A Disastrous Holiday for the American Economyhttp://www.fool.com/investing/general/2013/02/14/a-disastrous-holiday-for-the-american-economy.aspx Alex Planes
February 14, 2013
On this day in economic and financial history...
President Franklin D. Roosevelt's first days in office are often recalled for the bank holiday proclaimed shortly after his inauguration. However, this was not undertaken in a bubble, nor was it an unprompted act. By March 1933, many states had already declared banking holidays, and the proverbial straw that broke the camel's back fell on Feb. 14, 1933, when Michigan Governor William A. Comstock became the first state executive to implement a statewide banking holiday.
The nation's economic picture had deteriorated through the previous year as unemployment soared and the Dow Jones Industrial Average (INDEX: ^DJI) plummeted, destroying many billions in wealth in a highly leveraged market. Although the Dow had begun to regain ground by 1933, it was not enough to stave off widespread bank failures. Comstock made his decision in part to save the Union Guardian Trust Company, the Ford (NYSE: F) family and company's bank of choice. Ford stood to lose millions if the bank went under and was unable to agree to a reasonable solution with the Undersecretary of the Treasury that might allow the bank to stay open. This forced Comstock's hand, and the resulting forced closure of Michigan's 550 financial institutions caught everyone by surprise.
The lack of available cash confused and depressed the statewide economy, as many merchants were unable even to dispense change. The Federal Reserve Banks of New York and Chicago committed $40 million to help bail out the state's banks, which held $1.5 billion in depositor assets behind closed doors, while officials in Detroit worked frantically to stave off more failures.
Rather than ameliorate a bad banking situation, Comstock's enforced holiday made the national situation worse. The act was a blatant admission that banks could not be trusted and were not safe stores of assets, and millions across the country took the news as a reason to withdraw their funds. By the time Roosevelt stepped in with a federal guarantee for the nation's banking industry three weeks later, Americans had withdrawn $1.8 billion, increasing the currency in circulation throughout the U.S. by a third. Henry Ford, the man perhaps most responsible for lifting America into the modern age, became in 1933 one of the men most responsible for its descent into economic madness.
A steady hand on the reins of commerce
Nearly every facet of America's relationship with the companies doing business on its soil is managed through these two organizations, which, combined, marshaled a $21.6 billion budget and nearly 60,000 employees for the 2012 fiscal year. The U.S. Patent and Trademark Office, the Bureau of Economic Analysis, and the Census are key parts of Commerce, providing a valuable service to many economics and markets bloggers through the vast reams of data generated every year. In addition to giving bloggers something to pore over, these organizations play key roles in guiding business innovation and setting economic policy.
Probably not the best idea
When it has to be there overnight (in Oakland)
UPS remained a private company for much of its history, but its expansion reached truly national scope by 1975, when it was serving all 48 contiguous states while rival FedEx was still struggling to turn a profit. In the early 1980s UPS' airmail service became the fastest-growing airline in U.S. history as it sprang fully formed onto the scene in less than a year. By 1999 -- by which point it was already making well more than 10 million deliveries per day -- UPS went public for the first time, eight decades after making that fateful move to the Bay Area.
Machines or computing? Why not both?
In a report filed the same day as its name change, IBM recorded $1.9 million in profit for the 10-month period ending in October of the prior year, which annualizes out to roughly $2.3 million for the full year. This was an impressive 510% increase over the $376,000 in net income IBM reported for the full year before its 1915 IPO. Eight years after it changed its name, IBM would join the Dow as a money-making machine with $7.4 million in profit -- another 230% gain from its 1923 net income.
IBM has been at the forefront of technological progress both before and after its name change, and five IBM employees have earned Nobel prizes for their efforts. Semiconductor research earned the prize in 1973, the scanning tunneling microscope won in 1986, and superconductivity research won in 1987. IBM has also been instrumental in developing the hard disk drive, the ATM, the UPC, and artificial-intelligence systems. Since its name change, IBM has grown its profit at an annualized rate of 10.5%, well in advance of the 6% annualized increase in U.S. GDP over the same time frame.
The computer that started it all