Banks Were Too Big To Fail 200 Years Ago, Too: Study

Banks were too big to fail 200 years ago, too.

If you think American banks are too big to fail now, you should have seen them 200 years ago.

Banks dominated the American corporate landscape in 1812, according to a study by professors Richard Sylla of New York University and Robert Wright, of Augustana College in South Dakota, for Bloomberg View. The professors reconstructed what the Fortune 500 would have looked like 200 years ago and found that banking and insurance dominated Corporate America in its infancy.

According to their list, 130 of top 500 U.S. companies back then were banks, making it the most-represented sector in Ye Olde Fortune 500. Second on the list were turnpike companies -- an industry no longer in existence -- with 110 representatives. There were also 89 insurance companies on the list.

Nine of the top 10 and 19 of the 20 biggest companies back then were banks, including City Bank of New York, at No. 5, known today as Citigroup; and Manhattan Co., at No. 8, known today as JPMorgan Chase. There's a Bank of America at No. 2 on the list, but it's no relation to today's Bank of America, which is the No. 9 company in the modern Fortune 500. (Today's Fortune 500 are ranked according to revenue, not capital. Based on market value, the modern Bank of America doesn't even make the top 20 biggest companies.)

Beyond sheer numbers, the banks in the Ancient 500 had a lopsided share of the total capital held by the nation's biggest companies. The 130 biggest banks back then were allowed a total of $88.4 million in equity capital -- the government regulated such stuff in those days. That represents 54 percent of the total capital allowed to the top 500 companies. No other sector even came close -- insurance was second on the list, with less than 18 percent of the total capital allowed.

Today, the market value of all the financials in the S&P 500-stock index, including both banks and insurance companies, is less than 15 percent. Using capital to rank companies as the professors did, there's only one financial in the top 10 biggest companies by market cap today -- insurance giant Berkshire Hathaway.

So does this relative shrinkage mean the banking sector is small enough that we don't have to worry about it wrecking the economy again?

Not by a long shot.

It's all fun and games to measure simple stuff like market cap and revenue, but those are meaningless measures of how important banks are to the economy. Banks had less than 20 percent of the total market cap in the S&P 500 when they brought down the global economy in 2008.

The important thing is how much debt these banks are carrying, and by that measure, they are still way, way too big to be safe.

Comments

[Terri Skau]

09:33 PM on 04/13/2012

1896: The Morgan Bonds
http://projects.vassar.edu/1896/morganbonds.html

[Terri Skau]

09:31 PM on 04/13/2012

Jefferson's Prophesy
http://www.barefootsworld.net/prophesy.html

[Terri Skau]

09:26 PM on 04/13/2012

The Federal Reserve: History of Lies, Thievery, and Deceit
http://www.scionofzion.com/federalreserve.htm

[iam99]

10:48 AM on 04/13/2012

One reader did point out that Thomas Jefferson died destitute. He had about $100k in debt at the time of his passing, a very large number then. None the less who could dispute that he was a great human being? Luckily he left much material for historians.

[financialpolicy]

02:52 AM on 04/13/2012

The story was quite long and hard to follow: there were lots of detours into explanations of what a derivative is, or explorations of what the BAC stock price was doing that day.

Thanks,
Financial Advisor

[Roosevelt Democrat]

12:21 AM on 04/12/2012

Seems just like today we need a President Roosevelt!

Funny thing is the BANKS TO BIG TO FAIL wanted deregulation so they could compete with the large banks in Europe to loan money to countries Greece, Italy, Portugal, Ireland, and Spain on our subsidized (FDIC) dime.

How fain is that?

Banking Primer:

The Glass-Steagall Act was passed in direct response to the Great Depression and helped to stabilize and rebuild the nation's economy. It expanded the regulatory powers of the Federal Reserve, prohibited banks from trading in corporate securities and created the Federal Deposit Insurance Corporation (FDIC).

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (IBBEA) swept away all state barriers to interstate banking. It allowed financial institutions to locate branches in other states and to purchase or merge with banks headquartered in other states.

The Gramm-Leach-Bliley Act (GLBA), also referred to as the Financial Services Modernization Act of 1999, repealed part of Glass-Steagall, tearing down the walls between banking, insurance and investments. Companies could now merge, partner and operate freely within each other's industries. The act also made it possible for the financial industry to group mortgage and other portfolios, selling them as investments.

Read more: The History of Bank Deregulation | eHow.com http://www.ehow.com/about_5413083_history-bank-deregulation.html#ixzz1rnQNqdM6

[JPETERB]

12:39 AM on 04/12/2012

The Federal Reserve Act of 1913 is the key to much of this banker fraud. Listen to a good lecture by the man who wrote, "The Creature of Jekyll Island" about when, where and who wrote the act.

