 | Summaries and Customer Reviews are supplied by Amazon.com | "Before reading The Panic of 1907, the year 1907 seemed like a long time ago and a different world. The authors, however, bring this story alive in a fast-moving book, and the reader sees how events of that time are very relevant for today's financial world. In spite of all of our advances, including a stronger monetary system and modern tools for managing risk, Bruner and Carr help us understand that we are not immune to a future crisis."
—Dwight B. Crane, Baker Foundation Professor, Harvard Business School "Bruner and Carr provide a thorough, masterly, and highly readable account of the 1907 crisis and its management by the great private banker J. P. Morgan. Congress heeded the lessons of 1907, launching the Federal Reserve System in 1913 to prevent banking panics and foster financial stability. We still have financial problems. But because of 1907 and Morgan, a century later we have a respected central bank as well as greater confidence in our money and our banks than our great-grandparents had in theirs."
—Richard Sylla, Henry Kaufman Professor of the History of Financial Institutions and Markets, and Professor of Economics, Stern School of Business, New York University "A fascinating portrayal of the events and personalities of the crisis and panic of 1907. Lessons learned and parallels to the present have great relevance. Crises and panics are as much a part of our future as our past."
—John Strangfeld, Vice Chairman, Prudential Financial "Who would have thought that a hundred years after the Panic of 1907 so much remained to be written about it? Bruner and Carr break significant new ground because they are willing to do the heavy lifting of combing through massive archival material to identify and weave together important facts. Their book will be of interest not only to banking theorists and financial historians, but also to business school and economics students, for its rare ability to teach so clearly why and how a panic unfolds."
—Charles Calomiris, Henry Kaufman Professor of Financial Institutions, Columbia University, Graduate School of Business |
Average Customer Rating:   Panic of 1907 I loved this book. It goes through the Panic of 1907 so thoroughly that you feel like you were actually there. You learn so much about J.P. Morgan and the authority he held when he was on the earth. The author does a great job of showing how it parallels our current economic situation. Panic of 1907 Caveat: Its been more than a month since I read The Panic of 1907 (Panic). I read it for the pleasure of reading history so I took no notes. Consequently, this review will be a broad stroke, impressionistic recount of my take-aways. In addition, the book I read immediately after this was The Creature from Jekyll Island (Jekyll)and so my whole take on our banking system and its progenitors is negative.
There are two short comings here: 1) Panic reads like a hymnal from the Church of Morgan, filled with Morgan hero worship and 2) the lessons offered are not worth knowing. The picture drawn of Morgan resolutely plowing through the streets of the financial district on foot, parting a sea of worried weaklings with the power of his reputation and confidence, seems melodramatic and fawning. As to the lessons drawn, the idea that we (or regulators?) should be on the lookout for the development and convergence of a handful of unmeasurable economic, sociological and political conditions seems like a mushy formula for detecting the advent of financial disapointment.
And what of this very word, "panic", which in general usage describes supposedly irrational, disruptive and usually futile attempts by bank depositors to recover their money? The word may be unduly pejorative and suspect in the mouths of bankers. When a bank precipitously "calls in" loans from borowers whose circumstances have changed for the worse, that is accepted as a prudent, sadly necessary response by a lender. When depositors take the same action against a bank whose fortunes have changed, that is uncharitably called a panic. Seems like a distinctly one-sided way to view things.
Here's where Jekyll comes in. Jekyll preaches that the way to detect a bank's succeptibility to panics is to ask whether the bank's business is fractional reserve lending. If it is, then your job is done. You have identified a bank that has rendered itself incapable of making all, most or even many of its depositors whole at any given time. Don't sniff around for indicia of danger wafting through the air, look for them in the business practices of the bank. Of course, Jekyll also suggests that banking panics are now all but permanently bannished by the inflationary attentions of the Federal Reserve and its sidekick, the FDIC (the EMS of depositor trauma). God bless mighty Morgan for leading us all out of the desert of recurring, destructive depositor uprisings and to the safer world of American central banking (the money trust) where these annoyances are now literally, very literally, papered over. I am Frightened My first exposure to economic theory was Econ 101 in 1952 with Paul Samuelson's 1st or 2nd edition textbook. After a dozen years of entrepreneurial activity, I pulled that old text off the shelf and reread it. Even with my limited experience I knew there was more to the story. So I began reading everything I could find on economics from Keynesian (such as Samuelson), Econometrics (such as Chicago School, Friedman), and on to Austrian School (such as Mises, Hayek).
I still read a lot of books and often use Amazon to find them, order them, and read reviews. I have never written a review until now. It was the tenor of the reviews, not the book, that disturbed me and caused me to comment on the book.
