Financial History, Summer 2013

2013·6.3 MB·English

by  Museum of American Finance

Financial
history
The magazine of the Museum of American Finance
FDR, La Guardia and New York During the Great Depression
The Rise and Fall of Richard Whitney
The Colonial Public Lottery
ISSUE 107 | SUMMER 2013 | $4.00

Financial
IN THIS ISSUE FEATURES
history
The magazine of the
Museum of American Finance
in association with 12 The Colonial Public Lottery
the Smithsonian Institution
An 18th century lottery in New York proves the colonists
Issue 107 • Summer 2013
(ISSN 1520-4723) could raise money without direct British oversight.
By Julia Bricklin
Kristin Aguilera
Editor
EDITORIAL ADVISORY BOARD
Howard A. Baker, Esq. 16 Impeccable Connections
Howard Baker Associates
The rise and fall of Richard Whitney.
Brian Grinder
Eastern Washington University By Malcolm MacKay
Gregory DL Morris
Freelance Journalist
Arthur W. Samansky
The Samansky Group 20 City of Ambition
Bob Shabazian
American Stock Exchange (ret.) Franklin D. Roosevelt, Fiorello La Guardia RBIS
O
Robert E. Wright and New York during the Great Depression. n/C
AuJgaussotann Za wCoelliegg e By Mason B. Williams Bettman
The Wall Street Journal ©
EDITOR EMERITAE
Diana E. Herzog 25 Super Power
ART DIRECTION William Woodard and the last great steam locomotives.
Alan Barnett Design
By Gregory DL Morris
MUSEUM STAFF
David J. Cowen, President/CEO
Kristin Aguilera, Deputy Director
Jeanne Driscoll, Director of Development 28 The Great Nome Gold Rush
Linda Rapacki, Managing Director
and Receivership Fraud
of Visitor Services and Operations
Becky Laughner, Director of Exhibits and Archives
Nome, Alaska, becomes a “poor man’s paradise.”
Maura Ferguson, Director of Exhibits
and Educational Programs By Ron Hunka
Arturo Gomez, Business Manager
Copyright 2013 by the
Museum of American Finance, publisher, 32 Cash Box
48 Wall Street, New York, NY 10005. Telephone:
212-908-4110; fax: [phone]. All rights reserved. A brief history of cash dispensers and the
Financial History is the official membership accompanying revolution in retail banking.
magazine of the Museum of American Finance.
Annual individual membership is $55. Payment must By Bernardo Bátiz-Lazo
be made in dollars, by credit card or check payable
to the Museum of American Finance.
There is no implied endorsement
of any advertiser in this magazine.
hives
Arc
p
u
o
Gr
g
www.MoAF.org nkin
Ba
ds
oy
Ll
2 FINANCIAL HISTORY | Summer 2013 | www.MoAF.org
IN THIS ISSUE DEPARTMENTS
TRUSTEES
David J. Cowen
President/CEO
Museum of American Finance
4 The Ticker
Sanford F. Crystal
The Museum hosts the first meeting of the International Federation of Frank Crystal & Company
Finance Museums (IFFM) and announces two free admission programs.
Andrea de Cholnoky
Korn/Ferry International
Charles M. Elson
4 Message to Members University of Delaware
By David Cowen, President and CEO Niall Ferguson
Harvard University
Oxford University
Michael S. Geltzeiler
8 From the Collection
NYSE Euronext
Notgeld: German Emergency Currency Alfred F. Hurley, Jr.
Emigrant Bancorp
By Carol Kaimowitz
Myron Kandel
CNN
10 Educators’ Perspective Glenn Kaufman
Kaufman Family LLC
Conrad Kohrs, the Cattle King of Montana
Bradford Kopp
By Dan Cooper and Brian Grinder Bank of N.T. Butterfield & Son (former)
A. Michael Lipper
Lipper Advisory Services, Inc.
