It was October when the financial panic struck. Plans by certain captains of industry and Wall Street speculators to gain great wealth had backfired. The flight of money and the dumping of stock created a market freefall. One bank fails immediately. Others quickly follow.
Wall Street barons invest millions to try to prop up the market. It works -- temporarily. A week later, the real panic sets in, threatening the “too big to fail” institutions.  Financial titans issues calming words and attempt to support each other, but it doesn’t work.

Wall Street appeals to Washington and Washington -- despite the violations of the law that led to the crisis -- steps in to bail out the big banks. Along the way, smaller banks fold, and Main Street loses all.

Sound familiar?

That was the Panic of 1907. The major players were President Theodore Roosevelt and John Pierpont (J.P.) Morgan. It is described by Nomi Prins in her book “All the Presidents’ Bankers: The Hidden Alliances That Drive American Power.”

Prins is a former Wall Street executive, journalist, television and radio commentator. She is the author of five books, including “Other People’s Money” and “It Takes a Pillage.” Her writing has been featured in The New York Times, Fortune, Mother Jones, The Guardian and other publications. She is also a senior fellow at Demos, a public policy organization.

In her latest book, she describes the Panic of 1907 and, later in 1910, the secret meeting of the “money trusts” at Morgan’s compound on Jekyll Island, Ga., a retreat for the rich and famous of the time.

Morgan understood the lesson from the Panic of 1907. He recognized the “Big Six” financial institutions didn’t have enough money to stop the run on the banks and prevent the collapse of the stock market. They needed help—government help—to protect themselves and their institutions. The end result would be the creation of the Federal Reserve System in 1913.

A Century Of Great Wealth, Painful Lessons

Prins describes in painful detail the financial history of the next 100 years, and how this scenario is repeated. And repeated.

“All the Presidents’ Bankers” is thoroughly researched and contains 69 pages of notes, along with glossaries of the key players of the past 100 years and the financial terms used in the book.

 She recounts some of the lowlights of the financial history of the last 100 years, from the Great Depression to the Third World debt crises to the savings and loan crisis to the Mexican crisis to the Enron scandal to, finally, the Great Recession of 2008.
At each instance, it is like watching an instant replay of a car crash: You know what’s coming, but you just have to watch.

The book might anger some readers and frighten others because the cycles of boom and bust occur at frequent intervals in this country, usually with the taxpayer footing the bill.

What is amazing is that very little seems to change: The main players at any given time could be substituted with players from another era.  Issues don’t change either: Republicans are still arguing about cutting taxes and deregulation as they did in the 1930s, while Democrats urge rules and constraints.

Take the Great Depression compared to the Great Recession. As described by Prins, there appear to be lots of similar causes. However, the reactions of government were different.

President Herbert Hoover, by all accounts a very good man, gets the blame for the causes of the Great Depression when the actual seeds of it were sown during the Warren G. Harding and Calvin Coolidge presidencies. During the Great Depression, Hoover tried everything a fiscally conservative Republican’s philosophy would allow. But, in the end, nothing worked.

Hoover would later decide “panic” was the wrong word to use and decided it would be better to call the economic downturns “depressions.” However, after the Great Depression, the word “depression” would never be used again.

The lessons learned from that time and the people involved probably prevented the world from another Great Depression following the Wall Street crisis of fall 2008.

Privatizing Profits, Socializing Failures

The other story she tells is how members of Wall Street banks seem to appear at regular intervals as Treasury secretaries and economic advisors and in other financial roles in Washington, overseeing Wall Street. The revolving door seems to have become part of American finance: Some players cause the economic crises while others work to solve them -- and then they trade places.

Prins quotes Louis D. Brandeis, who said 100 years ago: “We must break the Money Trust (Wall Street) or the Money Trust will break us.”

Prins writes that the country has moved past “too big to fail” to “too powerful to control.”

To provide some urgency to that premise, she notes that the U.S. government added $2.4 trillion to the U.S. debt by simply cleaning up after Wall Street’s fall 2008 collapse.

The system has evolved, she wrote, to where we privatize profits and socialize the failures so the big banks have nothing to fear from trying riskier and riskier ventures.

 If the $2.4 trillion number doesn’t worry the country, Prins writes, this should: The original Big Six banks of 100 years ago are still around today in different forms, and they are more powerful today than their ancestors because of sheer volume of wealth that they control. It is estimated that by 2022, these banking firms will control a quadrillion dollars (that’s a 1 followed by 15 zeroes).

The takeaway from this history is that if big banks are not controlled, the country will be --  despite the pledges of politicians -- condemned to a future of Wall Street bailouts.  
“All the Presidents’ Bankers: The Hidden Alliances That Drive American Power” by Nomi Prins. Nation Books. April 2014; 521 pages.

William L. Haacker is an award-winning journalist and editor who has worked for various New Jersey newspapers, including Gannett New Jersey.