.bmp)
.bmp)
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.Given the historical echo — as well as the 20th anniversary of the crash of Oct. 19, 1987 — it’s appropriate that the plan to ease the credit crunch is high on the agenda this weekend as the finance ministers of the Group of 7 leading industrial countries confer in Washington.But this time around, it may take much longer to repair the damage and restore confidence than it did a century ago. It’s not only that the sums are larger now: even adjusting for a century of inflation, losses from the San Francisco earthquake totaled only about $18 billion in today’s dollars, according to Marc Weidenmier, an associate professor of economics at Claremont McKenna College, compared with the likely loss of hundreds of billions dollars related to subprime mortgages.It’s also that the breadth and complexity of today’s global markets create risks so great that no group of business leaders — or even a single country — can control them.To read more go to:
As in the days of Noah....