38 Book Review
Kirkpatrick MacDonald
MacDonald & Cie
The Battle of Bretton Woods: John Meynard Keynes, Harry Dexter White,
and the Making of the New World Order, by Benn Steil. Consuelo Mack
Consuelo Mack WealthTrack
Reviewed by James P. Prout
Robert Muccilo, Treasurer
Consolidated Edison
Richard B. Payne, Jr.
39 Trivia Quiz
US Bancorp
Edward J. Rappa
R.W. Pressprich
Wilbur L. Ross, Jr.
WL Ross & Co., LLC
Richard M. Schaeffer
Liquid Holdings Group
Mark Shenkman
Shenkman Capital Management, Inc.
ON THE COVER
David Shuler
CME Group
“Unemployed Men During Great
bis Ewout Steenbergen
Depression.” See related article, Cor ING U.S.
o/
page 20. ue Lantern Studi RichaSrtdeN rSenwy Sl clYahoo,r koP lUh on.fDi vB.eu, rsCsiinthyeassir man
Bl Charles V. Wait
G E/ The Adirondack Trust Company
N
HI
G
U
A
© L John E. Herzog, Chairman and Trustee Emeritus
Herzog & Co., Inc.
www.MoAF.org | Summer 2013 | FINANCIAL HISTORY 3
THE TICKER MUSEUM NEWS
Museum Sets Daily Attendance Record and Participates
in Financial Literacy Program with NFL Players
In the last issue of Financial History, I In June, we hosted the leadership of Bank. This will be the largest exhibit in the
mentioned it is our dream to make admis- museums from 12 countries for the inau- Museum’s history, and it will encompass
sion to the Museum free, as our atten- gural meeting of the International Federa- three galleries, as well as the theater. Our
dance numbers generally double when tion of Finance Museums (see article, page curatorial team, lead by Maura Ferguson
there is no charge. The past three months 5). The federation, the first of its kind for and Becky Laughner, have been working
have proven that statistic to be incorrect. finance museums, will focus on financial lit- on this exhibit with the New York Fed, as
We have learned that when we are consis- eracy and best practices among the member well as our chairman, Dr. Richard Sylla,
museums. The cutting edge and Rutgers professor and banking expert
research in financial literacy Dr. Eugene White. This interactive and
Message to Members is coming out of the Global innovative exhibit will be on view for one
Financial Literacy Excellence year, and it will illuminate one of the least
David J. Cowen | President and CEO Center in Washington, led by understood aspects of American finance.
Professor Annamaria Lusardi. Lastly, we have had a busy spring
At the inaugural meeting in and summer with third party rentals of
tently open for free the word gets out, and June, Anna and I were selected as co-chairs the Museum spaces. Our building has
our Saturday attendance numbers have of the organization, and we look forward been showcased on television shows and
quadrupled since we instituted the free our next meeting in China in 2014. motion pictures, and it has been the venue
Saturday program, sponsored by South- On July 12, we honored the patron for launch parties, weddings and cor-
port Lane, in May. On a recent Saturday saint of the Museum, Alexander Hamil- porate events. We encourage all of our
we set a single day attendance record, ton, on the anniversary of his death with readers to consider hosting an event at the
with more than 500 visitors. Building a graveside wreath ceremony, followed by Museum. Please contact Arturo Gomez
on the success of that program, another a talk inside Trinity Church by renowned with inquiries at [email protected].
firm, R.W. Pressprich, has underwritten historian and author Tom Fleming. For
free admission for students every weekday 25 years, our founder, John
this summer. We thank our newest board Herzog, has been leading this
member, Ed Rappa, CEO of Pressprich, tradition, and for the past two
for enabling students of all ages to come years we have partnered on
and see the value of finance to the building the event with Rand Scholet
of America. of the Alexander Hamilton
Another recent highlight of our finan- Awareness Society. The event
cial literacy efforts came when seven cur- included a message from the
rent and former NFL players toured the Prime Minister of Nevis,
Museum and spoke with middle school where Hamilton was born.
students from Bloomfield, NJ about the John and his wife, Diana,
value of education and the importance recently visited Nevis, and a
of developing personal finance skills. The video of John’s speech can
players, which included Pro-Bowlers and be found on the news page of Ruiz
Super Bowl winners, are enrolled in an the Museum’s website. o: Elsa
executive MBA program, called STAR On September 25, we will hot
P
EMBA, at the George Washington Uni- open our exhibit on the Cen- NFL players from the STAR EMBA program
versity School of Business. tennial of the Federal Reserve with the Title 1 students they taught at the Museum.
