80 Years Ago: The Bank of United States Fails

Gary Alexander notes some important market/economic anniversaries are happening this weekend:

December 12, 1791: The Bank of the United States opened. It was the first (eventually failed) experiment in U.S. central banking. Ironically, a bank by a similar name failed over a century later, around the same date: On December 11, 1930, the New York branch of the Bank of United States filed for bankruptcy, in the nation’s single worst bank failure. Despite its official-sounding name, this Bank of United States was privately held. It was not an arm of the Fed. It had 400,000 depositors in 60 branches. Many of those depositors were poor immigrants. By year’s end, over 1,300 banks had failed in the United States.

On December 12, 1800: Washington, DC was established as the new capital city of the United States, after lower Manhattan (Wall Street) and Philadelphia had served their time as America’s first capitals.

December 12, 1805: Henry Wells, the father of speed-conscious delivery and creative banking services, was born in Thetford, Vermont. Wells began as an agent for Harden’s Express in upstate New York. Obsessed with the express transport business, he first set up shop as Livingston Wells and Pomeroy’s Express, which ferried “goods, valuables, and specie” between Buffalo and Albany. In 1844, Wells joined forces with William Fargo and Daniel Dunning to start Wells & Company. In 1850, he merged these two concerns into the American Express Company, which linked the Eastern seaboard to California. In 1852, he teamed with Fargo to form Wells, Fargo & Co. In retirement, Wells spent his fortune on charity, mostly to aid chronic stutterers and to establish Wells Seminary (now Wells College) for women. Henry Wells died in Glasgow, Scotland, two days short of his 73rd birthday, on December 10, 1878.

On December 12, 1900, the original Charles Schwab, age 38, president of Carnegie Steel, was honored at the University Club (at 58th St. & 4th Avenue), in the presence of 80 great titans of industry, including Andrew Carnegie, E.H. Harriman, Jacob Schiff, and J.P. Morgan. Asked to make a few remarks, the charismatic young Schwab knew that this was his greatest sales opportunity ever. He spoke for over an hour, during which time he laid out his vision for a consolidation of America’s greatest steel companies into something he called “U.S. Steel.” Sitting next to Schwab, J.P. Morgan rolled his unsmoked cigar back and forth during the entire talk, and then asked for a private meeting with Schwab. Morgan bought the idea and U.S. Steel was born. U.S. Steel was so huge that on its first day of operation, it was almost triple the size of the U.S. government and it represented 13% of the entire U.S. manufacturing sector.

On December 12 1901, Guglielmo Marconi (1874-1937) sent a radio signal from an antenna in Cornwall, England, to Newfoundland, Canada, 2,232 miles away, in the first trans-Atlantic radio signal. This news literally electrified the world. Previously, the scientific community had argued that the curvature of the earth would limit the transmission of any radio waves to a 100 to 200 mile radius. In 1910, Marconi hired a Russian emigrant, David Sarnoff, as a telegraph operator. Sarnoff was the first person to pick up the Titanic’s S.O.S. call, staying at his post for 72 straight hours. Sarnoff later proposed that the Marconi Company market a “radio music box,” which led to the birth of RCA in 1921. In one of those delicious ironies of history, David Sarnoff died on December 12, 1971, 70 years after Marconi’s historic invention.

On December 12, 1914, the New York Stock Exchange reluctantly opened its doors for limited stock trading, after being closed since the end of July, 1914, in fear of panic selling at the outset of the Great War in Europe. Only a few issues could be traded, and for cash only. Volume was so low that it reached a 20th Century nadir on December 30, when fewer than 50,000 shares traded. Full trading restrictions were not removed until April 1, 1915, making a total of eight months partial closure: four months total closure and four months of partial closure. As a result of this excess of paranoia, a new tradition emerged, restricting all future closings to “no more than three days.” Until 9/11, 2001, the market never took a four-day break. (This is why the stock market holds a half-day session on the Friday after Thanksgiving.)

On December 11, 1929 – six weeks after the Wall Street crash – a winning design was announced for the Empire State Building, which rose to the sky throughout 1930 and was finished in 1931. Life goes on…

December 11, 1931: Japan went off the gold standard. Britain had ended the gold standard earlier in 1931. America would hold on to the gold standard for two more years, until new President Franklin Roosevelt confiscated privately-held gold in 1933 and then raised the price of gold from $20.67 to $35 per ounce.

Posted by on December 10th, 2010 at 9:23 am


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