tenure. He addressed me as “Mr. Chairman.”

Without thinking, I said, “Don’t be silly. Everybody calls me Alan.”

He gently explained that calling the chairman by his first name was just not the way things were done at the Fed. Read more »

The Bank War

With his usual furious vigor, Andrew Jackson posed a question that continues to trouble us to this day

The alarm bells are ringing for Social Security again. That’s not exactly news— predictions of the exhaustion of its trust fund have been made before. Earlier this year some members of yet another panel of experts proposed a new remedy: to wit, the investment of a part of those reserved billions in private securities instead of lesser-yielding but safer government bonds. That, of course, would make the United States of America a direct player in the market.Read more »

The Man Who Wasn’t There

On a hot July night about fifteen years ago, a young New Yorker on his way out for the evening decided on a quick shave. When he flicked on his electric razor, however, the lights in his apartment went out. From his window he could see that the lights all over New York had gone out as well. Standing there in the darkness, the now useless razor still in his hand, the young man was certain, understandably enough, that somehow he had personally caused the great blackout of 1977. He hadn’t, of course; he was confusing coincidence with causation. 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 »

THE BANKING STORY

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 »

The Businessman And The Government

Corruption, Yesterday and Today

The recent spate of revelations of bribery by American corporations of government officials, domestic and foreign, has left many with a sense that the business ethics of the nation are going to hell in a handbasket.Read more »