The US Securities & Exchange Congress establishes the first
JUL 1 JUL 14
Commission (SEC) officially pension system, paying up to $8 a
1934 begins its business of regulating 1862 month to injured or disabled Union
the nation’s financial markets. soldiers or their heirs.
4 FINANCIAL HISTORY | Summer 2013 | www.MoAF.org
MUSEUM NEWS THE TICKER
Finance Museums Throughout the World
Unite to Promote Financial Literacy Globally
On June 19, the leadership of finance, sav- without being financially literate,” said
ing and money museums from around the Lusardi. “Finance museums have the
world gathered at the Museum of Ameri- potential to elevate the importance of
can Finance for the first meeting of the financial literacy worldwide.”
International Federation of Finance Muse- The IFFM was conceived by the leader-
ums (IFFM). The goal of the IFFM is to ship of the Chinese Museum of Finance,
provide a framework for greater collabora- the Museum of American Finance, the
tion among finance museums, facilitating Museum of Saving in Italy and the Global
the sharing of exhibits, the exchange of Financial Literacy Excellence Center.
scholarship and scholarly research, and the Representatives of finance museums in
interchange of information and knowledge. Austria, Chile, The Czech Republic, Eng-
According to Annamaria Lusardi, Aca- land, France, Greece, Mexico, The Neth-
demic Director of the Global Financial erlands and Poland also participated in
Literacy Excellence Center at the George the meeting.
Washington School of Business, financial On June 19, Lusardi and David Cowen,
literacy is critical to fully participate in president of the Museum of American
today’s society. Finance, were elected co-chairs of the
“Just as it was not possible to live in IFFM, with a term of two years. The
an industrialized society without liter- meeting was sponsored by The European uiz
R
acy — the ability to read and write — so Investment Bank Institute and McGraw- o: Elsa
it is not possible to live in today’s world Hill Financial. ot
h
P
uilera
g
Photo: Kristin A Photo: Elsa Ruiz
Clockwise, from top: Annamaria Lusardi, Academic Director of the Global Financial Literacy Excellence Center, delivers the
keynote address on June 19; IFFM founders Andrea Beltratti, David Cowen, Annamaria Lusardi and Wei Wang; Attendees of
the inaugural IFFM meeting, which included the leadership of finance museums from a dozen countries.
JUL 28 Wells Fargo launches the world’s first AUG 4 Congress enacts Alexander Hamilton’s
stock-index fund with $6 million from plan to fund the public debt, giving
1971 1790
the pension fund of Samsonite Corp. birth to the American securities markets.
www.MoAF.org | Summer 2013 | FINANCIAL HISTORY 5
THE TICKER MUSEUM NEWS
Museum Launches Two Free Admission Programs
On May 10, fourth grade students from young people understand the many pos-
PS 66 in Brooklyn joined the leadership of itive accomplishments of the world of
hedge fund Southport Lane at the Museum finance. The Museum has an extensive col-
to announce the launch of a free Saturday lection of financial artifacts and interactive
admission program. Sponsored by South- exhibits that make it an ideal place for stu-
port Lane, the program includes free admis- dents to learn and expand their financial
sion for all visitors, as well as a free historical nett literacy,” said Edward J. Rappa, Chairman
Bar
stock certificate for all student visitors on n and CEO of R.W. Pressprich & Co. and a
Ala
Saturdays through 2013. The Museum has o: new board member of the Museum.
ot
experienced a four-fold increase in Saturday Ph According to Museum President David
visitorship since the program began, and in Alexander Burns of Southport Lane and Cowen, free admission to the Museum is
Museum President David Cowen pose with
July broke a single-day admission record of an important objective, as it eliminates the
students from PS 66 in Brooklyn at the launch
more than 500 visitors. barrier to entry for the people who need
of the free Saturday program in May.
