American economist
(born October 20, 1927) is President of Henry Kaufman & Company, Inc. and is known, by some critics of his economic analyses and prognostications, as "Dr. Doom." Kaufman worked in commercial banking and served as an economist at the . After the Federal Reserve, he spent 26 years with , where he was Managing Director, Member of the Executive Committee, and in charge of the Firm’s four research departments. He was also a Vice Chairman of the parent company, Salomon Inc. He also served as a director of Lehman Brothers Holdings Inc. and as chairman of the Lehman board's finance and risk committee.
From: Wikiquote (CC BY-SA 4.0)
[T]he most striking feature of America's Gilded Age banking and financial markets is their lack of regulation. Wall Street was periodically upended by... colorful figures such as , Jim Fiske, and Jay Gould to manipulate prices and corner markets. The only force countervailing against such panics was a handful of more responsible investors, most notably J. P. Morgan... [who] engineered a successful rescue operation after the ... That episode inspired Congress to begin... plans for a central bank. After all, Morgan couldn't live forever.
In 1900, industrial workers toiled 10 hours a day, 6 days a week and earning an average of $375 dollars a year. ...[W]orking conditions were typically unsanitary, unsafe, and often fatal, and there were few protections—whether from unions (...a meager 5 percent of industrial workers), employers, or government. ...[S]tate and federal governments frequently trotted out their armed militias to help suppress striking laborers. ...[W]hites lived an average of only 47 years, blacks a mere 33.
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Salomon's growth over the next generation would astound even its most optimistic partners. ...And as we would all see to our amazement, Salomon's rise was reflected in broader and equally dramatic transformations in the financial markets—as credit burgeoned, financial crises occasionally rocked the markets, prices and interest rates moved with new volatility, institutions underwent massive shifts, and monetary policy emerged as the dominant force in sustaining economic growth.
The credit approval process began with the analysis of balance sheets and profit and loss statements. For those who know how to unlock their secrets, these documents can contain hidden traps, as I soon discovered—and was later reminded by some of the more spectacular credit problems of recent decades. Balance sheets tend to overstate assets and understate liabilities. Inventories commonly are assigned a large cash value after they have become obsolete, while receivables that are ostensibly current are quite often in arrears. Inadequate reserves constitute yet another common weakness that is poorly reflected... A receivable is a current asset, but it could be a slow asset.
[T]he nation's middle class was about to embark on an educational revolution that would help boost incomes to unimagined levels over the next three generations. ...Along with the obvious benefits to... individuals, education yielded enormous social and economic returns. Economists have found universal public education in America to be one of the leading engines of economic growth.
In the 1890s and 1810s corporate consolidation inspired an enormous public outcry against the "trusts" (...big business). Newspapers overflowed with editorial deriding... "robber barons," and for the first time in American history the federal government stepped in to regulate... First came the ... designed to limit discriminatory railroad rates, and then the Sherman Anti-Trust Act of 1890—Congresses' first attempt to constrain monopolistic practices. In practice, both acts proved to be weak against the predominant power of big business. For decades, the courts in effect made regulatory policy in how they interpreted... these two...
The federal made some efforts at regulation in 1900, by passing the Gold Standard Act, which allowed state banks to set up branches in small towns and ended the bimetalism debate by establishing gold as the only redeemable metal. Still, the vast majority of banks were local, single unit operations, and access to capital and credit... increasingly difficult as... business enterprises expanded rapidly.