Paulson's Plan.(The Talk of the Town)(Hank Paulson)

Publication: The New Yorker

Publication Date: 17-DEC-07

Bookmark this article Print this article Link to this article Email this article Digg It! Add to del.icio.us RSS

COPYRIGHT 2007 All rights reserved. Reproduced by permission of The Condé Nast Publications Inc.

In late October, 1907, the American financial system appeared to be on the verge of collapse. The trouble had begun with a seemingly minor event--a failed attempt at stock-market speculation by a bank owner named F. A. Heinze--but it spread quickly after news of Heinze's losses prompted a run on his banks by worried depositors. In a matter of days, financial institutions with connections to Heinze were facing similar withdrawal frenzies, and the stock market was falling precipitously. Amid the turmoil, the financier J. P. Morgan stepped in. Consulting with the Treasury Department, which committed millions in deposits to weak banks, Morgan browbeat bankers into bailing out struggling institutions, funnelled money to cash-starved brokers, and even convinced clergymen in New York City to dedicate their Sunday sermons to the need for "calmness and confidence." Within a few weeks, the fear and chaos...

Read the full article for free courtesy of your local library.