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Financial history The magazine of the Museum of American Finance Female Investment in America The $1 Conspiracy Beware of Unintended Economic Consequences ISSUE 102 | WINTER 2012 | $4.00 Financial IN THIS ISSUE FEATURES history The magazine of the Museum of American Finance in association with 14 Female Investment in America the Smithsonian Institution A history of women as investors, from the 18th century Issue 102 • Winter 2012 (ISSN 1520-4723) through the Great Depression. Kristin Aguilera By Marissa Knaak and Megan Soe Editor 17 Insuring Lives and Protecting Families EDITORIAL ADVISORY BOARD Howard A. Baker, Esq. The early years of the $5 trillion life insurance industry. Howard Baker Associates Brian Grinder By Alan Lavine Eastern Washington University Gregory DL Morris Freelance Journalist 20 The $1 Conspiracy Arthur W. Samansky How Ralph Kramden brought down Casey Jones, in which The Samansky Group Bob Shabazian a cartoon rabbit and a very real civil-rights heroine also appear. American Stock Exchange (ret.) By Gregory DL Morris Robert E. Wright Augustana College Jason Zweig The Wall Street Journal d. DEiaDnITaO RE E. MHEeRIrTzAoEg nry For He ART DIRECTION he Alan Barnett Design of T MUSEUM STAFF urtesy David J. Cowen, President/CEO Co Kristin Aguilera, Deputy Director Jeanne Driscoll, Director of Development Linda Rapacki, Managing Director of Visitor Services and Operations Becky Laughner, Director of Exhibits and Archives Maura Ferguson, Director of Exhibits and Educational Programs 24 Beware of Unintended Economic Consequences Alexis Sandler, General Counsel Arturo Gomez, Business Manager Exploring the long-term financial implications of historic actions initiated by the President, Congress and the Supreme Court. Copyright 2012 by the Museum of American Finance, publisher, By Michael A. Martorelli 48 Wall Street, New York, NY 10005. Telephone: 212-908-4110; fax: 212-908-4601. All rights reserved. Financial History is the official membership 28 Juan de Miralles: Forgotten Foreign magazine of the Museum of American Finance. Annual individual membership is $55. Payment must Founding Father of the American Revolution be made in dollars, by credit card or check payable to the Museum of American Finance. A little-known Spanish agent provides financial and There is no implied endorsement material aid during the war for independence. of any advertiser in this magazine. By Vicente Ribes-Iborra 32 From Gilt-Edged to Blue Chip The evolution of a stock market term. By Jay Hoster www.MoAF.org 2 FINANCIAL HISTORY | Winter 2012 | www.MoAF.org IN THIS ISSUE DEPARTMENTS TRUSTEES Charlotte B. Beyer Institute For Private Investors 4 The Ticker: Museum News Stephen A. Cooper Museum honors Felix Rohatyn at 2012 gala and launches online Nemco Brokerage, Inc. “Checks and Balances: Presidents and American Finance” exhibit. David J. Cowen President/CEO Museum of American Finance 4 Message to Members Andrea de Cholnoky By David Cowen, President and CEO Korn/Ferry International David N. Deutsch, Vice Chairman 5 Founder’s Letter David N. Deutsch & Company LLC By John E. Herzog, Founder and Chairman Emeritus Charles M. Elson University of Delaware 10 From the Collection: Liberty Loan Bond of 1917 Niall Ferguson Harvard University By Lawrence D. Schuffman Oxford University 12 Educators’ Perspective Michael S. Geltzeiler NYSE Euronext Patents, Hostile Takeovers and the Making of the John E. Herzog, Chairman Emeritus Fortune of Alexander Graham Bell Herzog & Co., Inc. By Dan Cooper and Brian Grinder Myron Kandel CNN 39 Trivia Quiz Kirkpatrick MacDonald MacDonald & Cie Consuelo Mack Consuelo Mack WealthTrack Robert Muccilo Consolidated Edison Wilbur L. Ross, Jr. WL Ross & Co., LLC Richard M. Schaeffer Shaf Consulting LLC Timothy R. Schantz PE Cathedral Foundation Mark Shenkman Shenkman Capital Management, Inc. David Shuler ON THE COVER CME Group Ewout Steenbergen Two women read ticker tape in ING a stock broker’s office in St. Paul, Richard Sylla, Ph.D., Chairman Minnesota, 