Financial History, Fall 2011

2011·6.4 MB·English

by  Museum of American Finance

Financial
history
The magazine of the Museum of American Finance
“Checks & Balances” Exhibit Opens
Three Epochs of Federal Budget Management
Darwin Economics
Issue 101 | Fall 2011 | $4.00

Financial
In thIs Issue Features
history
The magazine of the
Museum of American Finance
in association with 12 darwin Economics
the Smithsonian Institution
Why charles Darwin may one day unseat adam smith
Issue 101 • Fall 2011
(issn 1520-4723) as the intellectual founder of economics.
By robert H. Frank
Kristin Aguilera
Editor
EditoriAl Advisory BoArd
Howard A. Baker, Esq.
Howard Baker associates
Brian Grinder
Eastern Washington University
Gregory dl Morris
Freelance Journalist
Arthur W. samansky
the samansky Group
Bob shabazian
american stock Exchange (ret.)
robert E. Wright
augustana college
Jason Zweig
The Wall Street Journal
17 Harry Markowitz, Father of
Editor EMEritAE
diana E. Herzog Modern Portfolio theory, still diversified
Art dirEction
Alan Barnett design the Great recession of 2008 puts Modern Portfolio theory
to the supreme test.
MusEuM stAFF
David J. cowen, President/cEo By Alan lavine
Kristin aguilera, Deputy Director
Jeanne Driscoll, Director of Development
20 checks and Balances
linda rapacki, Managing Director
of Visitor services and operations
the history of the Us government’s management of its budget
Becky laughner, Director of Exhibits and archives
can be divided into three great epochs: the age of surpluses, the age
Maura Ferguson, Director of Exhibits
and Educational Programs of transition and the age of deficits.
alexis Goodman, General counsel
By robert E. Wright
arturo Gomez, Business Manager
copyright 2011 by the
26 Wall Street in Widescreen
Museum of american Finance, publisher,
48 Wall street, new york, ny 10005. telephone:
cinema helps define the Financial crisis of 2008 for the american public.
212-908-4110; fax: [phone]. all rights reserved.
Financial History is the official membership By Hal thompson
magazine of the Museum of american Finance.
annual individual membership is $55. Payment must
be made in dollars, by credit card or check payable 29 Colonial Antecedents
to the Museum of american Finance.
analyzing the financial landscape of north america in 1765 and 1795.
there is no implied endorsement
of any advertiser in this magazine.
By Edwin J. Perkins
33 Joseph and Jesse seligman: Pioneers of
19th century investment Banking
German Jewish immigrants overcome adversity to become leading
investment bankers and champions against anti-semitism.
www.MoAF.org By James s. Kaplan
2 Financial History | Fall 2011 | www.MoaF.org
In thIs Issue Departments
trustEEs
charlotte B. Beyer
institute For Private investors
4 the ticker
stephen A. cooper
Museum opens “checks & Balances: Presidents and american Finance” nemco Brokerage, inc.
and launches Museum Finance academy for high school students.
david J. cowen
President/cEo
4 Message to Members Museum of american Finance
By david cowen, President and cEo Andrea de cholnoky
Korn/Ferry international
5 Founder’s letter
david n. deutsch, vice chairman
David n. Deutsch & company llc
By John E. Herzog, Founder and chairman Emeritus
charles M. Elson
8 From the collection University of Delaware
Museum adds north africa note to collection. niall Ferguson
Harvard University
By lauren Marchisotto oxford University
9 Educators’ Perspective Michael s. Geltzeiler
nysE Euronext
Unlocking Value at Biltmore Estate
John E. Herzog, chairman Emeritus
By Brian Grinder and dan cooper Herzog & co., inc.
Myron Kandel
37 Book reviews
cnn
Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led
Kirkpatrick Macdonald
to Economic Armageddon, by Gretchen Morgenson and Joshua rosner. MacDonald & cie
reviewed by Gregory dl Morris
robert Muccilo
Peddling Protectionism: Smoot-Hawley and the Great Depression, consolidated Edison
by Douglas a. irwin.
Wilbur l. ross, Jr.
reviewed by Michael A. Martorelli Wl ross & co., llc
richard M. schaeffer
39 Events calendar
shaf consulting llc
timothy r. schantz
39 trivia Quiz
Mountbatten institute in na
Mark shenkman
shenkman capital Management, inc.