“The financial history of the United the Museum the most.
States is a fascinating and vital story about “As the only institution of its kind
how money, bankers and entrepreneurs in the United States, the Museum plays
helped form our nation’s identity, infra- the free Saturday program, institutional an important role in educating visitors
structure and strength,” said Alexander broker dealer R.W. Pressprich funded a about the financial successes and declines
Burns, Chief Strategist of Southport Lane. similar program in July. Through this throughout our nation’s history,” said
“The Museum tells this story in an enter- program, admission to the Museum is free Cowen. “Southport Lane and R.W. Press-
taining and accessible way. We believe that for all student visitors with ID on week- prich truly understand the importance of
knowledge of this history will help individ- days through Labor Day. Like the Satur- the history of American finance, and we
uals gain insight into how financial markets day program, the student visitor program are thrilled that their generous donations
build the economy, as well as the concepts offers complimentary historical share cer- will help further our mission of promot-
of financial literacy in their own lives.” tificates for students of all ages. ing financial literacy among even more
Given the overwhelming success of “R.W. Pressprich is dedicated to helping visitors.”
CORPORATE, FOUNDATION AND INDIVIDUAL SUPPORT
The Museum is most grateful • Blackstone Foundation • David N. Deutsch & Co. • John Gilbert
for the support of the following • Bloomberg • DeWitt Stern • S. Parker Gilbert
major donors who have • Alan Bowser • Donaldson Fund • Mark K. Gormley
generously provided funding for • The Briar Foundation • Ina Drew • The Guardian Life Insurance
the Museum in the past year. • Robert Buckholz • Harold Ehrlich Company of America
• Carter, Ledyard & Milburn, LLP • Charles Elson • Bill & Anne Harrison
• The Adirondack Trust Company
• CFA Institute • Ernst & Young • The Hartford Financial
• James Aitken
• Charina Foundation • Fagenson & Co., Inc. Services Group, Inc.
• American Express
• Citi • Mr. and Mrs. Eric Fast • Edward D. Herlihy
• Anonymous
• Griffith Clarke • Niall Ferguson • Herzog & Co., Inc.
• Aronson Johnson Ortiz
• CME Group • Fiduciary Trust International • Landon Hilliard
• The Asher Family Foundation
• Consolidated Edison Co. • Financial Recovery Technologies • Alfred J. Hurley, Jr.
• Howard Baker
of New York • Alan H. & Judith R. Fishman • ING U.S., Inc.
• Bank of America/Merrill Lynch
• Continental Grain Company • Frances Alexander Foundation • Institute for Private Investors
• Barrett Asset Management
• David Coulter • David G. Frey • JPMorgan Chase & Co.
• Charlotte Beyer
• Crane Co. • Friedman Family Foundation • Allan and Margaret Keene
• BlackRock, Inc.
• Crystal & Company • Geduld Cougar Foundation • Myron Kandel
AUG 5 AUG 6
The Revenue Act of 1861 becomes law, Paul Volcker takes office as Chairman
1861 creating the first federal income tax. 1979 of the Federal Reserve Board.
6 FINANCIAL HISTORY | Summer 2013 | www.MoAF.org
MUSEUM NEWS THE TICKER
Volunteer Spotlight: Carol Kaimowitz
Museum volunteer Carol Kaimowitz and Puck satirical magazines. In 2013, she
has a wonderfully diverse background in took on a major archival project as she
both the arts and business. A trained clas- identified, translated and researched the
sical singer who studied at Oberlin College Museum’s collection of Notgeld emer-
and the Mozarteum in Salsburg, Austria, gency currency (see article, page 8). She
Carol performed in various opera com- has enjoyed the challenge of this project
panies before beginning a 17-year career and says it has been good exercise for her
in the international property insurance German language skills.
