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Posts Tagged ‘banking

“These days, the bigger the company, the less you can figure out what it does”*…


Late 19th-century Americans loved railroads, which seemed to eradicate time and space, moving goods and people more cheaply and more conveniently than ever before. And they feared railroads because in most of the country it was impossible to do business without them.

Businesses, and the republic itself, seemed to be at the mercy of the monopoly power of railroad corporations. American farmers, businessmen and consumers thought of competition as a way to ensure fairness in the marketplace. But with no real competitors over many routes, railroads could charge different rates to different customers. This power to decide economic winners and losers threatened not only individual businesses but also the conditions that sustained the republic.

That may sound familiar. As a historian of that first Gilded Age, I see parallels between the power of the railroads and today’s internet giants like Verizon and Comcast. The current regulators – the Federal Communications Commission’s Republican majority – and many of its critics both embrace a solution that 19th-century Americans tried and dismissed: market competition…

The current controversy about the monopolistic power of internet service providers echoes those concerns from the first Gilded Age. As anti-monopolists did in the 19th century, advocates of an open internet argue that regulation will advance competition by creating a level playing field for all comers, big and small, resulting in more innovation and better products. (There was even a radical, if short-lived, proposal to nationalize high-speed wireless service.)

However, no proposed regulations for an open internet address the existing power of either the service providers or the “Big Five” internet giants: Apple, Amazon, Facebook, Google and Microsoft. Like Standard Oil, they have the power to wring enormous advantages from the internet service providers, to the detriment of smaller competitors.

The most important element of the debate – both then and now – is not the particular regulations that are or are not enacted. What’s crucial is the wider concerns about the effects on society. The Gilded Age’s anti-monopolists had political and moral concerns, not economic ones. They believed, as many in the U.S. still do, that a democracy’s economy should be judged not only – nor even primarily – by its financial output. Rather, success is how well it sustains the ideals, values and engaged citizenship on which free societies depend.

When monopoly threatens something as fundamental as the free circulation of information and the equal access of citizens to technologies central to their daily life, the issues are no longer economic.

Stanford historian Richard White unpacks an important historical analogue; read it in full at “For tech giants, a cautionary tale from 19th century railroads on the limits of competition.”

[Image above: source]

* Michel Faber, The Book of Strange New Things


As we wonder if The Invisible Hand is giving us the finger, we might recall that it was on this date in 1852 that Henry Wells and William G. Fargo joined with several other investors to launch their eponymously-named cross-country freight business.  The California gold rush had created an explosive new need, which Wells, Fargo and other “pony express” and stage lines leapt to meet.  It was after the Civil War, in 1866, when Wells, Fargo acquired many of their competitors, that it became the dominant supplier.  (Ever flexible, they adapted again three years later, when the transcontinental railroad was finished.)

From it’s earliest days, it also functioned as a bank, factoring the shipments of gold that it carried.  Indeed, when Wells, Fargo exited the freight business as a result of government nationalization of freight during World War I, the bank (which merged with Nevada National in the first of a series of “transformative transactions”) continued to operate as “Wells, Fargo,” as indeed it does (albeit under unrecognizably evolved ownership) today.



Written by LW

March 18, 2018 at 1:01 am

“Fortune’s bubbles rise and fall”*…


Gordon Gekko talks tulips. Wall Street: Money Never Sleeps / scottab140

Right now, it’s Bitcoin. But in the past we’ve had dotcom stocks, the 1929 crash, 19th-century railways and the South Sea Bubble of 1720. All these were compared by contemporaries to “tulip mania,” the Dutch financial craze for tulip bulbs in the 1630s. Bitcoin, according some sceptics, is “tulip mania 2.0”.

Why this lasting fixation on tulip mania? It certainly makes an exciting story, one that has become a byword for insanity in the markets. The same aspects of it are constantly repeated, whether by casual tweeters or in widely read economics textbooks by luminaries such as John Kenneth Galbraith.

Tulip mania was irrational, the story goes. Tulip mania was a frenzy. Everyone in the Netherlands was involved, from chimney-sweeps to aristocrats. The same tulip bulb, or rather tulip future, was traded sometimes 10 times a day. No one wanted the bulbs, only the profits – it was a phenomenon of pure greed. Tulips were sold for crazy prices – the price of houses – and fortunes were won and lost. It was the foolishness of newcomers to the market that set off the crash in February 1637. Desperate bankrupts threw themselves in canals. The government finally stepped in and ceased the trade, but not before the economy of Holland was ruined.