The Birth of the U.S. Federal Reserve Bank - How usury destroyed ...
► 71:12► 71:12

video.google.com/videoplay?docid...

[Roosevelt Democrat]

01:48 AM on 04/12/2012

You mean the roots of the Rockefeller Republicans?

The Kinder Gentler Republicans, socially progressive but the bedrock of Wall Street! We call them today Clinton Democrats!

[Grouchland]

11:14 PM on 04/11/2012

So, that means that 10 White Men really do rule the world????? Is anyone familiar with this IDEA? That there are 10 men that decide what our lives will be like in a room? That greed is what drives their decisions?

[muck-raker]

07:30 AM on 04/12/2012

I place economy among first and most important virtues, and public debt as the greatest of dangers. To preserve our independence, we must not let our rulers load us with perpetual debt."

-Thomas Jefferson

One of most ungodly and fraudulent institutions ever perpetrated on American people and the world, is Federal Reserve System which through deceit became the central bank of United States in 1913. The idea came about on meeting in Jekyll Island . The bankers in this country, especially J.P. Morgan, created currency panic in 1907 in order to get American people to accept idea of a central bank.

since 1694. The Rothschilds completely dominate banking system. It is estimated their wealth goes into trillions.
Rothschild boasted:

• "I care not what puppet is placed upon throne of England to rule the Empire on which sun never sets. The man that controls Britain's money supply controls the British Empire, and I control British money supply."

The idea of a central bank is to so enslave the people of the country to a debt money system that you continue to collect taxes continuously which just covers the interest. The duped people of the United States are paying about $400 billion dollars per year to the IRS which is the collection agency for the Federal Reserve. By the way, the Federal Reserve is a privately owned bank with 10 private members. The Chase Manhattan Bank is member which is owned by the Rockefellers who are Rothschild Agents.

[Terri Skau]

12:35 PM on 04/12/2012

Muck damn I never thought anyone would ever write an article on this...Maybe we've finally got them to stand up and see and listen to what we've been trying to tell everyone for so long...This is a day of semi celebration..:-))

[kdraper]

09:29 AM on 04/12/2012

Check out Thomas R. Dyes, "Who's Running America Anyway". It is more than 10 people but not many more. It is a pretty good read and awareness expanding. I really enjoyed it. F/F.

[4eva]

10:44 PM on 04/11/2012

The Secret of Oz - Winner, Best Docu of 2010 v.1.09.11
http://www.youtube.com/watch?v=swkq2E8mswI

[AlfredE69]

10:29 PM on 04/11/2012

Plainly stated: Too big to fail is Un American.

Did Rudy's Pool Hall get bailed out when he went out of business because he never replaced the crooked pool cues and his customers stopped coming?

Of course not. Rudy sucked it up and filed for bankruptcy.

These Wall St elites need to suck it up too and not be looking to Big Mommy Government for a hand out.

[Timma]

10:12 PM on 04/11/2012

...that TBTF is an old concept merely proves that it needs to stop...

[Hillbilly49]

07:59 PM on 04/11/2012

Going back to the Banking Regulations imposed by Franklin D. Roosevelt would be a good start for America to get back on a path to progress and prosperity.

[LunaPark]

12:17 AM on 04/12/2012

Going back to ending central banking imposed by Andrew Jackson would be a better place to start.

[JoAnn Kennedy]

06:55 PM on 04/11/2012

http://www.youtube.com/watch?v=OND8fI15AYU The Ascent of Money 1815 Battle of Waterloo the Rothschild's made millions speculating in Bonds and War.

[Richard Keane]

06:33 PM on 04/11/2012

watch the new documentary The Wall Street Conspiracy. www.TheWallStreetConspiracy.com it is powerful information about how Goldman Sachs sold FAKE STOCK into pension funds.

Richard
SiriusNews

[doober]

11:01 PM on 04/11/2012

The more I look at it the more I think that the big banks and Wallstreet are run by the Mafia..

The Supreme court stifled the Rico Act so they cant be charged with racketeering..

[scndchnchtr]

05:46 PM on 04/11/2012

Hmm, I wonder if a turnpike company today could better manage the infrastructure of America or if would just lead to steak dinners and pot holes

[Kenz300]

05:08 PM on 04/11/2012

The too big to fail banks need to be broken up into 2 or 3 smaller ones.

There needs to be a financial transaction tax so that the banks that created this mess can help pay for it.

[PotomacOracle]

06:31 PM on 04/11/2012

Here's support for your position. You're absolutely right. http://preview.tinyurl.com/7zlpq2n

Full article, http://tinyurl.com/7zlpq2n

F & F