On the COver david shuler
cME Group
President George Washington, Ewout steenbergen
inG
as depicted on the dollar bill.
see related article on Presidents richard sylla, Ph.d., chairman
stern school of Business
and american finance, page 20.
new york University
charles v. Wait
the adirondack trust company
Kenneth G. Winans, treasurer
Winans international
credit: © lawrence Manning/corbis
www.MoaF.org | Fall 2011 | Financial History 3
tHE ticKEr MUsEUM nEWs
museum launches new exhibits
and educational program
Financial literacy is alive and well at regular class offerings, where we have now On Election Day, we opened a new
the Museum. Thanks to a generous anony- taught over 150 classes since launching the exhibition, “Checks & Balances: Presi-
mous gift, this fall we launched a pilot after Center for Financial Education in 2010. dents and American Finance,” which fea-
school and Saturday program to teach 11th Our calendar is full this fall with a tures objects and documents pertaining
and 12th graders about financial matters. robust Henry Kaufman Lecture Series, to the nation’s economy and the per-
featuring a lineup of first-rate sonal finances of five American Presi-
speakers. Over the course dents. Among the highlights is a specimen
Message to Members of the next few months our $100,000 gold note bearing the portrait
headliners include noted of Woodrow Wilson. In the late fall we
David J. cowen | President and cEo Goldman Sachs economist will be launching a full online exhibit to
Abby Joseph Cohen, Under supplement the gallery show.
Secretary of the Smithso- Later this fall we will also install a por-
94 students signed up for the 10-week nian Richard Kurin, journalist and author tion of our “America’s First IPO” exhibit
course, which covers not just the basics Gretchen Morgenson, former Lieutenant in Wells Fargo’s Philadelphia museum.
of personal finance but also includes live Governor of New York Richard Ravitch This exhibit, which showcases unique
immersive experiences like visits to the and legendary Federal Reserve Chairman items from financial history like the ear-
NYSE floor and the Federal Reserve Bank Paul Volcker. liest known share certificate, will be our
gold vault. We strive to make finance Our Lunch and Learn Series has also first true traveling show. And through the
fun, engaging and not intimidating. Early been active with a half dozen events this month of November, we will have on view
indications are that the Museum Finance fall on topics ranging from the Liberty in our gallery a display in honor of Charles
Academy is a great success, and we are bonds used to finance World War I to Dow’s 160th birthday, which has been a
seeking funding for the spring and beyond ethical investing. These events are posted joint effort with the Market Technicians
as we strive to make this a permanent on our website, are free to members and Association.
program. This initiative supplements our are a great way to spend a lunch hour. Exhibit preparations for 2012 are well
underway, and we are planning to replace
“Alexander Hamilton: Lineage and Leg-
acy” in our featured gallery with an exhibit
on the gold standard. We expect to bor-
row gold objects and works of art from a
number of sources to illustrate the story
of the gold standard, and we are currently
seeking funding for this exhibit.
As always, these programming and
exhibition efforts take the support of our
membership. We appreciate your dona-
tions, and we hope you can see that the
money is spent wisely on these incred-
ible programs. As the giving season is
approaching, please remember the
this specimen of the $100,000 gold note featuring Woodrow Wilson is on view in “checks & Balances.” Museum.
the national association of Iran, Iraq, Kuwait, saudi arabia and
Sept 1 Sept 10
securities Dealers (nasD) is Venezuela begin meeting in Baghdad
1936 incorporated to oversee the 1960 to form the Organization of the
conduct of brokerage firms. petroleum exporting Countries (OpeC).
4 Financial History | Fall 2011 | www.MoaF.org
MUsEUM nEWs tHE ticKEr
In remembrance of museum Volunteer ruth Baker
I first met Ruth Baker in the winter Rediscovered” exhibit to some of the high
of 1997. A retired teacher and principal, school content on entrepreneurship.
she was interested in volunteering at the My reputation as the local cookie mon-
Museum. We didn’t have any volunteers ster was well served with Ruth’s terrific
at the time, though we certainly needed baking, and few weeks went by without
something delicious. The
thank-you conversations
Founder’s letter
became longer, and we each
discovered a very lovely,
John Herzog | Founder and
| chairman Emeritus dignified and highly analyti-
cal friend, eager to help the
Museum achieve the growth
some, so we happily accepted her offer. and community service we all imagined.