industry in New York, London, Vienna In addition to her volunteer work at the
and Zurich. Upon her retirement from Museum of American Finance, Carol has
the insurance industry, Carol sold antique also volunteered in the Visitor Services
silver for three years before returning to Departments of the Whitney Museum and
singing for audiences in New York, Los the New-York Historical Society, where
Angeles and throughout the United States, she was also a docent. Prior to that, she
as well as in Germany. volunteered for other non-profits, includ-
Carol’s diverse background has made ing God’s Love We Deliver and Out of
her a welcome addition to the Museum’s the Closet, a thrift shop supporting AIDS
volunteer corps. She began working in charities.
the Visitor Services Department in 2009, Carol’s other interests include attend-
where she greeted guests at the front desk ing the opera and other concerts (she
and provided visitor information. She says holds season tickets to the Met), visiting
she enjoyed this work because of the vari- other museums (The Morgan is among
ety of people she got to meet from around her favorites), reading (particularly non-
the world. in the Museum’s archives, where she trans- fiction and biographies) and collecting
In 2012, Carol decided to put her lan- lated a variety of German-language col- antiques. She resides in Manhattan and
guage skills to work and began volunteering lection materials, including stocks, bonds has an apartment in Connecticut.
CORPORATE, FOUNDATION AND INDIVIDUAL SUPPORT
• Lehrman & Co. • NYSE Euronext • Shenkman Capital Management • Wells Fargo & Company
• Lipper Financial Services, Inc. • NYSE Euronext Foundation • Walter Shipley • Frank Wendt
• Bobye List • OTC Markets Group • David Shuler • W. R. Berkley Corporation
• Lower Manhattan • Dick and Mary Payne • D. Jack Smith • Anthony Yoseloff
Development Corporation • Peter Huberman Family Fund • Southport Lane
• MacDonald & Cie • Peter Jay Sharp Foundation • Mr. and Mrs. Robert Steel
• John J. Mack • PNC Bank • Sullivan & Cromwell LLP For information about
• Macy’s and Bloomingdale’s • Julian Robertson • Richard Sylla supporting the Museum’s
• John Malvey • James D. Robinson III • Tishman Speyer Properties, LP activities and programs,
• McRoberts Protection Agency • Robert Robotti • Mr. and Mrs. John L. Townsend III please contact Jeanne
• Merck • Royal Bank of Canada • Twenty-First Securities Baker Driscoll, Director of
• Garrett and Mary Moran • Sarah and Daniel Rueven • U.S. Bank Develop ment, at 212 908-4694
• Morgan Stanley • R. W. Pressprich & Co. • Wachtell, Lipton, Rosen & Katz or [email protected].
• The Morningstar Foundation • Saber Partners, LLC • Taylor Wagenseil
• Muriel Siebert & Co., Inc. • Sageview Capital • Charles Wait
• Ed Murphy • Saybrook Capital • Warburg Pincus
• Nemco Brokerage, Inc. • Timothy Schantz • Max Weintraub
The universally-deductible Individual Retirement
AUG 12 Charles Ponzi is arrested for financial fraud in AUG 13
Account (IRA) is created, as President Ronald
Boston after taking in more than $6 million from
1920 1981 Reagan signs into law the Economic Recovery
thousands of investors.
Tax Act of 1981.
www.MoAF.org | Summer 2013 | FINANCIAL HISTORY 7
THE TICKER FROM THE COLLECTION
Notgeld: German Emergency Currency
By Carol Kaimowitz and concentration camps. Even the Cen- notes are from Braunshweig, the author’s
tral Bank of Germany (the Reichsbank) birthplace, and they feature cityscapes and
Notgeld currency notes were issued and German colonies were involved in images of famous persons. One note also
in Germany from 1914 to 1948 to replace this process. In 1914, 452 municipalities celebrates the local Mumme beer.
coins, which had become scarce for a issued 5,500 notes, and in 1923, 5,649 enti- Braunschweig also issued a series of four
variety of reasons. German expansion ties produced 70,000 notes. By 1947–1948, Till Eulenspiegel currency notes (Image 1).
