Table Of Content

The magazine of the Museum of American Financial History Financial TORY H I & Politics Profits: The Election and Panic of i860 Fortune Rises from the Great Depression The Speculating and Spending of Mr. Magic Millions Issue 71 ~ Fall 2000 ~ $7.00 Q 7 . 'b Extremely Rare <? II \1 I T r n C T A T r C /I IT n n n m T Crisp UncirculatedFederal Reserve Notes Legal Tender r»'OTOX.n.C . 5U 022^ g0 aasaSBM' ^ss®s®k OB^"' stRltS asii * *-vv. The perfect gift and a unique asset . An extraordinary opportunity to own a piece ofhistory. Each one-of-a-kind note is individually mounted in an exclusive display case, and includes a certificate ofauthenticity and historical guide. In any condition, these high denomination notes are extremely rare. In crisp uncirculated grade they become major rarities. Limited quantity available. Crisp Uncirculated $500 note $3,249 Crisp Uncirculated $1,000 note $4,989 $5,000 and $10,000 notes also available. Order today. Contact Al Michael, POB 63, Beverly Hills, CA 90213-0063. For more information call (310) 278-0712 /fax (310) 278-2065 or call toll-free 1-877-US-NOTES. wAvw.unitcdstatescurrency.com Thirtydayno-riskguarantee [email protected] J The Name To Know In Blocks The Leading Nasdaq Institutional Block Trader Herzog Heine Geduld We areconsistently ranked as oneofthe leading institutional block tradingfirms. The reasonswhy areclear: unparalleled expertise and exceptional customer service. We've earned our stripes. Quietly. NASDAQ (800) 221-3600 INSTITUTIONAL (800) 843-4845 INTERNATIONAL (800) 225-3271 BRADZIPPER,JAMES CORRAO JERRY LOGAN TONY FASONE, RON HAMMER HERZOG Established 1926. MemberoftheNewYork Wf!sGyBr',U HEINE StockExchange/SIPC. jgWy GEDULD www.herzog.com Merrill Lynch Merrill Lynch Company <7 III/ WWW.FINANCIALHISTORY.ORG Financial History ~ Fall 2000 Get The Best Nights Sleep Ever! In the battle against hazy investing, it’s Saperston Asset Management A Full Service Brokerage. 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The Presidential election of i860 ends a bull market, Diana E. Herzog begins a depression, and arguably starts a war R.M. Smythe & Co., Inc. By Thomas Kaiinke Douglas Parrillo Parrillo Communications, Inc. 20 Finance Finds a Spokesperson ArthurW. Samansky The Depression-era roots ofFortune magazine & Stern Co. By Walter John Chilman Bob Shabazian American Stock Exchange (retired) 24 The Evolution of Mr. Magic Millions Richard Sylla A portrait ofHenry Flagler, the Standard Oil partner Henry Kaufman Professor of the History ofFinancial Institutions who divided his life between making as much money and Markets, New York University as he liked and spending as much money as he wished Jason Zweig By K.C. Tessendorf Senior Writer, Money Magazine 27 The Panama Canal: Part II ArtDirection Alan Barnett, Inc. The development and financing of the canal that connected the world Museum Staff By Sanford Mock J. Brian Thompson, Executive Director Meg Ventrudo, Assistant Director for & Exhibits & Education 31 Thorstein Veblen the Tides of Fashion Kristin Richard, Communications Director Biography ofone ofthe most respected economists, satirists and social critics ofthe early zoth century By Vanessa Drucker Copyright 2000bytheMuseum ofAmerican Financial History, publisher, 26 Broadway, New York, NY 10004-1763. Telephone: 34 The Isle of Man 212-908-4519; fax: 212-908-4601; toll-free A business history ofthe globe’s most prudential offshore center 877-98 finance. All rights reserved. By Ian Moncrief-Scott Financial History is the official membership magazine of the Museum of American Financial History. Annual individual mem- On Cover bership is $40. Payment must be made in the dollars, by credit card, or check payable to the Museum ofAmerican Financial History. San Diego staged an exposition in 1915 to celebrate tLehtetmertsotFoitnhaencEidailtHoirsatroeryweatlctohemea.boPvleeaasdedsreensds the completion ofthe Panama Canal. It was the first ore-mail [email protected]. American port