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On this day in economic and financial history...
A fire began in Chicago on Oct. 8, 1871. At first it was thought to be small and contained, but by evening the dangerous blaze had become an inferno. Wire reports from the New York Times after midnight were grim: "God's mercy can only save the city from utter destruction."
It would be two days before the fire burned out. The Times later pronounced it "the ruined city," with over 18,000 buildings worth $200 million destroyed -- nearly $4 billion when adjusted for inflation to the present day. Much of the city's financial infrastructure was gutted in the fire, but many bank vaults successfully defended their contents. One of Chicago's leading bankers told the Times dispatcher to "tell New York to stand ready on the center, and Chicago will rally on the right."
Relief funds flowed in from New York financial institutions. The New York Stock Exchange donated $50,000. The Chamber of Commerce raised $55,000. The Produce and Cotton Exchanges offered $22,000. These and many other donations allowed Chicago's residents to begin an immediate and frenzied reconstruction. Within a year, $50 million of new buildings had been constructed.
The Chicago Stock Exchange opened 11 years after the fire, and the Chicago Mercantile Exchange would be founded in 1898. The Mercantile Exchange is now part of the CME Group (NYSE: CME ) following its merger with the Chicago Board of Trade. CME Group became 90% owner of the Dow Jones Indexes, including the heavily followed Dow Jones Industrial Average (INDEX: ^DJI ) , in 2010. Today, the Chicago Stock Exchange regularly completes trades of over 20 million shares each day, and the Chicago Mercantile Exchange's parent company now controls the largest derivatives marketplace in the world, with nearly over 10 million contracts traded on most days.
A commentary in the Chicago Tribune, published the day after the fire burned out, told residents: "Cheer Up... Chicago Shall Rise Again." It has, from 334,000 citizens in 1871 to 2.7 million today, supporting the fourth-largest GDP of any city in the world.
Every beat of my heart
Arne Larsson had a history of heart problems. On Oct. 8, 1958, the 43-year-old's failing health forced him into a Stockholm hospital for surgery, where Drs. Rune Elmqvist and Ake Senning implanted the world's first fully internal pacemaker. Elmqvist, also an engineer at Siemens (NYSE: SI ) , had to rig a temporary solution that only lasted three hours due to the haste of the surgery. However, a better pacemaker would quickly replace the first, and 24 other pacemakers would follow that second implant for Larsson, who lived to the ripe old age of 86.
This first implant marked the unofficial beginning of modern implantable medicine. By 2016, the worldwide market for electronic medical implants is expected to reach $25 billion. The total market for all medical implants is estimated to be worth more than $200 billion today, with Dow component Johnson & Johnson (NYSE: JNJ ) alone generating approximately $18 billion in medical-device sales in its most recent fiscal year.
Not too big to fail
The Franklin National Bank failed on Oct. 8, 1974. At the time, it was the largest bank failure in American history by nominal assets. It had been kept afloat for a year by $1.7 billion in Federal Reserve loans, but the bottom fell out on Oct. 8, and the institution was declared insolvent and its assets sold off to a banking group co-owned by some of Europe's largest banks.
A dividend suspension, following news of $83 million in losses through the first half of the year, preceded the insolvency. Franklin National's precarious situation caused a run on its deposits, with depositors withdrawing over half of the $3.72 billion in assets it had reported two years earlier by the time of the failure.
Swift action by the FDIC prevented any interruption in service or loss of deposits for the bank's account holders. However, the tide of bank failures would rise significantly in the years following Franklin National's collapse. Over a thousand banks failed as a result of the savings and loan crisis.
The European American Bank, which acquired Franklin National in 1974, was sold to Citigroup (NYSE: C ) in 2001. Citigroup would narrowly avoid becoming a far larger banking casualty during the financial crisis when it received a $45 billion bailout from the Troubled Asset Relief Program.
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