into other countries created a need for only about 1,000 notes appeared. According to German folklore, Eulen-
more change. Also, as the value of silver The Museum’s Notgeld collection con- spiegel was born in Kneitlingen around
increased, silver coins began to disappear. sists of 48 notes and an article written by 1300 and traveled through Germany, the
Some even blamed enthusiastic players of Richard Behrens of Braunschweig, Ger- Low Countries, Italy and Bohemia. In the
the popular card game skat for hoarding many, dated May 15, 1946. These objects stories, he is generally presented as a fool
the coins, though this is an unlikely expla- were donated by Professor Joseph W. who plays practical jokes on his contem-
nation. More importantly, nickel and cop- Eaton of the University of Pittsburgh, who poraries, exposing vices at every turn. The
per coins disappeared into the caldrons of was posted in Germany after World War four notes show Eulenspiegel dressed as a
World War I. II. In a letter to the Museum, Professor fool and in various situations, including as
The collecting and, indeed, hoarding of Eaton explains that he was the editor of the a lover and a doctor.
Notgeld were common almost from the Regensburger Post, a newspaper published A series of eight currency notes from
very beginning of their issuance. Munici- in Straubing, Germany. Although he does Bad Harzburg shows scenes from the city
palities, which were the primary issuers not know how this came to be, among his and surrounding area. These may have
of Notgeld, often took this opportunity papers he discovered an illustrated article been tourism advertisements, as they
to show their pride in their cities. It was that Mr. Behrens had submitted to the include pictures of the local spa and race
also a chance for city leaders to demon- Braunschweiger Bote, a German language track (Image 2).
strate a sense of humor or disclose their newspaper published by the US Army and The city of Genthin issued 10 different
prejudices. The notes were often richly intended for the residents of Braunschweig notes of different values with the follow-
illustrated with images that ranged from during the post-World War II occupation. ing preface:
folklore to politics and local satire. The Museum accessioned the Notgeld and
Isn’t it a perverse world?
The need for Notgeld increased expo- article in 2009.
The smallest city prints its own money
nentially as inflation reached staggering The article gives an informal descrip-
And the pictures show the homeland,
levels. By the end of 1923, the exchange tion of how Mr. Behrens came to have
The home town which to you is worth
rate rose as high as 12 trillion marks to $1 the Notgeld. He found the notes “in a yel-
more than money,
on the black market. The official rate was lowed envelope” in a drawer in his house
Or, should be worth this,
4.2 trillion to $1. Thus, newsreels of Ger- and describes one note with the following
If you don’t want to be a fool.
mans with wheelbarrows full of currency poem:
became a familiar site. The collection also includes a series of
Collect as many of these as you want,
In November 1923, the Commissioner five different pictures of Otto von Bis-
They will bring me a sack full of gold.
of National Currency, Hjalmar Horace marck (1815–1898), who unified most of
I will then take it to the Reichsbank,
Greeley Schact, successfully reined in the German states into a powerful Ger-
Emergency currency hoarders —
inflation by creating a new currency, the man Empire under Prussian rule. The cur-
you are twits!
Rentenmark. The Rentenmark was backed rency notes each picture Bismarck at a dif-
by 4% of public lands, including railroads. It is possible that, because of just such ferent stage of his life, from a young man
Although municipalities issued by far hoarders, we have this collection today. in 1836 to an elderly one in 1894 (Image 3).
the most Notgeld, other issuers included The article describes the notes, indicating Two full-color notes from Altenau in
individual retailers, manufacturers short their value in pfennigs and marks and giv- the Harz area of Germany are partic-
of money to pay their workers and POW ing the location of issuance. Several of the ularly attractive. One features a spring
The Social Security Act is signed into law. A record price is paid for a
AUG 14 AUG 21
Payroll taxes are set at 1% for both workers membership seat on the New York
1935 and employers, on the first $3,000 of 1999 Stock Exchange: $2.65 million. The
earnings. record low price was $17,000 in 1942.
8 FINANCIAL HISTORY | Summer 2013 | www.MoAF.org