The View From 1776
Size Or Asset Quality?
Historical evidence suggests that the proposed limitations upon bank size may do little to avert financial crises.
- Historical evidence suggests just the contrary!
In 1902, Teddy Roosevelt, George Bush's favorite president, shocked financiers on Wall Street with his decision to approve the government's lawsuit against Northern Securities, a large and recently merged western railroad company, for violating the Sherman Anti-Trust Act.
The financier J.P. Morgan who had arranged the merger and who had huge sums invested in Northern Securities, took Roosevelt's decision as a personal insult.
Just like today, many conservatives in Congress and bankers on Wall Street attacked the President and Attorney General Philander Knox for the decision. The American people, one the other hand, loved Roosevelt for his boldness in the face of the trusts.
Roosevelt was canny enough to nominate Oliver Wendell Holmes, Jr., to replace Justice Horace Gray on the Supreme Court, and when the question came before the court, the government won the suit, and Northern Securities was dismantled into smaller companies, and President Roosevelt came to be known as the "Trustbuster."
As the Sherman Act had never been truly enforced until this time, the breakup of Northern Securities opened the floodgate for suits against other major trusts including the Standard Oil trust.
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