The Panic of 1907 was a fun read and I have not so much quarrel with the books content as with the omissions. Bruner and Carr have done a great deal of fascinating research and presented it in a scholarly manner. The reviews, however, bother me. Of about 48 reviews, 75 percent were in agreement with the authors, the rest disagreeing. I am among that last 25 percent.
Virtually every economist I have read whose views make sense to me at all attribute a large share of our periodic booms and busts to good old credit expansion. Obviously, the financial system in 1907, experienced the same shock as in 1929 and as in the year 2000. Money created from thin air anyplace in the system can start a boom. As the resulting inflation progresses, people want to spend the money before it loses more value. These smaller cash holdings result in significant growth of money in the system. People feel impelled to borrow more and more for less and less advantageous projects. A boom may develop that will carry on until the system breaks down as the economic growth declines enough to fall below the monetary growth rate. The money that had come into the system as excess credit then washes out of the system and a recovery is at hand. Of course, there is a lot of pain as firms and individuals lose their poor bets.
I waited in vain for the authors, who run the business school at the University of Virginia, to chart this most basic characteristic of the business cycle and compare it to present booms and busts. By the time I got to the end of the book, I had to acknowledge the likelihood that Bruner and Carr have a very large lacunae in their knowledge of money theory. That is not so disturbing, as I have found a very large number of economists who write books that also exhibit the same trait.
It is the position of the readers who critiqued the book that cause me profound concern. If they represent the sample of economics educated persons which probably contains economists, graduate students, government employees, bankers, and others: then I truly fear for the ability of our economy to recover from such profound damage as is being inflicted by the highest level managers in government and banking on our monetary system in the present day collapse of a the wildest excess of unbacked credit in history.
The stated purpose of the book as a lesson in economics gets an F from me. I learned nothing. It appears the authors learned nothing. But worse, readers were subjected to fallacious economic theories that have been extant in our economy for decades. And even much worse, a large majority of readers seem to support policies derived from theories that seem likely to bring this economy to its knees.
A Panic of One's Own? Tolstoy's comment about happy and unhappy families has its counterpart in investment: all euphoric investors are euphoric for the same reasons, but all panic-stricken investors are panic-stricken for reasons unique to them. Challenging the notion that each episode of market panic is unique is one of the two central objectives of this remarkably informative book on the panic of 1907. The other objective is to avoid providing an account of the panic that is overly general. All too often, Bruner and Carr maintain, the explanation of a financial crisis is either too generic or too specific. Hence, their aim is to provide an account that is "neither too idiosyncratic nor too simplistic."
The result is the identification of seven inter-related "element" or "factors" that surface during crisis periods. Bruner and Carr claim these factors converged in 1907 and reappeared 100 years later. They are: buoyant growth, complexity, inadequate safety buffers, adverse leadership, real economic shock, undue fear and/or greed and failure of collective action.
Perhaps invariably this book is more hypothesis than proof. More work will be required to establish the usefulness of their framework. They have, however, decisively brought to life the panic of 1907 and, in a separate chapter, shown the relevance of 1907 to our own real estate induced panic. Their description of the panic and the response of market participants makes for both gripping and, considering how little has changed, sobering reading. With respect to the latter, what strikes the reader is how little has changed a century after Otto Heinze inadvertently struck the match that started the fire by attempting to "corner" shares in the United Copper company.
What I find disconcerting in books that attempt to explain a financial crisis is the scant attention paid to the question of how to prevent or more realistically prepare for the next one. On this point, however, Bruner and Carr are instructive. Their emphasis on the importance of collective action offers a clue going forward. Nothing struck me more in this book than the pivotal role of J. Pierpont Morgan. Morgan, already in his late sixties at the time of the panic, worked tirelessly to contain the panic by cajoling and uniting the otherwise independent players in New York's financial community. That his intervention may not have been entirely selfless is beside the point when one considers his impact. No single "factor" did as much to limit the duration and depth of the market's decline as the active involvement of Morgan. What's the lesson? This need for collective action in the financial community certainly surfaced during the demise of Long-Term Capital Management. It is in play in this crisis. All of which prompts the question: Should the Fed or Treasury periodically identify key players and engage in "war games" or otherwise prepare them for the next time they are called upon to act collectively? Great lessons from the past Why in the world are we talking about 1907 when we are dealing with the current financial crisis? Because there are many similarities. I found this book very interesting especially after reading other books on the subject whose authors suggest to getting rid of the Federal Reserve and the FDIC. Both of these institutions were born because of the Panic of 1907, which was really a liquidity crisis, similar to what we saw in late 2008. In 1907, the person who saved the day was J.P. Morgan, and today, people such as Ben Bernanke and Tim Geithner are trying to do the same.
This book is perfect for readers who would like learn more about what is happening with our economy by looking at the past. I enjoyed reading this book very much.
- Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market |  |
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