The Panic of 1907 (A book review) along with a segment of "In Other News"

Robert F. Bruner, Sean D. Carr, The Panic of 1907: Lessons Learned from the Market’s Perfect Storm (Hoboken, NJ: John Wiley & Sons, 2007), 258 pages, 8 pages of photos.

I’m not sure this is a book I should have read this fall. As the markets were tanking, reading about “the market’s perfect storm,” caused me to draw too many parallels to our current situation. In one instance, the book invaded my sleep and entered my dreams. That said, it is also enlightening to read such a book while the newscasters are talking about our troubled economy. I just don’t know what to make of the fact that this book was an early Christmas present from a financial advisor! Reading a book that begins with the suicide of a president of a bankrupt trust company, while listening to the financial news in the background, isn’t the sanest thing I’ve ever done.

Bruner and Carr, two professors at the University of Virginia, have written about an event that happened a century ago. Although often overlooked by historians who go for the more dramatic economic events (the Depression of 1893, the Crash of 1929, Sage’s investment blunders and so forth), the 1907 crash and panic in the financial sectors led to the creation of the Federal Reserve Bank and fundamental changes in the American economy. These changes were needed as the nation shifted from an agrarian to an industrial society.

The 1907 panic followed an aggressive period of growth for the American economy. Tied to this growth was also a period of consolation as smaller companies and factories joined together to form corporations which were financed by a handful of firms in New York City. In this setting a series of events took place that lead to the panic in the fall of 1907. Starting in 1906, stock prices began to decline. This created problems as much of cooperate financing had been backed by the value of corporate equity. Also challenging corporations at this time was an activist President (Teddy Roosevelt) who sought to regulate and even break up corporations that had monopolistic control on particular sectors of the economy. Another compounding problem was a devastating earthquake in San Francisco which impacted the insurance industry and creating a demand for capital for rebuilding. And then there were a few greedy players in New York, such as the Otto Heinze and Charles Morse. These are some of the ingredients for a “perfect storm” in the financial markets.

In addition to the greedy, there were also those who tried to save the day. The book almost deifies J. P. Morgan, who not only committed large sums of capital to help keep banks liquid, but also raised capital for troubled institutions. Enchanted with Morgan’s work ethic and desire for large orderly corporations that reduce the cost of production, they credit Morgan for helping to calm the crisis. One of the fascinating stories is how Morgan talked the newly formed U. S. Steel into buying Tennessee Coal and Iron (this is also how US Steel moved into Alabama and took over the Birmingham mills). According to the authors, USS was leery of buying TC&I as they already controlled 60% of the steel production and was fearful of an anti-trust lawsuit. Morgan wanting a buyer for TC&I as a way to raise cash and avoid a run on the trust company that held its securities. US Steel was rich in cash, so Morgan agreed to intercede with Roosevelt if USS brought the company at an inflated value.

A squeeze play is not just something in baseball or a move executed by an opportunist old man. One of the interesting stories in the book involved Otto Heinze’s squeeze play, an attempt to corner the copper market. Copper had been in high demand early in the century as electrical wiring was connecting the nation. Thinking there were lots of short-selling involved with United Copper stock and believing he had a significant enough position in the company to control the market, he sought to drive up the price, forcing those who had shorted the stock to settle up. If Heinze was correct in his interpretation, he would have benefitted at the expense of the short-sellers. But Heinze had misread the market and after a brief advance, the stock price collapsed, exposing Otto and his brother who had purchased additional stock on margin in their attempt to drive up the price. They both lost a fortune and brought about the demise of Otto’s brokerage house, Gross and Kleeberg and also the Otto Heinze & Company. This was followed by a collapse of the State Saving Bank in Butte, Montana, which was a correspondent bank for the Mercantile National Bank in New York. Augustus owned the Montana bank and was of Mercantile. This event set off a run on banks, and forced New York financiers to move around money an attempt to increase liquidity.