1929. See related article, Stern School of Business New York University page 14. Charles V. Wait The Adirondack Trust Company Kenneth G. Winans, Treasurer Winans International © Minnesota Historical Society/CORBIS www.MoAF.org | Winter 2012 | FINANCIAL HISTORY 3 THE TICKER MUSEUM NEWS Celebrating the Achievements of the Past Year The Museum shined brightly at the experience to supplement our tour pro- annual gala in January, as we honored gram. We have taught over 160 classes in Felix Rohatyn with the John C. Whitehead this program since its inception in 2010. Award for Distinguished Public Service 2) The Museum Finance Academy, our and Financial Leadership. The exhibit hall afterschool and weekend program, is a 10 class experience for 11th and 12th graders launched Message to Members in the fall as a pilot program. Students are begging for a David J. Cowen | President and CEO better financial education, and this Museum is a part of the solution. All students was full and the mood festive as we cel- who complete this course receive a cer- ebrated the Museum’s achievements of the tificate, and the top performing student past year — a 44% increase in individual receives a scholarship. We will run the uiz visitors, 454 different school group visits, Academy again in the spring, as we look Elsa R close to 2,000 Museum members and the to secure permanent funding. 3) We again David Cowen speaks at the Museum’s 2012 gala. publication of our magazine’s 100th edi- partnered with Junior Achievement to tion. To top that off in December, with the host their Finance Park for two months, launch of our first online exhibit (http:// and several thousand inner city students presidents.moaf.org), we had 90,000 web participated in the program this winter. hits, smashing all records. We expect to 4) Lastly, we have been able to offer our Scotland-Tartan Week festivities in April. launch our new website shortly (www. classroom and tour programs at no charge We have also received an LMDC grant to moaf.org), enhancing our web presence to Title 1 schools, thanks to a generous climate control our feature gallery, which and connectivity with social media. grant from ING. will enable us to borrow extremely rare Our evening lecture series is robust and We also received an anonymous and fragile items, and to exhibit some we look forward to our upcoming pro- $100,000 year-end matching gift for our of the more delicate objects in our own grams with William Rhodes (February 28), Center for Financial Education. This is collection. Robert Shiller (March 27) and a panel incredibly generous and will go a long Finance is still on everyone’s minds as on Andrew Carnegie (April 10). Combine way to further our mission to teach about the nation and world suffer through the this with a dozen Lunch and Learn events finance and financial history. credit crisis, and we continue to explain with contemporary authors, historians and Our “Checks & Balances: Presidents and and contextualize the crisis through our equity and commodity traders, and you American Finance” exhibit, which opened exhibits and programs. In the past six realize there is a lot happening at your on Election Day, is playing to favorable months we have also been approached by finance museum — and not just for adults. reviews in the Wall Street Journal and several other nations who are contemplat- Our Center for Financial Education elsewhere. Next is a display about Andrew ing finance or money museums, demon- had a banner year and now has four Carnegie, as we again join forces with the strating the growing interest in financial components: 1) A one-hour classroom American-Scottish Foundation during the history on a global level. The first US savings bond is The world’s oldest con- MAR 1 MAR 3 The London MAR 4 issued after Henry Morgenthau tinually-operating bank, Stock Exchange 1935 observes that the US lacks a 1801 1472 the Monte della Pieta, is is founded. government savings plan. founded in Siena, Italy. 