US banks lived without a regulator for 77 years
Can you imagine the global financial epicentre, US, without a central bank for over 3 quarters of a century at a stretch? You can call it the mother of all weird financial policies. From 1836, when President Andrew Jackson allowed the charter of the Second Bank of the United States to expire, to 1913, when the Federal Reserve Act came into force, the US banking system had no regulators for 77 years. Thinkers like banker Jacob Schiff of Kuhn, Loeb & Co. did warn about the situation stating, “Unless we have a central bank with adequate control of credit resources, this country is going to undergo the most severe and far reaching money panic in its history.”
But surprisingly, no one ever bothered till the market lost it all under the famed ‘Panic of 1907’. In the absence of any regulator, banks (mis)used money at their (ill)will. As a result, in a notable case, many banks and financial trusts, where a particular businessman F. Augustus Heinze was on the board, funded Heinze and notorious Wall Street banker Charles W. Morse’s plans to corner the United Copper Company (UCC). But when the scheme failed and share prices of UCC crashed, not only did Augustus’ brother Otto Heinze’s brokerage house go bankrupt, but many of his bankers too filed for insolvency throwing the market into chaos. Bankers, all of a sudden, stopped lending to brokers; and lack of funds very soon wiped off almost 50% of the Dow Jones Industrial Average. It was only after a brave attempt by New York City’s dominant banker J. P. Morgan (by putting his own money) to restore bankers’ faith that Wall Street finally showed signs of stabilisation. However, this panic certainly made top guns in the US create a regulatory system for US banks.
Can you imagine the global financial epicentre, US, without a central bank for over 3 quarters of a century at a stretch? You can call it the mother of all weird financial policies. From 1836, when President Andrew Jackson allowed the charter of the Second Bank of the United States to expire, to 1913, when the Federal Reserve Act came into force, the US banking system had no regulators for 77 years. Thinkers like banker Jacob Schiff of Kuhn, Loeb & Co. did warn about the situation stating, “Unless we have a central bank with adequate control of credit resources, this country is going to undergo the most severe and far reaching money panic in its history.”
But surprisingly, no one ever bothered till the market lost it all under the famed ‘Panic of 1907’. In the absence of any regulator, banks (mis)used money at their (ill)will. As a result, in a notable case, many banks and financial trusts, where a particular businessman F. Augustus Heinze was on the board, funded Heinze and notorious Wall Street banker Charles W. Morse’s plans to corner the United Copper Company (UCC). But when the scheme failed and share prices of UCC crashed, not only did Augustus’ brother Otto Heinze’s brokerage house go bankrupt, but many of his bankers too filed for insolvency throwing the market into chaos. Bankers, all of a sudden, stopped lending to brokers; and lack of funds very soon wiped off almost 50% of the Dow Jones Industrial Average. It was only after a brave attempt by New York City’s dominant banker J. P. Morgan (by putting his own money) to restore bankers’ faith that Wall Street finally showed signs of stabilisation. However, this panic certainly made top guns in the US create a regulatory system for US banks.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face
IIPM – FLP (Flexi Learning Program)