The Panic of 1907 is very readable and provides an understanding of the macro-events that led to the panic. He also compares what went wrong in 1907 and how it might happen again. The understatement of the book, when speaking of "system-like architecture" of the finanical markets, is: "New credit derivates and other exotic contracts might help to reduce risk, but they have never sustained a live test: No one knows whether they wil dampen or amplify a crisis." (174) I think we now know!!! The book also includes a helpful appendix that defines various terms that get thrown around a lot by the media and economists. If you’re interested in economics, I recommend this book, but to avoid spoiling the holidays, you might wait till the New Year! Follow my lead, I'm giving up serious books for the rest of the month.


In other news… Obama, American’s new Marlboro Man, is going to have to deal with a smoke-free White House. I was surprised to uncover that the White House became smoke free due to the efforts of Hillary Clinton. She was obviously attempting to break Bill’s affection for cigars.

-Nevada Jack reporting

Remembering Pearl Harbor and my December reading list

The fire is burning and I sit in the recliner, trying to decide if I’m going to finish another memoir post or just take a nap. Instead, I surf through my favorite blogs and while reading Randall’s, am reminded that today is Pearl Harbor Day.

When I was back in North Carolina last month, I spent some time talking to my aunt (my mother’s older sister) and discovered new tidbits about my mother’s family. Aunt B told they learned about Pearl Harbor walking to church. They lived in rural Moore County and attended a Baptist church about a half mile from their home. They must have been going to an evening services. One of the houses they passed had a radio on and called them over to tell them that the American fleet had been attacked in Hawaii. My grandfather had recently completed training to become a welder and few weeks later, during their Christmas vacation, the family packed up and moved to Wilmington. There, my granddaddy went to work in the shipyard, building Liberty Ships. My grandmother worked in the cafeteria at the Wilmington Dry Docks, while my great-grandma took care of the kids (there were three of them) and also cooked for her family and a couple more families from Moore Country who’d moved with them to Wilmington. Gradually, as those families found a place to live and moved out, new families from Moore County, who were moving to Wilmington for the war jobs, would share their house. With all the adults working, they were able to save enough money to buy my granddaddy’s farm.

My favorite story about learning that Pearl Harbor had been attacked came from a man I knew in Utah. John was an eighteen year old sailor that fateful December morning. He was in the Philippines, assigned to a submarine tender. Although John didn’t like to talk much about his experiences in the war, he loved telling the story of how he learned that we were in war. Early that Sunday morning he was drunk and in a Manila Gin Mill. All of a sudden, the lights came up and there were Shore Patrol and Military Police, with their clubs swinging, waking up soldiers and sailors and ordering them to report immediately to their duty station. It was a hell-of-a-way to begin a war. There was a mechanical problem with John’s ship and they didn’t think it could run the blockade, so they kept them in the Philippines. The ship was made to look like it had been scuttled, but they keep the machine shop running, making tank parts for the army fighting on Bataan. After running out of materials, the sailors died their uniforms and were given a rifle. One Marine was placed with each group of sailors, who were sent to do rear guard duty. Before the surrender of Bataan, John and the rest of the sailors were transferred to Corregidor where they held out till they ran out of ammunition. Afterwards, they were Japanese POWs and forced to labor in coal mines under inhumane conditions. The mine John worked for was own by a company still in business (I think it was Hitachi). Needless to say, John did his best never to buy anything made in Japan. He died about a year before I left Utah.

