Bail-out hope sends shares higher
1 October 2008
Bail-out fears return to markets
23 September 2008
Concern returned to the US stock market as US Treasury Secretary Henry Paulson faced tough questions about his $700bn (£382bn) financial rescue plan.
Morgan Stanley in 20% stake sale
22 September 2008
Morgan Stanley shares surged after Japanese banking giant Mitsubishi UFJ Financial Group said it would buy a stake in the bruised Wall Street bank. The Japanese group said the stake will account for 10% to 20% of Morgan Stanley's common shares. The deal, estimated to be worth around $8.5bn, comes shortly after Morgan Stanley was granted approval by the Federal Reserve to change its status to become a bank holding company, which allows it to grow its deposits to raise funds.
The radical move, which was taken by Goldman Sachs [Henry Paulson, former CEO of Goldman Sachs], too, marks the end of the independent investment bank on Wall Street, which aggressively grew profits using money borrowed from the bond market - a model which is now in tatters.
Paulson wants a speedy debt deal
21 September 2008
Henry Paulson has urged Congress to move quickly to pass a $700bn (£382bn) package to tackle the worst financial crisis for decades. The US Treasury Secretary plans to set up a fund to buy back much of the bad debt held by banks and financial institutions around the world.
Bear Stearns gets emergency funds
14 March 2008
Central banks fight credit crisis
11 March 2008
The world's largest central banks have launched their latest co-ordinated action to calm jittery credit markets. The US Federal Reserve, the European Central Bank and central banks in the
The House of Morgan by Ron Chernow, 1990
On October 22, 1929, the president sent a frantic messenger to Lamont [Morgan Stanley] expressing concern about the "speculative situation which seemed to him to be running very wild." The next day panic selling hit selected blue chips, with Westinghouse dropping 35 points and General Electric 20. The balloon was about to burst. The following morning, Winston Churchill stood in the visitors' gallery of the New York Stock Exchange. Within the first two hours of trading, almost $10 billion was lost on paper. The drops posted were so sharp and the resulting shrieks so fearful that the gallery was closed by late morning.
Desperate men stood on the steps of Federal Hall, hands in their pockets, their hats pulled low, staring grimly ahead. They stood six deep outside the Stock Exchange. Having bought on margin, many investors were ruined outright. Newspapers noted a strange noise filtering through the canyons of the Street - a roar, a hum, a murmur. It was the cumulative sound of thousands of stunned people giving vent to their feelings. Violence was in the air.
The Morgan role in rescues was now automatic. The bankers' rescue on Black Thursday proved longer on symbolism than on substance. The men knew they couldn't prop up a collapsing stock market, so they tried to introduce liquidity and engineer an orderly decline. So they pledged $240 million to buy up assorted stocks and stabilize the market.
At the end of the trading day, the bankers regrouped for a second meeting and designated Lamont their spokesman. Almost at once, Wall Street began to issue bravely hopeful statements. The headlines in the Wall Street Journal the next morning featured not the crash but the rescue: "BANKERS HALT STOCK DEBACLE 2-HOUR SELLING DELUGES STOPPED AFTER CONFERENCE AT MORGAN'S OFFICE" $1,000,000,000 FOR SUPPORT." The market staggered through Friday and Saturday morning trading without a fresh crisis.
On Tragic Tuesday, October 29, investors looked back on Black Thursday as a halcyon time. On this worst day in market history, the ticker lagged two and a half hours behind. Unlike Black Thursday, Tragic Tuesday exposed the bankers' frailty. Lamont now faced a more hostile group of reporters. As if expressing a new bunker mentality, the Stock Exchange governors met on Tragic Tuesday in a basement room under the Exchange floor. The main topic was whether to shut the market. As in 1897, the group decided to shorten Exchange hours instead.
As it happens, the real remedial action that was taken came not from the old Wall Street club but by a force new to financial panics - the Federal Reserve. In late October, Jack chaired a meeting at the Morgan Library with George Harrison, Ben Strong's successor at the New York Fed, son of an army officer, a graduate of Yale and
Wall Street tried to face the crash with stoic fortitude and treat it as a stern but salutary lesson. Everybody sounded philosophical. In late 1929, Lamont described the crisis as an unpleasant warning of no lasting harm: "I cannot but feel that it may after all be a valuable lesson and the experience gained may be turned to our future advantage. There has never been a time when business as a whole was on a sounder basis." This reasonable approach reflected a belief that the financial trouble had ended; in fact, it had just begun.
From a rate of 60 bank failures a month in early 1930, the figure snowballed to 254 in November and 344 in December 1930. There were over a thousand bank failures for the year. The failure of the Bank of United States was the largest thus far and threatened more general ruin, its bankruptcy fed a psychology of fear that already gripped depositors across the country.
The Wall Street of 1932 was a dismal ghost town. After falling for over two straight years, the stock market hit bottom on July 8, 1932. By that point, two thousand investment houses had failed, and new underwritings stood at 10 percent of their 1929 peak volume. Securities firms declared "apple days" - unpaid vacation days each month that enable destitute brokers to go out and supplement their income by selling apples on the sidewalk.
In 1932, almost thirteen million of