Thus, Ruth began a stellar career as the Ruth would often take the time to pass on a Museum volunteer ruth Baker.
dean of our volunteer corps, and along the compliment or criticism, and the Museum ‘lifeline,’ a treasured opportunity to con-
way became a grandma to us all. benefited greatly from her wise counsel. nect with young people, with interesting
For 14 years, Ruth greeted visitors to the Ruth passed away in September at the age visitors, with ideas and with colleagues who
Museum every Wednesday at the front desk. of 95. Her granddaughter, Bonnie, wrote to became her true friends. She was grateful
She welcomed everyone with a smile, and me after our shiva call, when I asked for a for all the years she was able to serve the
with an interesting bit of information. She photo of Ruth to put up in the Museum. “I Museum and its visitors; and the Museum,
also created several of the Museum’s edu- know that my grandmother would be so in turn, gave a great deal back to her.”
cational materials, from the “Wizard of Oil” flattered and honored by your proposal. Bonnie got it just right. Thank you, Ruth,
middle school guide for the “Rockefeller As she often told me, the Museum was her for all that you gave us.
COrpOrate anD FOunDatIOn suppOrt
the museum is most grateful • Donaldson Fund • Morgan stanley • standard & Poor’s
for the support of the follow- • Fagenson & co., inc. • the Mountbatten institute • the starr Foundation
ing corporations and founda-
• Friedman Family Foundation • nemco Brokerage, inc. • the stone Foundation
tions who have generously
• Geduld cougar Foundation • nysE Euronext • twenty-First securities
provided funding for the
• Goldman sachs & co. • nysE Euronext Foundation • UBs
museum in the past year.
• the Guardian life insurance • open society institute • Wells Fargo & company
• american Express company of america • Peter G. Peterson Foundation • Winans international
• anonymous • Henry & Elaine Kaufman • Peter Jay sharp Foundation • Wreyford Family Foundation
Foundation
• the asher Family Foundation • rrE Ventures
• Herzog & co., inc.
• the Briar Foundation • saber Partners, llc
• iGs Energy For information about
• carter, ledyard • saybrook capital
supporting the Museum’s
& Milburn, llP • inG americas • scully Peretsman Foundation
activities and programs,
• cFa institute • institute for Private investors • securities industry and please contact
• cME Group • lower Manhattan Financial Markets assn. Jeanne Baker Driscoll,
Development corporation
• consolidated Edison co. • shenkman capital Director of Develop ment,
of new york • MacDonald & cie Management at 212 908-4694 or
• the curtain Foundation • the McGraw-Hill companies • Muriel siebert & co., inc. [email protected].
alexander hamilton the stock market crashes; Wal-mart goes public
Sept 11 Sept 20 OCt 1
is sworn in as the Western union falls from 75 to over-the-counter, issuing
1789 nation’s first secretary 1873 54½, and the nYse Board of 1970 300,000 shares at an
of the treasury. Governors closes the exchange. initial price of $16.50.
www.MoaF.org | Fall 2011 | Financial History 5
tHE ticKEr MUsEUM nEWs
“Checks & Balances” exhibit Opens on election Day
On November 8, the Museum opened national and personal fiscal policies of five designed by Becky Laughner, Director of
“Checks & Balances: Presidents and of the most well-known Presidents: George Exhibits and Archives, and Maura Fergu-
American Finance,” an exhibit on the Washington, Andrew Jackson, Abraham son, Director of Exhibits and Educational
financial challenges faced by American Lincoln, Franklin Delano Roosevelt and Programs.
Presidents both in the Oval Office and in Woodrow Wilson. The exhibit introduces “The exhibition seeks to create a dia-
their personal lives. important Treasury secretaries and tracks logue between the nation’s financial past
From its inception as an experiment in significant financial markers, such as GDP, and the present, presenting the legacy and
a new kind of democratic government, presidential salary and the consumer long-term impact of the Presidents’ finan-
the US has faced a panoply of economic price index. It then delves into the per- cial policies on today,” said Wright.
and financial challenges. More often than sonal finances of the Presidents, including “Checks & Balances: Presidents and
not, it was the President to whom the their economic backgrounds and their own American Finance” is sponsored by Con
nation turned to tackle these problems banking practices. Edison and will be on display through
and secure financial prosperity. Financial historian Robert E. Wright, November 2012. An enhanced “Checks &
Designed as an ongoing series of rotat- Nef Family Chair of Political Economy Balances” online exhibition is scheduled
ing exhibitions, the inaugural installment at Augustana College SD, guest curated to launch in the late fall.
of “Checks & Balances” focuses on the the exhibit, which was developed and
(Left) second Bank of the
Us shares owned by Baring
Brothers, april 1830. andrew
Jackson’s veto of the Bank’s
recharter was the most
significant economic action
of his administration.