On the economic front, our bookstore is closing. Seldom does a town of our size have a good bookstore, but for the past four years we’ve been blessed. The owner is a reader and has always had an interesting collection from which to choose. It’s going to be sad to see him go. I spent an hour in his store on Friday (his collection is over half way gone), and found four books I wanted (with a 40% discount, my wants go up). The book I am most excited about and put down all other books in order to read is William Zinsser’s Spring Training. Zinsser is the author of the classic, On Writing Well. I was pleasantly surprised to find that he’d written a book about baseball. I was even more pleasantly surprised to find out that it was about the Pittsburgh Pirates. And I was ecstatic to learn that it was about the 1988 Pirates in spring training! I was at Three Rivers Stadium for the Pirates' opening game that year. Now, how good is that! By the way, I have been reading way to many serious books lately (maybe I’ll get around to writing some reviews), but I've decided that for December I will mainly books that bring joy or make me laugh. When I work out, I’m listening to Skin Tight by Carl Hiaasen on my ipod. As for books you can hold, after I finish Spring Training, I plan to jump into Bill Bryson’s The Life and Times of the Thunderbolt Kid.

The Blizzard of '66

Sorry, I’ve been busy this past week, with work demanding a lot and the holidays upon us. We’re having an extended period of snow (which makes me happy). Here is a memoir of me as a nine year old boy, inspired by photographs I came across last summer when visiting my parents. I apology that these black and white shots aren’t’ the best of quality, but they’re the only photos I found from this snow. The first photo shows Bubba (in front), my brother, Denise, Sage and (I think) Bubba and Denise’s older sister. The second photo is of my brother (on the left), Denise and me.

I fell in love with winter in the 3rd grade. January 1966 was a particular snowy year in Petersburg. In the middle of the month, there was a dusting snow for my birthday. But the real snow came at the end of the month, when the eastern seaboard closed down due to a massive blizzard. Richmond, just to our north, received over 40 inches of snow within the last few days of the month. Everything came to a stop and most important to those of us attending Walnut Hills Elementary School, we were given an extended winter break. It was like a second Christmas holiday. Every day we’d trek out, pushing through knee deep snow as we may our way through the alley behind our houses to the hill on the road between Bishop and Warren Street. There, we’d spend hours sledding, our run going crossing Warren Street and then through a path in the woods that headed toward Fort Hell. We’d then hike back up and do it again. This was a rather safe run as the street we sledded on was the edge of the development and few people drove up it when the weather was good. With the snow and ice, in the days before four wheel drive, it was nearly impossible for vehicles to make it up the hill. All the neighborhood kids convened at the hill. Most were older than us; my brother and I mostly hung out with Bubba and Denise, who lived next door. When fatigue overtook us, or our clothes became too cold and wet, we’d retreat back inside where mom would fix us hot chocolate or a bowl of snow cream as our gloves and coats dried over heat vents.



The family at the corner of the hill, whose boys were several years older and always taunting my friends and me, took it upon themselves to take a hose and spray the hill down with water at night. With fresh ice on the hill, it was a fast run and we were assured no cars would try to make it up the hill. They also scrounged up a metal oil drum with the top cut out in which they’d keep a fire going. As construction was beginning in the woods south of Warren Street, with streets being laid out and a few homes being built, there was plenty of scrap lumber available. Someone had even brought smudge pots, black metal cylinders that were used to mark hazards like the end of pavement in construction areas, and used these to provide a little light along light the sled hill at night. My brother, sister and I felt left out as our parents didn’t let us go out at night. But during the day, for the week we were out of school, we got to enjoy the hill as we shared our sled, which was one with metal runners and a wooden deck and a wooden slat that allowed you to twist the runners in an attempt to give the vehicle some maneuverability (which we needed as we made our way through the path and into the woods).

Of course, what was joyous for us wasn’t for our parents and other adults in the neighborhood. Many families were stuck. My father, unable to drive our newer car, was able to get around in our older and heavier Buick for which he had tire chains. Early in the storm Dad stopped by one of the fabricating plants he inspected and borrowed a few sheets of steel. Placing these in the trunk, over the back axle, he was able to go just about anywhere. But other families were not so lucky. We heard stories about families being stranded along I-95 and how farmers along the freeway took in families whose cars were in the ditch. But that didn’t affect us kids. We were happy; we were out of school for a week. However, I’m sure that by the time we returned, more than half the moms in Walnut Hills were on the verge of losing their sanity.

