"The House of Morgan: An American Banking Dynasty and The Rise of Modern Finance" by Ron Chernow
All in all, this is a very ambitious and impressive piece of research. As the title implies, it goes beyond chronicling the House of Morgan. Chernow does a nice job describing how our financial system has evolved over the past 150 years.
One thing I didn't know about was how influential Louis Brandeis was in shaping our economy into its current form, with vigorous competition. Chernow had an interesting perspective, that Pierpont was not opposed to Communists/Socialists's idea of having a heavily structured and regulated economy, just that he thought it should be private banks and industrialists doing the controlling, not the government.
Hoover exhibits some Clownish behavior. In 1932, he led a Senate inquiry into short-selling. He contended that real value was being destroyed by bear raids. Morgan's Tom Lamont relied, "But what can be called 'real value' if a security has no earnings and pays no dividend?" The more things change, the more they stay the same. -g- Chernow had an even better rejoinder at the start of the next paragraph: "Amid the controversy, Hoover had to deal with a serious slump in the bond market - where short selling was prohibited. Corporate America couldn't cope with the debt accumulated in the 1920s, much of it to finance takeovers."
A funny anecdote, with some insight as to the leisurely pace of things back then: "The old House of Morgan had encouraged attendance at partners' meetings by handing out gold coins. In a modern variant, Morgan Stanley gave out ten- or twenty-dollar bills to partners when they entered a meeting. They also got to divide the booty left by absentees. The only unanimous attendance occurred once, in a snowstorm, when everybody planned to make a killing."
The contrast between high finance in the early vs. the later part of this century in brief: "The old Morgan had favored sound, conservative finance, and was protective of the credit ratings of its clients. The new Morgan Stanley stampeded companies into taking on crippling debt, whether to conduct raids or to ward them off." |
