It has been 228 years since , but his name is still remembered in . Please welcome , a British-born American lawyer, developer, and, most importantly, a . He is now known as he crashed the market the history of financial crises William Duer speculator from New York City an Englishman who fooled America. Without any doubt, Besides being an entrepreneur, land speculator and settlement promoter of the Northwest Territory (aka Ohio), he was also founder of the Society for the Encouragement of Useful Manufactures (co-founded with Alexander Hamilton) and a Mr. Duer was a talented person. the first secretary of the Board of the Treasury, signer of the Articles of Confederation. However, he will go down in history using stock and bond options. Had it not been dealt with as effectively as it was, as the creator of the first U.S. stock market crash in 1792 it might have destroyed the financial revolution. The question should be asked, As writer and philosopher George Santayana said, " But, most importantly, it can provide and functioning of why should one care? Those who cannot remember the past are condemned to repeat it." insights into the nature the early stock exchange. swindles, and fraud, after attempting to corner the market of United States government bonds in 1791-1792. Despite the fact that it and clearing systems, and the founding in 1792 of what would become the New York Stock Exchange, that more serious changes should be made to protect the market stability. William Duer showed that financial markets are vulnerable to manipulation, led to more effective securities trading it took regulators over 200 years to understand Probably, for that reason, his “feat” was repeated by : of the early 19th century, which took premiums for customers but disappeared before paying any claims; The life insurance companies known as " ". He was actively borrowing money from banks and investors and using the proceeds to buy stocks. Ward pledged the same securities to support more than one bank loan (required to speculate in the market). The stock market began to fall in 1883, but Ward managed to extract money from Grant’s family, his friends, and acquaintances. It allowed him to give the money back to earlier investors. The scheme collapsed in 1884, bankrupting Ulysses S. Grant, Sr. and many other investors. Ferdinand Ward, the Napoleon of Wall Street a man who brought electricity to Americans.  To pay for expansion, Insull had sold low-price bonds and stock. Over a million middle-class Americans bought in but their investments were made worthless by the . Overnight, Insull went from a hero on the cover of Time magazine to the villain who had stolen the people's money. Samuel Insull , Great Depression The pyramiding scheme of in 1920; Charles Ponzi The highly and its chairman, Charles Mitchell, in the run-up to the Great Crash of 1929. suspect practices of New York’s National City Bank In the 20th century, took the lead with a massive Ponzi scheme. Mr. Bernard Madoff Of course, … the list of fraudsters doesn’t end there At least now, we know that , facilitate transparency, and promote fair dealing among market actors. The question must be asked, is the current system offering all three counts? an effective regulatory system must manage risk The first bank of the United States The , and many of its citizens, . The situation deteriorated even further with the rampant inflation, bankrupting many people. However, t war for independence left the young nation heavily in debt he country didn’t give up. Here I would like to ask you to turn on the Broadway musical Hamilton . , the first Secretary of the and economic structure of other countries, especially France and Britain, for . Hamilton studied the works of philosophers David Hume and Adam Smith, as well as England’s . It is worth noting that military might and pay for its wars and had enabled the to build an empire. Alexander Hamilton Treasury decided to research the history ideas on how to build a nation use of public debt this type of funding had helped to build England’s British In December 1790, in which he outlined his proposal for . He used the example of the Bank of England as the basis for his proposal. Hamilton believed that , provide a safe place to keep public funds, offer banking facilities for commercial transactions, and act as the government’s fiscal agent, including c Hamilton submitted a report to Congress creating a national bank such an institution could issue paper money ollecting the government’s tax revenues. Even though, In particular, Secretary of State Thomas Jefferson was afraid that a that would undermine state banks. Other opponents thought that the bank was an affront to states’ rights and would make the states too subservient to the new federal government. things didn’t go smoothly for Mr. Hamilton. national bank would create a financial monopoly Hamilton’s both the House and the Senate. On December 12, 1791, He didn’t give up and in the winter of 1791 bill cleared the First Bank opened for business in Philadelphia. When the bank subscriptions went on sale in July 1791, and had to try to bid them away from those fortunate enough to have obtained the scrips. they sold out so quickly that many would-be investors were left out Many borrowed money to do so. It is worth noting that at its IPO, , but rather “scrips,” which cost $25 each, payable in specie (gold or silver). This money acted as a down payment on buying bank stock, which sold for $400 a share. Investors would then pay the balance due over the course of the next two years (until July 1793). One-quarter of the amount due would be paid in specie and the remaining three quarters in U.S. debt securities. the First Bank did not directly sell shares for immediate delivery Very soon, in order to buy the scrips to obtain the bank’s stock. As a result, 1, and prices fell, in some cases by more than $100. And the speculation began. bank scrips doubled in price as many people borrowed money the bubble burst by the end of August 179 So, Alexander Hamilton asked fellow members of the Treasury The commissioners agreed to do so. After that, government securities and bank scrip surged to new highs during the winter of 1791-1792. Among the speculators was the hero of this story, , Hamilton’s old friend and former assistant at the Treasury Department. The need for intervention was obvious. to authorize purchases of government securities in the marketplace. William Duer At the end of 1791, to corner the market on U.S. government securities. In addition, . The plan was to sell the appreciated assets to other investors at a significant profit. Duer cooperated with a wealthy land speculator named Alexander Macomb Duer was borrowing heavily to pay for his investments Some claim that in the press in order to make the share price rise. There were no regulatory agencies to monitor such actions. This is why Duer could leak stories. Duer would purposely leak news stories about companies he was investing He began buying additional bank securities on contract, with a promise to pay within two weeks. and the money he borrowed could easily be repaid. Like a fish, Duer was hooked on speculation. Duer was sure the securities would grow The bank merger didn’t happen and . In early 1792, the First Bank suddenly slowed the expansion of its loan pool and in turn slowed the number of banknotes it issued, other banks followed suit, If only prices had risen... stock prices began falling creating another credit crunch. In March, , thus . The number of people and companies he had borrowed from was so large that his undoing, in turn, . Other investors also started to sell off securities and default on their loans. a selloff of these assets began bankrupting not only Duer but everyone else who was willing to lend money to him led to widespread financial contagion This crisis has become known as the Panic of 1792. In order to prevent the catastrophe, H . It calmed the markets and allowed the fledgling U.S. financial system to return to more normal operations. amilton once again appealed to the Treasury buying government securities in the open market P.S. He arrived at the jail with pistols and telling Duer to pay up or let a duel decide his fate. In May 1792, 24 brokers met under a buttonwood tree to sign a brief, two-sentence agreement. to shut out speculators from the market. For several decades, this group of brokers conducted business from the second floor of the nearby Tontine Coffee House. Pierre de Poyster was the only person to wring his money out of Duer. William Duer himself died in 1799 in prison. So-called Duer’s acts were meant In 1817, that club became the New York Stock Exchange .

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Englishman Who Fooled America

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