The Early History of the National Debt

The U.S. is currently in debt to the tune of more than $15 trillion. Though this is definitely the highest dollar amount of debt the country has ever experience, the U.S. is no stranger to national debt. The U.S. acquired its first debt in 1777 when the Farmers General of France lent the U.S. approximately $381,000. The Farmers General of France was a group that collected taxes from French citizens on a variety of items, including salt and tobacco. The U.S. repaid the debt with bales of tobacco.

By January 1, 1791, debts incurred during the American Revolution and Articles of Confederation totaled $75 billion. In the years following the revolution, the U.S. experienced 14 surpluses and two deficits. The War of 1812 added additional debt, although the U.S. was able to pay off nearly all of its debt in the 20 years following the war.

A pattern begins to emerge following the Civil War as America accrues more debt. In 1860, the U.S. was only $65 million in debt, but by the end of the war, the debt exceeded $2.7 billion.

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The History of Wall Street

The New York Stock Exchange got its start in March of 1792 when 24 of New York’s leading merchants met secretly regarding wresting control of the securities business from the auctioneers and bringing order to the business. Only two months later, these merchants signed the Buttonwood Agreement, which was named for the buttonwood tree that became their meeting place. According to the agreement, the businessmen agreed to trade securities among themselves only, abide by set trading fees and not to participate in trades or auctions of securities outside of their circle.

A hundred years prior to the creation of this first stock exchange, Dutch settlers built a wall to protect them from danger. The path along the wall became a popular commercial thoroughfare because it connected the banks of the East and Hudson rivers. This path was eventually named Wall Street and was home to a wide range of shops and businesses. The Exchange formed by these 24 businessmen would eventually reside at 11 Wall Street and coining the phrase most commonly associated with stock trading in the U.S.

The New York Stock and Exchange Board was officially formed on March 8, 1817 and rented space at 40 Wall Street. Each morning, Anthony Stockholm, the Exchange president, would read the list of stocks available for trading that day. The Exchange was open to members only. New members had to be voted in and had to pay an annual fee for their seat.

The first of Wall Street’s biggest panics took place in 1929. Stock prices rose 400 percent in five years and were grossly inflated from the actual worth of the companies being traded. When the Wall Street insiders could no longer keep the con going, the stock market fell 31 points in just one day, dropping another 49 points just a few days later. On October 29, 1929 the stock market collapsed completely leading to a nationwide economic crisis and depression.


Putting an End to Wash Sales

On March 15, 1817, the New York Stock Exchange announced a ban on wash sales, which are technically fictitious sales of stocks by people who don’t even own the stocks. Even though the ban is announced in 1817, the practice of wash sales continues for several decades. There are typically two reasons wash sales occur: either to manipulate the price of stocks or to claim a tax deduction on the loss and repurchase the stock at a lower price. Since the 1800s, many laws have been passed to crack down on traders engaging in wash sales.

In the U.S., a wash sale is detected by the selling or buying of a stock or security at a loss within 30 days of buying identical stocks or securities or acquiring identical stocks in a trade. This policy includes the 30 days prior to the sale as well as the 30 days following the sale. If you conduct a wash sale, there are two consequences: you cannot claim any loss you sustain on the sale and your holding period for replacement stock includes the holding period of any stock you sold.


The Oil Crisis of 1973

The oil embargo of 1973 was a retaliatory act by the Organization of Petroleum Exporting Countries (OPEC) against theU.S.for helping Israel in the Arab-Israeli conflict. Less than two weeks after the U.S.got involved in the conflict, OPEC announced that it would increase the price of oil by 70 percent and imposed an embargo that cut oil production by 5 percent from the previous month. The organization stated that production would be cut an additional 5 percent each month until specific political and economic objectives were met. At the time, theU.S.was importing 35 percent of its oil supply. The price of oil went from $3 to $5.11 overnight. Within three months, the price had risen to $11.65 per barrel.

Approximately 85 percent of Americans were driving to and from work every day, which meant the oil shortage was an incredibly effective retaliatory act. President Nixon urged Americans to turn their thermostats down and asked businesses to cut work hours to conserve energy. He also instructed gas stations to ration gas purchases to 10 gallons per customer and banned gasoline sales on Sundays. Nixon also proposed an extension to the current Daylight Savings Time period, which meant Americans needed to use less electricity to light their homes in the evenings.

Perhaps the most important initiative to come out of the oil crisis of 1973 was the approval of the Trans-Alaskan pipeline. Congress approved the pipeline in November 1973 and it was completed in 1977. Once completed, the pipeline would supply theU.S.with 2 million barrels of oil each day.