(Right) one of FDr’s economic
challenges was to raise money
for the war effort, as illustrated
by this patriotic playbill.
18 banks in new York
OCt 6 paul Volcker becomes OCt 11 the Boston stock OCt 13
City suspend payments
chairman of the exchange opens
1979 1834 1857 on loans, setting off the
Federal reserve. for trading.
panic of 1857.
6 Financial History | Fall 2011 | www.MoaF.org
MUsEUM nEWs tHE ticKEr
high school students Develop healthy
Financial habits In museum Finance academy
By Maura Ferguson, financial goals and learn to avoid scams. program for the fall 2011 semester and
Director of Exhibits and In the program, students learn the life is expected to continue with the second
Educational Programs cycle of spending and saving which is semester beginning in early 2012.The pro-
critical as students leave high school and gram is offered at no charge to students on
This fall, the Museum launched the move on to college or a career. Progress is a first come, first served basis, and enroll-
Museum Finance Academy, a 10-week tracked, and all students who successfully ment is limited to 20 students per class.
financial literacy course for 11th and 12th complete the program receive a certificate. For more information on the Museum
graders with the goal of teaching stu- The top student of the semester will be Finance Academy, please visit www.moaf.
dents to aspire to financial independence, awarded a $5,000 college scholarship. org/education or call 212-908-4110.
develop an appreciation for savings, make The Academy was launched as a pilot
Black tuesday. the the first stock ticker goes the Dow Jones Industrial
OCt 29 nOv 14 nOv 14
DJIa plunges 30.57 “online,” making continuous average closes above 1000
1929 points to 230.07, an 1867 nationwide transmission of stock 1972 for the first time. It finishes
11.7% drop for the day. prices possible for the first time. the day at 1003.16.
www.MoaF.org | Fall 2011 | Financial History 7
tHE ticKEr FroM tHE collEction
museum adds north africa note to Collection
nce
na
n Fi
merica
a
of
m
u
use
M
By Lauren Marchisotto unstable areas. The main purpose of the certificates from standard US currency.
notes was that they could be easily iden- The feature that stands out the most is that
The Museum has a new addition to tified and declared invalid in the event each type of note was distinguished by the
its “Money: A History” exhibit: a North that the troops and their surrounding unusual color of the seals. Standard silver
Africa, small-size silver certificate. areas were captured. If that were to hap- certificates had blue seals, while the North
Although silver certificates have been in pen, then the notes could no longer be Africa notes had yellow seals and Hawaii
use since the 19th century, these small- used to further the causes of US enemies notes had brown seals. In the case of the
size certificates were not introduced until by either using the currency directly or Hawaii notes, an additional marking of
1928. Prior to their introduction, larger making counterfeit copies once they were the word “Hawaii” was added in small
format certificates were issued. The North devalued. block letters on the front and in larger
Africa notes were printed in $1, $5 and North Africa notes were not the only outlined letters on the back. In an effort
$10 denominations. Despite the deceiving kind of small-size currency issued during to streamline the nation’s currency in the
name, this emergency note, donated to this turbulent period. Due to fear of the 1960s, they were discontinued.
the Museum by David F. Noyes, was in capture and occupation of the Hawai-
fact US currency. The name of the North ian Islands by the Japanese, the US gov-
Africa note refers to the location of the US ernment also distributed small-size silver The Museum would like to thank David F.
troops where they were first distributed. Hawaii notes in denominations of $1, $5 Noyes for his recent donation, which also
These types of silver certificates were and $10. Hawaii was also issued $20 Fed- included Liberty Loan receipts signed by
issued during World War II (from eral Reserve notes. his great grandfather, George Washington
1942 – 1944) so that United States troops Although at first glance the emergency Noyes. Mr. G. Noyes was Treasurer of the
had access to US currency while fighting notes looked similar to US currency, it was City Five Cents Savings Bank in Haverhill,
abroad in Africa and Europe, which were simple to discern the differences of these MA.
Ivan Boesky, one of Wall street’s top traders, In the same room where the Declaration
nOv 14 nOv 19
settles with the government on charges of securi- of Independence was adopted 16 years
1986 ties fraud, implicating michael milken of Drexel 1792 earlier, the Insurance Company of north
Burnham lambert in an insider-trading scheme. america holds its IpO at $10 per share.
8 Financial History | Fall 2011 | www.MoaF.org