4 FINANCIAL HISTORY | Winter 2012 | www.MoAF.org MUSEUM NEWS THE TICKER Teaching Financial History Through Original Documents The Museum is celebrating its 25th exhibitions. To begin, I donated to the more than 10,000 documents and artifacts year in 2012, marking its official anniver- Museum a large portion of my own collec- in the archives. Among the highlights sary on October 19. Most people remem- tion of financial documents, so that people are hundreds of 18th century American ber that day 25 years ago as the Crash of could have the opportunity to actually see financial documents, which are crucial to 1987, but I recall it best as the moment that the history, not just read about it in a book. appreciating the terrific accomplishments There is nothing like seeing of the nation’s founders. The archives the original handwriting of a also contain thousands of stock and bond Founder’s Letter famous, often legendary indi- certificates, paper currency, photographs, vidual on the letter that estab- periodicals, business documents and arti- John Herzog | Founder and | Chairman Emeritus lished the policy or the act of facts detailing the country’s financial his- Congress that has profoundly tory from 1776 to the present. It is a ter- influenced our history. Some rific story, and every American needs to inspired me to start the Museum. I had documents, such as Alexander Hamilton’s understand it. been in our old trading room that day and first Report on Public Credit, which he This spring my alma mater, Cornell experienced the pandemonium first hand, wrote, printed and distributed to Congress University, has invited me to speak about as I remembered my father’s warning that only eight days after being appointed Secre- the Museum at another milestone anni- “1929 will be back.” tary of the Treasury, illustrate the remark- versary, my own 55th class reunion. I will Noticing an absence of institutional able talent and drive of our nation’s found- be presenting with six other classmates memory on Wall Street at the time, my ers.Wouldn’t it be nice if we could expect who have established impressive careers vision was to create a Museum to preserve that sort of performance today? in the arts, and we will be speaking to Wall Street’s history, as well as provide an The Museum’s collection continues a very large audience of all the Cornell opportunity for the public to access primary to grow with donations and the occa- reunion classes. This will be a marvelous source documents through collections and sional purchase, and there are currently opportunity to tell the Museum’s story to a large and well-diversified group, and I’m sure it will bring more visitors to see the exhibits which, during this financial crisis, are available for all to see. uiz Elsa R JCoohrnn Helel rUznoigv ewrsililt ya dtod rteeslls tahne asltuomryn oi fg tahteh eorriinggin ast John Herzog with Museum Trustees Andrea de Cholnoky and Tim Schantz at the annual gala. and history of the Museum on June 9, 2012. The Toronto Stock Exchange is The New York Stock & Exchange Board, ancestor of the NYSE, MAR 7 MAR 8 incorporated; fewer than a dozen is formed when 24 brokers agree on a “constitution” that fixes 1878 stocks are traded, and a seat on 1817 commissions at 0.25% and sets a fine of at least six cents for talk- the exchange costs $250. ing out loud about other subjects while stocks are being traded. www.MoAF.org | Winter 2012 | FINANCIAL HISTORY 5 THE TICKER MUSEUM NEWS 2012 Museum Gala Honoring Felix Rohatyn 3 1 4 2 1. (L to R) William Donaldson, David Cowen, John Whitehead, Felix Rohatyn and John Herzog. 2. Felix Rohatyn, recipient of the 2012 John C. Whitehead Award, speaks at gala. 3. Museum supporters enjoy pre-dinner cocktails in the exhibition hall. 4. (L to R) Trustees David Deutsch, Charles Wait and Myron Kandel. 5. Museum Chair Richard Sylla (L) and Vice Chair Charlotte Beyer (R) with Michael and Ruth Lipper. uiz R 5 otos: Elsa h P Microsoft Corp. goes Eli Whitney patents President Franklin D. Roosevelt MAR 13 MAR 14 MAR 16 public at an initial offer- his cotton gin, setting takes the US off the gold stan- 1986 ing price of $21 a share, 1794 off an industrial boom 1933 dard, removing the yellow metal raising $61 million. in New England. from coinage and circulation. 