ofcall north ofthe canal on the Pacific www.financialhistory.org coast, and the exposition called attention to the city and bolstered an economy still shaky from the Wall Street Panic of19oy. Image courtesy ofTheSan Diego HistoricalSociety- Photograph colle www.sandiegohistory.org WWW.FINANCIALHISTORY.ORG 3 Financial History ~ Fall 2000 No doubt about it. We’ve got big plans for tbe next several months and the next couple of We years! offer free catalogs prior to any of our sales to all who request them. Do not hes- itate to fax, call, email or write us with your requests. December 2000 Miscellaneous 1 ou name it, its here! Autos, planes, toys, gaming, railroad, oil, medical, power companies and more. More than 200 categories. 1 housands of pieces. Live and absentee auction with no reserv Winter 2000 2001: / Fixed Price Rare Ami mm ware, emera, mimni Mining! Certificate catalog’. More than 1000 different pieces from all over the United States. The certificates will he presented without our usual historical research. /%.?: This is your chance to get great material at a great price. This catalog will contain many collector/dealer lots of multiple certificates. Future Sales for 2001 and 2002: Colorado Nliningf. More than 1000 different lots of great Colorado material. California Mining. Offering of more than 1000 lots of Callforma stocks, documents & photos. Arizona Mining!. 1 he best Arizona stock certificate collection ever assembled. Tke Filer Mining! History libray. Oh hoy! Tke Filer Mineralogy Library. Double ob boy! The Filer Reference Libaray. We have no wonels for tinis one! H Fred olabird Americana 3555 Airway Dr., #308, Reno, Nevada 89511 Tel: 775-852-8822 Fax: 775-852-8866 Email: [email protected] Website: www.holabird.org D Financial History ~ Fall zooo WWW.F1nancialhistory.org History Financial Trustees Edward I. Altman Max L. Heine ProfessorofFinance NYU Stern School ofBusiness, NewYork, NY Thomas Asher J. The Robinson-Humphrey Co., Inc. (retired) GA Atlanta, Departments Molly G. Bayley Optimark Jersey City, NJ 6 Founder’s Message William P. Behrens By John E. Herzog Chairman & CEO,Investec Ernst & Company NewYork, NY Members’ News 6 Randy Cepuch Members get behind-tbe scenes access to the Vice President Communications, Capital financial media with the Museum s Free Markets, Research & Management, Washington, DC Free Press” exhibit events. Dan Cooper President, Active LearningTechnologies, Inc. 10 Educators’ Perspective NY Westpark, Sometimes Stakeholders Win Stephen A. Cooper By Dan Cooper &C Brian Grinder President, Nemco Brokerage, Inc. New York, NY 36 Book Review David Deutsch Famous First Bubbles, Peter Garber, 2000 David N. Deutsch 8c Company, Inc. NewYork, NY By Ellen Jovin James F. Getz BC From the Collection President, Federated Securities Corp. Pittsburgh, PA By Meg Ventrudo John E. Herzog Chairman, HerzogHeine Geduld, Inc. New York, NY Every Issue Thomas D. Levis Managing Director, Investors Company New York, NY 33 Financial History Trivia Quiz Gordon S. Macklin Chairman, White River Corporation MD 37 Events Calendar Bethesda, William M. Pinzlcr, Esq. 38 Marketplace New York,NY MortonJ. Wagner 40 Museum Information Salomon Smith Barney Inc. (retired) Ft. Lauderdale, FL st: 4W* John L. Watson 111 PresidentEmeritus,SecurityTradersAssociation PonteVedra, FL John Westergaard Westergaard Publishing, New York, NY Jason Zweig SeniorWriter, MoneyMagazine,New York,NY Martin E. Zweig Chairman and President,The Zweig Funds New York, NY WWW.FINANCIALHISTORY.ORG 5 Financial History ~ Fall 2000 gShb&rs* Founder’s Message THE FULL FAITH AND CREDIT OF THE UNITED STATES John E. Herzog Chair Florida’s hurricane season has just about passed, meteorologically and politically. Forecasts for constitutional crisis were disproved. In the wake of a stormy election which shook our nation’s faith in the durability of the Museum founderJohn E. Herzog (right) with Trustee Thomas D. Levisatthe October2000 Board Retreat Founders’ political architecture, where