We only lived in Petersburg for three years; that next summer we moved back into North Carolina and near the ocean, where it seldom snowed. I’d be in my thirties before I saw another blizzard and every snow since has been measured against the one we experienced in ‘66.

For another story about living in Walnut Hills and our local Civil War site, "Fort Hell," click here.

Ron: Memories of a Mentor, Part 2

I hope everyone had a great Thanksgiving. Eating with friends means that my refrigerator isn’t overloaded with turkey (some will say that one turkey in a house is enough anyway). But it was a good day and a friend did a great job smoking a turkey and his brother-in-law brought in a wonderful mini-keg of Stout from a local micro-brewery. This should be a new tradition as the Pilgrims loved their beer. Below is part two of my memories of working with Ron… Here you get to see a little different side of him. I still need to dig out some old photos.


Ron taught those of us on staff to make the best of any situation. We were a small staff; there were only five of us. Twice a year, Ron would pull us away for a three day retreat. This was a time for planning and training, and we worked hard. But Ron was never one to let hard work get in the way of having a good time. Often we’d hold these retreats in beach houses owned by one of our council board members. In addition to planning out our work, we’d fish and take turns preparing fancy seafood dinners. If the water was still warm, we’d swim and I remember one such occasion when we all, after having worked all day and relaxed with drinks and a big meal, played football in the surf after dark.

One fall morning we all meet one such beach house for one of these retreats. Ron unlocked the door and we began to barge in with boxes of food, cases of beer, bottles of booze and bags of chips, along with flip charts and calendars and other assorted accruements. We were all shocked as a barely dressed woman stepped out of the bathroom and squealed and ducked back in. Then, in the commotion, a young man appeared from the bedroom as the coed returned from the bathroom with a towel wrapped around her. She asked who we were. Ron told her and that he’d arranged with so and so to use the house for a few days. So and so turned out to be this girl’s father. Embarrassed and concerned her daddy might learn she’d taken a premature break from college in order to entertain her boyfriend, she asked for a few minutes to pack up. Ron was polite and said that we were all in need for some breakfast and that when we return, we’ll have forgotten what we’d seen. We left. An hour later we returned; the woman and her illicit boyfriend were gone. I’m sure when Ron dropped a thank you note to her Daddy, he omitted the fact that it had been our pleasure to meet his daughter.

Ron had a temper and never liked it when things didn’t go the way he’d plan. In one staff meeting, where he learned that several assignments had been dropped, Ron started cussing and fussing and marched us into his office. Ron’s desk was always immaculate and he started giving lecturing us on how to organize our mail so that everything got done. He had a three bin file on the edge of his desk. His goal was to never handle a piece of paper more than twice. When he opened his mail, if it could be handled immediately, he did so. If it was of top importance and wouldn’t take much time, it went into this top bin. Second bin was for things that weren’t critical and the bottom one was for things he wanted to look at but was not so important that the world would end if he didn’t get around to it. In his rant, Ron picked up the stack of papers in his top bin. On the bottom of this stack was a Hustler magazine and we all started to smirk. Ron’s face got redder and redder as we all broke out into laughter. Finally, before Ron blew a gasket, someone pointed to the magazine. Ron looked at the bottom of the pile and laughed. His lecture had come to an end as he made a quip about his priorities.

