Last Updated Nov 4, 2008 6:12 PM EST
But now it appears that, while 1873 may be apt, there are still more precedents for the current meltdown even further back in history.
Writing in Commentary, for example, John Steel Gordon, author of "An Empire of Wealth: The Epic Story of American Economic Power," says:
Fueled by easy credit, the real-estate market had been rising swiftly for some years. Members of Congress were determined to assure the continuation of that easy credit. Suddenly, the party came to a devastating halt. Defaults multiplied, banks began to fail. Soon the economic troubles spread beyond real estate. Depression stalked the land.When I think of 1836, I usually remember the Alamo. But, according to Gordon, 1836 was a banner year for financial fickleness, brought on in part by the anti-financial initiatives of President Andrew Jackson.
The year was 1836.
Much of this easy-credit-induced speculation had been caused, as it happens, by President Andrew Jackson. This was a terrific irony, since Jackson, who served as President from 1829 until 1837, hated speculation, paper money, and banks. His crusade to destroy the Second Bank of the United States, an obsession that led him to withdraw all federal funds from its coffers in 1833, removed the primary source of bank discipline in the United States. Jackson had transferred those federal funds to state banks, thereby enabling their outstanding loans to swell--Recovery, says Gordon, did not even begin to set in until 1843.
The result was a credit crunch. Interest rates that had been at 7 percent a year rose to 2 and even 3 percent a month. Weaker, overextended banks began to fail. Bankruptcies spread. Even several state governments found they could not roll over their debts, forcing them into default. By April 1837, a month after Jackson left the presidency, the great New York diarist Philip Hone noted that "the immense fortunes which we heard so much about in the days of speculation have melted like the snows before an April sun.
Sounds pretty rough and pretty modern, doesn't it? Surely, you can't go back much further than the early 19th century to find anything like the crisis we face today, right? Well, how about 1492, the year Columbus sailed the ocean blue? Not to be outdone in the literary Wayback Machine department, Marcello Simonetta writes that the Renaissance's financial crisis actually had its roots around a century earlier than that, with the birth of modern banking itself:
Founded in 1397 by Giovanni di Bicci, the [Medici banking conglomerate] reached its peak under the wise management of Cosimo de Medici, the famous patron of the arts."Wars of choice" and high taxes to pay for them, political infighting, lack of coordination among bank branches, lack of transparency, lack of liquidity -- the Medici bank rarely had more than 10 percent cash on hand -- and finally embezzlement in the form of early golden parachutes lead to a huge credit crunch that eventually brought the Medici bank down and ended in the ouster of the Medici heir from Florence.
The expansion of the banking activities continued at an extraordinary pace until his death in 1464. Gold and cash deposits along with commercial ventures and merchandise exchanges guaranteed a continuous flow for high-interest lending, which was wisely supervised. But the Bank soon began to overstretch itself--
Meanwhile, Edward Rothstein, asks the question, "What Would George Bailey Do?" You will remember George Bailey as the affable, small town savings and loan manager played by Jimmy Stewart in "It's a Wonderful Life." "George's view of the savings and loan as a form of social welfare institution," writes Rothstein, "was learned at the feet of his father, who built that savings and loan, telling him, 'It's deep in the race for a man to want his own roof and walls and fireplace. And we're helping him get those things'." No doubt that's what Congress had in mind for Freddie and Fannie. And then Wall Street found "that such risky loans could be bundled with others like some multipack at Costco and resold as highly rated securities."
But as far back as we can go into history and as deep as we can delve into film, John Lanchester thinks that when the financial system went postal, it also went post-modern.
But, if you really want to get the long view of finance, in crisis or otherwise, try Niall Ferguson's "The Ascent of Money: A Financial History of the World."