6 FINANCIAL HISTORY | Winter 2012 | www.MoAF.org MUSEUM NEWS THE TICKER 6 9 7 10 6. John and Cynthia Whitehead with Chair Richard Sylla. 7. The 2012 John C. Whitehead Award for Distinguished Public Service and Financial Leadership. 8. William Donaldson, co-chair of the Museum’s advisory board, speaks at gala. 9. Hundreds of Museum supporters turned out for the 2012 gala dinner. 10. Vice Chair Charlotte Beyer and Senior Educator Chris Meyers speak with Museum Finance Academy scholarship recipient Paul Lindseth. uiz R otos: Elsa 8 h P Wall Street The western world’s first Michael Milken is indicted on MAR 19 MAR 20 MAR 29 crashes for the major publicly-traded company, 98 felony charges of violat- 1792 first time ever, on 1602 the Dutch East India Company, 1989 ing federal securities laws at “Black Monday.” is born. Drexel Burnham Lambert. www.MoAF.org | Winter 2012 | FINANCIAL HISTORY 7 THE TICKER MUSEUM NEWS Paul Lindseth Receives Museum Finance Academy Scholarship for Fall Semester The Museum is proud to announce that the Rational Market by Justin Fox, and Paul Lindseth, a 16-year-old junior from to enroll in the inaugural semester of the Hunter College High School, has received Museum Finance Academy. the Museum Finance Academy’s merit Paul is taking AP Economics at Hunter scholarship for the Fall 2011 semester. this year and is writing his US History Paul said the subprime mortgage crisis term paper on the Panic of 1907 and J.P. of 2007 and the ensuing economic crisis Morgan’s role in rescuing the nation’s sparked his interest in the foundations financial system from collapse. of the US financial system. This led him His side interests include Taekwondo, to look at some of the recent literature in which he is a first-degree black belt, and on crises and markets, including The Big writing for his school newspaper, where Short by Michael Lewis, Crisis Econom- he is the features editor. He hopes to pur- ics by Nouriel Roubini and The Myth of sue a career in economics and finance. CORPORATE AND FOUNDATION SUPPORT The Museum is most grateful • CME Group • Lazard • Standard & Poor’s for the support of the follow- • Consolidated Edison Co. • Lower Manhattan • The Stone Foundation ing corporations and founda- of New York Development Corporation • Ted Moudis Associates tions who have generously • DeWitt Stern • MacDonald & Cie • Twenty-First Securities provided funding for the • Donaldson Fund • McRoberts Protection Agency • UBS Museum in the past year. • Downtown Alliance • Morgan Stanley • Wachtell, Lipton, Rosen & Katz • Abner, Herrman & Brock • Fagenson & Co., Inc. • Muriel Siebert & Co., Inc. • Wells Fargo & Company • American Express • Financial Recovery • Nemco Brokerage, Inc. • Winans International • Anonymous Technologies • NYSE Euronext • W. R. Berkley Corporation • The Asher Family Foundation • Geduld Cougar Foundation • NYSE Euronext Foundation • The Zweig Funds • Aronson Johnson Ortiz • The Guardian Life Insurance • Patricof Family Foundation • Berkshire Capital Securities Company of America • Peter G. Peterson Foundation For information about • Bloomberg • Henry & Elaine Kaufman • Peter Jay Sharp Foundation supporting the Museum’s Foundation activities and programs, • BLS Investments • Saber Partners, LLC please contact • Herzog & Co., Inc. • The Briar Foundation • Saybrook Capital Jeanne Baker Driscoll, • ING Americas • Carter, Ledyard • Shenkman Capital Director of Develop ment, & Milburn, LLP • Institute for Private Investors Management at 212 908-4694 or • CFA Institute • Knight Capital Group • The Shoreland Foundation [email protected]. Chase Manhattan and Chemical Bank — descendants of Congress passes MAR 31 APR 2 a water supply company founded in 1799 and a maker of the Coinage Act, 1996 chemicals founded in 1823 — merge, forming what then 1792 establishing the is the largest bank-holding company in America. US Mint. 8 FINANCIAL HISTORY | Winter 2012 | www.MoAF.org