Ron should have been on Madison Avenue. Not only was he a good salesman, he was a master marketer. Even when we were doing things like raising money to pay off debt, Ron could come up with positive campaign slogans and materials that turned what many would have considered drudgery into an opportunity to celebrate. He always told his staff that when an event was over, it didn’t matter how good it was. What mattered was how people thought it went. If it was the greatest event in the world and only those who were there knew about it, it was a flop and then next time we’d have to work just as hard. However, even if the event was mediocre, but everyone thought it was great, then it was a success and the next time such an event would be even easier to promote. Ron encouraged us to learn the stories from scouts and leaders and to tell them in order to promote the program. Knowing I was interested in photography, Ron encouraged me to shoot photos whenever possible. With the scouting program financing my film and developing chemicals, I photographed everything. As I was working in rural areas with smaller newspapers, I often had full page spreads of my photographs showing scouts in action. Although at the time my writing was limited to an occasional press release, I’m sure Ron’s insistence on telling stories influenced my writing more than I could have imagined.

Perception was also important in how we did our jobs. Ron taught us that you always left your business card and even encouraged us to stop by places in which we knew someone wouldn’t be home or in the office. Leaving a business card was almost as good as making a face to face visit. It didn’t take as much time and it left the perception that we were hard at work (in truth, when you have hundreds of volunteers, such time saving techniques were necessary to help everyone feel connected and cared for. He told stories about dropping off his business cards in mail boxes in the middle of the night. I never did that, but I wouldn’t put it past Ron. In addition to dropping off business cards, Ron was always writing notes to people—both to volunteers as well as his professional staff. Whenever we did something well, he’d write us a note and encourage us to do likewise. To this day, I always care a few note cards in my folder, a habit I learned from Ron.

A few years ago, in writing about Roscoe (one of my scoutmasters), I told about a forest fire that forced the evacuation of our council’s camp during a camp-o-ree which involved all the council’s districts with over a thousand boys on site. After everyone had been safely evacuated, the staff all stayed behind. Ron went into town to get more water hoses so we could have hoses available at all the buildings. He came back, not only with water hoses, but with a cooler of beer and snacks. That night, the humidity rose, the wind died, and the fire laid down, burning in a bay (swamp) at the edge of camp, not too far from the camp office. We were told to watch the fire and to let the forest service know if it started to come out of the swamp. Rod got the bright idea to haul lawn chairs and the cooler up to the roof of the camp office. We took turns napping and watching the fire, while enjoying cold beer and chips. The next morning, as the wind picked up and humidity dropped, we worked liked crazy putting out spot fires and watering down buildings, but that night we made the best of the situation.

Ron: memories of a mentor

Going home always seems to prime the pump when it comes to memories from the past. I’ve been working on several stories from my childhood and young adult years. This is my first installment of a series about working with Ron, a man who was my boss from February 1981 through February 1984. In addition to being my boss, Ron was also a mentor. Somewhere I have photos of Ron and of my scouting days and maybe I'll get around to copying them and including a few in this blog.

With our plates overloaded with barbeque, cole slaw, baked beans and hushpuppies, Ron and I went searching for empty seats at the makeshift tables that filled Clarkton’s tobacco warehouse. It was a month or so after market, but the sweet smell of Brightleaf Tobacco lingered. We nudged our way to a couple empty seats. Ron turned to the man and his wife sitting next to them and asked if these seats were available.

“Ya’ll good Democrats, aren’t you?” the man asked in a strong southern dialect.

“Hell yeah, wouldn’t vote no other way,” Ron shot back.

I about dropped my plate as I knew Ron had never voted for a Democrat in his life.

It was homecoming day for Jimmy Green, North Carolina’s Lieutenant Governor. Green had just been acquitted of some kind of corruption charge. I was a young district scout executive and since many of Green’s supporters were also scout volunteers, they’d arranged from him to give a sizable gift to our camp and I was there to be a part of presenting him a plaque in front of his friends and neighbors on this day of celebration. Ron was my boss, the council executive, and I had told him about the program and he asked if he could tag along. Waiting for the program to began, we ate our barbeque and drank glasses of ice tea. Ron, with his Mississippi accent, fit right in.