Yes, it makes an exciting story. The trouble is, most of it is untrue…

Drawing on ten years of research for her new book, Tulip mania: Money, Honor and Knowledge in the Dutch Golden AgeAnne Goldgar tells a different story, one that’s just as illuminating, but very different: “Tulip mania: the classic story of a Dutch financial bubble is mostly wrong.”

Like most trends, at the beginning it’s driven by fundamentals, at some point speculation takes over. What the wise man does in the beginning, the fool does in the end.”  The world went mad. What we learn from history is that people don’t learn from history.   — Warren Buffett, 2006 Berkshire Hathaway annual meeting

* John Greenleaf Whittier


As we curb our enthusiasm, we might recall that it was on this date in 1933 that banks began to re-open after the “Bank Holiday” declared by the Roosevelt Administration to calm the market after bank runs had threatened the nation’s financial system during the Depression.



Written by LW

March 13, 2018 at 1:01 am

“What we call chaos is just patterns we haven’t recognized. What we call random is just patterns we can’t decipher.”*…


A “commonplace” book from the 17th century

On any given day, from her home on the Isle of Man, Linda Watson might be reading a handwritten letter from one Confederate soldier to another, or a list of convicts transported to Australia. Or perhaps she is reading a will, a brief from a long-forgotten legal case, an original Jane Austen manuscript. Whatever is in them, these documents made their way to her because they have one thing in common: They’re close to impossible to read.

Watson’s company, Transcription Services, has a rare specialty—transcribing historical documents that stump average readers. Once, while talking to a client, she found the perfect way to sum up her skills. “We are good at reading the unreadable,” she said. That’s now the company’s slogan.

For hundreds of years, history was handwritten. The problem is not only that our ancestors’ handwriting was sometimes very bad, but also that they used abbreviations, old conventions, and styles of lettering that have fallen out of use. Understanding them takes both patience and skill…

A transcriber on the Isle of Man can decipher almost anything: “Where Old, Unreadable Documents Go to Be Understood.”

* Chuck Palahniuk


As we puzzle it out, we might recall that it was on this date in 1659 that the first known check of the modern era was written.  Early Indians of the Mauryan period (from 321 to 185 BC) employed a commercial instrument called adesha; Romans used praescriptiones; Muslim traders used the saqq; and Venetian traders used bills of exchange— but these were effectively either a form of currency or letters of credit.  The 1659 draft– made out for £400, signed by Nicholas Vanacker, made payable to a Mr Delboe, and drawn on Messrs Morris and Clayton, scriveners and bankers of the City of London–  was the first “check” as we came to know them.  It’s on display at Westminster Abbey.  (The world “check” likely also originated in England later in the 1700s when serial numbers were placed on these pieces of paper as a way to keep track of, or “check” on, them.)



Written by LW

February 16, 2018 at 1:01 am

“The past is not dead. It is not even past.”*…


 zoomable version here

In 1943, as American businesses tried to guess whether wartime relief from the Depression would translate into postwar prosperity, the Tension Envelope Corporation printed this chart for customers. The infographic folded into a pamphlet and could be displayed on the wall when opened. (The online archive of the Federal Reserve, FRASER, has digitized a PDF of the pamphlet, which you can view here.)

The infographic and the explanatory text below it tap data from several sources, including U.S. Treasury reports, the Department of Labor’s Bureau of Labor Statistics, the Survey of Current Business, and the Committee for Economic Development, a nonprofit founded in 1942 to help American business plan for the postwar future. Excerpted text from a Committee for Economic Development publication, “Business Planning Now for V Day,” can be found in the lower left-hand corner of the chart.

In an explanatory section on the federal debt—represented on the chart as a red line that climbs steeply upward beginning in 1941—the chart’s authors articulate a strong stance on what could be an alarming indicator: “The necessary cost of this war is not important. Victory is worth the price. Whatever the cost to the future citizens is, they will get their money’s worth in benefits derived.”…

From the redoubtable Rebecca Onion: “A Comprehensive 1943 Infographic of American Booms and Busts.”

* William Faulkner


As we reach for the Dramamine, we might recall that it was on this date in 1969 that Chemical Bank installed the first ATM in the U.S. at its branch in Rockville Centre, New York.  In fact, as noted here before, the ATM was imagined (and an early version patented) in 1960 by Luther George Simjian; but a six-month trial of the stand-alone device in 1961 was a failure.  A British version (developed by the banknote company Delarue and deployed by Barclays) debuted in 1967, but required the use of pre-acquired “cheques” for withdrawal.  The Chemical ATM was the first of the breed that is now common: networked machines that communicate with the bank (and its account information) in real time.



Written by LW

September 2, 2015 at 1:01 am

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