better than Wall Street to turn for a and financial realms. We examine retreat to better position the Board lesson in the durability of their vision, some of these historic instances, from to lead the Museum in the new in the face of ups and downs. the market’s reaction to Hamilton’s millennium. The Board addressed Wall Street was the focal point of debt plan to its response to President exciting new opportunities, and also America’s political and financial life in Franklin Roosevelt’s depression-era adopted cutting-edge practices which 1789 when George Washington was policies and to the news of President are improving the accountability and sworn in as president, across the street John F. Kennedy’s death, in “Free effectiveness of non-profit organiza- from where the New York Stock Markets, Free Press,” the exhibit tions. With their leadership and your Exchange today stands. Here where currently on display in the gallery. support, we look forward to great British occupation troops had been In the days prior to the recent Novem- strides in the new year. stationed during the Revolution, the ber election, Assistant Director Meg CNN inauguration and the installation of Ventrudo was featured on a government based upon the newly discussing how the financial markets ratified Constitution signaled New respond to presidential elections. And The Museum would World confidence in democratic you will recall that in Issue 69, we like to thank these government based on the rule of law. featured in these pages Sandy Mock’s members for their As imaginative and enduring as the foreboding essay on the contested generous recent gifts: Founders’ political legacy was their 1876 election toss-up between design for a free market economy, presidential candidates Rutherford B. Alexander Hamilton largely the work of treasury secretary Hayes and Samuel Tilden. With such Society $500 Alexander Hamilton, who rests in the an instinct for articles, our editor Mr. Timothy R. Schantz Trinity Church cemetery where Wall should be picking stocks! Financial Mr. Rudige—r K. Weng Street meets Broadway. A year after history offers Washington this lesson Donors $150 Washington’s oath of office, Hamilton from Wall Street: that the underpin- ' Ms. Diana Henriques formally proposed the creation of the nings of our democratic society have national debt establishing the credit- successfully weathered civil war and Mr. Brian F. Trumbore worthiness of the new nation, and in injustice, political assassinations and 1792 the Buttonwood Agreement resignations, bank collapses and The Museum thanks all contributors, launched the cartel which would market crashes, and election feuds. old and new, for their continued become the New York Stock Exchange. As we progress, your Museum support. To learn how you or your organization can participate in the Since then, America has weathered becomes more and more a permanent Museum’s program, educational, two centuries ofgrowth and challenge national institution. In November, the and service mission, please call - and of interplay between the political Trustees convened for a day-long Brian Thompson at 212-908-4519. Financial History - Fall 2000 WWW.FINANCIALHISTORY.ORG UembzrA TJfys i Museum Host Smithsonian to on African Currency Exhibit By Meg Ventrudo, Assistant Director earrings and collars crafted of copper, for Exhibits and Education gold and silver), cloth mats, cowrie shells and aggrey beads. For example, Americans reach for their debit in 18th-century Africa, a cow cost cards to purchase groceries, and to buy z,500 cowrie shells, and Z5 shells and sell stocks online, yet not all cur- would buy a chicken. rency exists in cyberspace. In January The exhibit will also feature items zooi, the Museum will host a traveling from the Museum’s permanent collec- exhibit from the Smithsonian’s National tion, including African paper money Museum of African Art entitled “The and securities. Ea Artistry of African Currency.” The exhibit, which will be