Ron was a salesman, and a good one. He’d recruited me to work for the Boy Scouts, taking a significant pay cut when I left the bakery. He was also a good teacher and mentor and to this day I am indebted to him. Under Ron’s tutelage, I learned to run successful fundraising campaigns which not only raised money, but empowered people to feel a part of the organization. Although on this day in Clarkton, we were honoring someone who’d given a large gift to the scouting program, Ron continually emphasized to his staff that we go after every gift, regardless of size. Emphasizing the importance of grass root gifts, Ron told and retold the story of Big Jim Folsom, a populist governor from Alabama in the mid-20th Century. Whenever Folsom spoke, he passed the hat and encouraged people to put in what they could. “Even if all you have is some change,” Folsom would quip, “that’s fine; every gift is important and we will use your gifts to fight for you.” Folsom’s advisors questioned this policy, reminding him he had plenty of fat-cats backing him and didn’t need to nickel and dime the poor folk, but Folsom knew better. “People make their commitment with money,” he told them, “and if they give me a quarter, I don’t have to worry when the next candidate who comes around seeking their support; they’ve already sealed their commitment to me.

The last time I saw Ron, I asked him about Folsom. We talked for a few minutes about the former governor. Ron, who had later in his career worked with many in Clinton's administration, told me that Bill Clinton could have learned from Folsom’s straightforward approach. According to Ron, Big Jim had once been caught going into a hotel room with a beautiful young woman who wasn’t his wife. He admitted to his constituents that he’d made a mistake, but went on to say that his opponents were out to get him and that girl had been the bait they’d used and anytime they use bait that appealing, they’re going to catch Big Jim.

"Ron," I said, “Monica wasn’t that good looking and furthermore, I don’t think Willie was set up.”

Ron laughed and told me another story. A rumor had circulated that Folsom was known to have cocktails with the Kennedy clan. “That’s a damn lie,” Folsom retorted. “Everyone knows I don’t drink cocktails, I drink my whiskey straight, just like you folks.”

Although Ron had learned the skills of motivating people from a populist governor who was also a racist, Ron worked hard to overcome the prejudices instilled in those of us who grew up in the South. That last day I’d spent with Ron, I reminded him of an incident that occurred one day, not long after I’d started working with the Boy Scouts. Ron and I made a call on a Baptist pastor in Evergreen, a small community in Columbus County which did not have a scout troop at this time. Several parents and kids in the community, most of whom were black, had requested that a unit be started. We just needed to find a chartering organization. We had pleasant chat with this pastor, but he insisted that although he’d love to see a scout program, his deacons would have a fit if black boys were running around in their church. I started to argue about this being an unchristian attitude, but Ron cut me off. He was nice and polite and told the pastor that if things changed, to contact us. We quickly left, but as we drove away, Ron muttered, “That lying son-of-a-bitch.” “Don’t you believe he really wanted the troop,” I asked. Ron said that he felt the pastor and the deacons were of the same mind. Then I asked why he didn’t want to confront the man and he said that there were no way we were going to change his mind while sitting in his study, that it was better to leave, letting him think better of us than we did of him.

Ron chuckled, as I recalled the incident that had happened nearly a quarter century earlier. He wasn’t doing very well, having had numerous surgeries and bouts of chemotherapy in an attempt to fight an aggressive brain cancer. His face was bloated from the drugs and he’d often forget what he was saying. I spent half a day with him while his wife ran errands. At about 11 AM, Ron insisted we have ice cream. An hour later, he decided we needed a sandwich and a beer. Ron was the only boss I had in my life that would treat his staff to drinks at lunch! We talked about working together in the early 80s and what had happened to the two of us since. Ron had risen in the scouting ranks to become the Scout Executive in Washington, DC, where he rubbed shoulders with many of these in government—Republicans and Democrats. He had done well, until his health forced to take a medical retirement, after which he moved back to Wilmington. Although we always exchanged Christmas cards, I had only seen him a couple of times in the 20 years since he’d been my boss. Ron talked about how he hoped to have a chance to write his memoirs before he died. That chance never came. In another two months, Ron would be dead.