Although the Trans-Alaskan pipeline would eventually allow the U.S.to rely less on foreign oil sources, through the remainder of 1973 and into 1974,Americafell into a recession. Gas quadrupled in price and, although oil stock profits rose significantly, the Dow Jones fell 15 percent.


The Fall of Richard Whitney

On March 8, 1938, the New York Stock Exchange (NYSE) suspended trading at 10:05 a.m., only five minutes after the start of their trading day. At that time, NYSE President Charles Gay took to the podium to announce that former NYSE President Richard Whitney’s company had been declared insolvent.

Whitney was serving as vice president of the NYSE during Black Thursday in 1929. He tried to stop the Wall Street Crash of 1929 by purchasing stocks in U.S. Steel and other blue chip stocks at prices will above their current market prices. While his actions did stop the market from sliding any further that day, it was not enough to stop the crash completely.

As it turns out, Whitney was making quite a few speculative investments during his career, many of which caused him to lose considerable amounts of money. He borrowed heavily from his brother, but when that wasn’t enough, he began embezzling from the New York Stock Exchange Gratuity Fund, the New York Yacht Club and his father-in-law’s estate. Whitney was charged with embezzlement on March 10, 1938 and sentenced to five to 10 years at Sing Sing prison. He was let out on parole for good behavior after only three years and four months.


The Great Southwest Railroad Strike and the Formation of the American Federation of Labor

In the 20 years following the Civil War, the railroad industry in America exploded. Railways were being laid at an astonishing pace and were the backbone of the country’s industrial economy. Some of the railway workers of the time belonged to the Knights of Labor, an early labor union that pushed for an eight-hour workday and other working conditions. In the 1880s a railway worker and member of the Knights of Labor in Marshall, Texas, was fired for attending a union meeting on work time. This action led to the Great Southwest Railroad Strike of 1886.

The strike quickly spread and soon more than 200,000 workers were on strike in five states. Although the strike started because of the man who got fired, the workers quickly added wages, hours and unsafe working conditions to their list of complaints. Rather than giving in to the strikers’ demands, industrialist Jay Gould, who owned about 12 percent of all railroads, quickly hired strikebreakers to come in and continue building. Another factor that led to the failure of the strike was that the Brotherhood of Engineers did not join the strike.

The Grand Master Workman who ran the various chapters of the Knights of Labor met on March 19,1885 and attempted to resolve the issues and end the strike, but they failed to reach an agreement. Several violent incidents led Gould go call in state militia in both Missouri and Texas, which resulted in retaliation by the union workers.

The strike ended by September of 1886, but the failure led to the collapse of the Knights of Labor. Leaders from several other unions, including Samuel Gompers of the cigar makers union and Peter J. McGuire of the carpenters union, met in December 1886 to form the American Federation of Labor, a more comprehensive and effective labor union. 


Charlie Ditkoff: Corporate Leadership at a Financial Institution With Over 100 Years of History

As Vice Chairman of Global Corporate and Investment Banking (GCIB) at Bank of America Merrill Lynch (BAML), Charlie Ditkoff leads a unit of Bank of America Corporation (BofA) specialized in M&A, high yield securities, corporate financing, and convertible debt transactions.

Currently America’s second largest bank holding corporation, BofA’s history stretches back to the early 20th century, when Amadeo Peter Giannini established San Francisco’s Bank of Italy. Two years after the bank’s founding, the 1906 earthquake struck. Mr. Giannini, securing the bank vaults in a chaotic environment, played a major role in financing the city’s rebuilding efforts. By the time of his death in 1949, Mr. Giannini had built the bank into America’s largest private financial institution through a series of mergers. In the process he revolutionized banking, pioneering services for ordinary citizens such as home mortgages, installment credit, and car loans. He also laid the blueprint for the emergence of nationwide banking, with his strategic concept that a bank operating in multiple regions would be less vulnerable to economic disruption from a specific market. In 1958, the bank achieved another first, issuing the BankAmeriCard, the first bank-issued credit card.

In 1998, the year before Charlie Ditkoff joined BofA, Bank of America suffered substantial losses due to the Russian bond default and was acquired by NationsBank. In the process, the merged entity shifted its corporate headquarters from San Francisco to Charlotte, North Carolina, where it remains today. BofA has since grown significantly through targeted mergers and acquisitions involving institutions such as FleetBoston Financial, MBNA, and LaSalle Bank Corporation. In 2008, BofA acquired Merrill Lynch for $50 billion, allowing the firm to establish a dynamic international investment brokerage presence.