on display in the Museum gallery through March, includes traditional and historical objects that are used to facilitate trade and measure wealth throughout Africa. Objects used as currency include jewelry (bracelets, Exhibit Events the history of Barron’s and answered For more information on events, questions about the magazine, prior to programs and tours, visit the www. Bring Members giving a tour of the newsroom and a Museum’s website at ED feel for how the publication is put financialhistory.org. Behind-the- together each week. The event also euncs el)cjN'cUtJJork gave Barron’s readers a once-in-a-life- Scenes of the time opportunity to have their ques- EPSARESET GoOrnePaenndsiBounsshaTnrdaSdpeeJnadbt tions answered directly by the editor fMfIlDGDLMEBEIAESET Financial Press of one of the country’s most respected cuoikumu financial magazines. AGOODWEEKFORSTOCKS,NOOWOOIfN*VAENOSCTAOTRrSttE'YlE*TtrIEBA&LLtOxTf1P0O*0XAMPIAOAfDc•MMW> Museum members enjoyed behind- Other public events associated with Wreaalslythniesceelsescatriyon ‘aWnhdoBuwislhlGbolarmee! JouncDrg.eunmlSecrhCrhernyispirer the-scenes access to the financial the exhibit included a newsroom tour media with the Museum’s Fall zooo of The New York Times, two interac- events calendar. The events associated tive tours of the new Nasdaq Market- with the “Free Markets, Free Press” Site, and an academic symposium at Fragile exhibit extended the Museum’s out- Baruch College entitled “Media and Still rexehaicbhitanbdy epnrohvaindciendgtahneiinmspidaectgloifmptshee aButseidnesbs:y FrCiNeNnd’ssorMyForeosn?,” Kmaonddeerl-. AfteSro*m»ecdriaonugse»rlsukr\emAa*inu,mb»urroddonu'tlocoxkpleitkleabnatoRtahrenr*e«m>iotu.tDpeataniell*oifneoxJpcerts at the profession of financial journal- On December 14, New York Times ism and exploring current issues in the reporter Diana Ffenriques will lecture financial media. on her new book, The White Sharks of On a tour of Barron’s, Editor and Wall Street, at the Grolier Club (see Publisher Edwin Finn, Jr. even took events calendar, page 37). The pro- the time to speak with members about gram is free and open to the public. WWW.FINANCIALHlSTORY.ORG Financial FIistory ~ Fall zooo hws 1 Kids Print Financial Souvenirs at Wall Street Children’s Festival The Museum took kids a step back in time with demon- The 200 children who participated in the Museum’s strations ofprinti—ng, embossing and engraving— Wall Street’s program also saw Thomas Edison’s Universal Stock Ticker in unique art form at Kidaround Downtown, a Wall Street action and made personalized ticker tape from the working District children’s festival on Saturday, September 23. 1870 replica ticker. More than 18 Downtown cultural Honarary Curator of Engravings Mark Tomasko demon- institutions, financial firms and businesses created special strated the process of printing stock certificates on a spider programs for the event, including the New York Stock press, as children turned the press’s arms to make their own Exchange, the New York Mercantile Exchange, the American souvenir financial engravings. Stock Exchange, and the Federal Reserve Bank. 03 Children learned theartof financialembossingand printing in the Museum at Kidaround Downtown. Trustee Visits World’s Oldest Bank This July, Museum Trustee Jason Zweig (center) visited the headquarters of the Monte dei Paschi di Siena in Siena, Italy. Founded in 1472, the Monte dei Paschi is the world’s oldest continually operat- ing commercial bank. Two of the bank’s execu- tives, Carlo Pensa (left) and Antonio Lachi (right), gave Zweig a tour of the Monte dei Paschi’s archives, which include the bank’s original charter, account ledgers dating to the early 16th century, and the minutes of a disciplinary hearing in 1610 that sentenced a teller to death for cheating. The Museum hopes to cooperate with the Monte dei Paschi and other Italian institutions to organize an exhibition on the origins of modern banking. 03 Financial History ~ Fall 2000 WWW.FINANCIALIIISTORY.ORG