101 years Later, The Ghost of J P Morgan Lives on.

If you are not familiar with the Panic of 1907, the Stock Market had fallen 50% from highs and Banks were in Panic as the public began to make runs on their deposits in the banks. At the time the US had no central bank to help inject liquidity. It was up to the biggest bankers on Wall Street to step up and buy stocks, buy assets, and inject liquidity back into the system. This all took place across the street from the NYSE Building. It took place in the office of J.P Morgan.

It was Morgan himself who was credited with persuading the others in the room that they really had no other alternative but to step up or face financial ruin across the board. Fortunately, it all worked out and the plan hatched by Morgan had stabilized the markets and contained all the systemic risk at that time.

So here we are, 101 years later with the same crisis (albeit much more complex). Washington Mutual has just been handed over to JP Morgan (the company bearing the founders undiluted name). Only weeks after getting its hands on Bear Stearns for pennies on the dollar, Washington Mutual is handed to JPM for a mere 1 Billion dollars. How is JPM getting all the sweetheart deals?

Maybe it’s just a case of “you get back what you give”. The JP Morgan legacy lives on.