Encyclopedia of american business history part 10 ppsx

241 L laissez-faire A French term meaning “allow to do,” it was transformed into an economic the- ory stating that business should be allowed to operate with as little government interference as possible. In economics, laissez-faire generally has been taken to mean hands off and to be the direct opposite of mercantilism, which suggested strong government interference in the private sector in the 18th and 19th centuries. Laissez-faire succeeded mercantilism in the 19th century as the economies of the United States and Europe began to industrialize. Its best known exponents were from the British classical school, led by economist Adam Smith, who maintained that humans are most produc- tive when they are motivated by unfettered eco- nomic self-interest, free of outside control. Competition flourishes when government influ- ence is minimal, and a full array of goods and services will follow, subject only to the demands of the market. The doctrine became very popular in the United States, especially during the period of rapid industrialization in the 19th century. Busi- ness developed at a much faster pace than gov- ernment’s ability to keep pace with it, and the term became a synonym for a government’s gen- erally lax industrial policy. But even during peri- ods when laissez-faire economics appeared to be working, some protectionist government policies still intervened, such as the TARIFFS imposed against imports. In the late 19th and early 20th centuries, the policies of progressivism began to attack the lenient attitude of government toward business. The administration of William McKinley was the last in which a hands-off policy toward business was evident—until the 1920s when Republicans controlled the White House and Congress. But stronger antitrust policies that began with the administration of Theodore Roosevelt, the found- ing of the F EDERAL RESERVE, and the regulations passed during the NEW DEAL all signaled a less permissive atmosphere for business than was the case in the 19th century. Similarly, the founding of many government-sponsored enterprises between the 1930s and the 1970s demonstrated that various administrations were not willing to allow certain sectors of the economy such as res- idential housing, the financing of higher educa- tion, and farm financing to be left totally to the private sector. After the 1930s, the term was used to describe the lack of government interference in the market- place rather than a specific economic policy. It is still used today to denote a general hands-off atti- tude of government toward business. See also ANTITRUST; DEREGULATION. Further reading Faulkner, Harold U. The Decline of Laissez Faire, 1897–1917. New York: Harper & Row, 1968. Fried, Barbara H. The Progressive Assault of Laissez Fair e. Cambridge, Mass.: Harvard University Press, 2001. Lamont, Thomas W. (1870–1948) banker Born in upstate New York, Lamont’s father was a Methodist minister. Thomas was sent to private boarding school at Phillips Exeter Academy and graduated from Harvard in 1892. After gradua- tion, he went to New York City and became a newspaperman at the New York Tribune, where he rose to become assistant city editor. Not satisfied with journalism, Lamont invested in a food processing company, but it ran into financial difficulties in 1898. He then reorgan- ized it with his brother-in-law Charles Corliss, and the new firm became known as Lamont, Corliss & Company. As a result of the reorgani- zation, Lamont came to the attention of many New York bankers, one of whom was Henry Davison, who invited him to work for the newly formed Bankers Trust Co. in 1903. In 1909, he moved to a senior post at the First National Bank of New York. After serving as the bank’s secretary and treasurer, he was lured away by J. P. Morgan with an offer to become a partner in Morgan’s bank in 1911. After becoming Morgan’s youngest partner, he remained with the bank for the rest of his career. After arranging large loans for Britain and France during World War I, Lamont was chosen to represent the U.S. Treasury at the Paris Peace Conference in 1918. He subsequently worked on German war reparations and became a supporter of the League of Nations. In the same year, he also purchased a controlling interest in the New Y ork Evening Post. He played a central role in the terms and conditions of the peace negotiations as well as the reparations placed on Germany after the war. He also was sent to Japan as a financial delegate in the 1920s to discuss Japan’s role in Manchuria and its role in international financial affairs. The period was notable for financial diplomacy especially, led mainly by J. P. Morgan Jr. and his partners. Lamont was involved in most of the other major international financial transactions and international diplomatic events of the 1920s, including the Dawes plan, named after Charles D AWES, and the plan to stabilize the French franc. At the time of the stock market crash of 1929, he helped organize a market stabilization plan while at J. P. Morgan & Company, but the plan failed despite the efforts of senior bankers. In 1931, he helped organize the Bank for Inter- national Settlements. Lamont became chairman of J. P. Morgan & Co. after the death of J. P. Morgan Jr. in 1943. The bank went public in 1940, and Lamont became the major shareholder. After 1943, his role in actively managing the bank was limited. During his lifetime, he was a major benefactor to many charities and to Harvard College and Phillips Exeter as well. He is best remembered as a major figure in American banking in the 20th century who provided the Morgan bank with leadership during a time of transition. See also M ORGAN, JOHN PIERPONT; MORGAN, J OHN PIERPONT, JR. Further reading Carosso, Vincent. The Morgans: Private International Bankers, 1854–1913. Cambridge, Mass.: Harvard University Press, 1987. Chernow , Ron. The House of Morgan: An American Banking Dynasty and the Origins of Modern Finance. New York: Simon & Schuster , 1990. Lamont, Edward M. The Ambassador from Wall Street: The Stor y of Thomas W. Lamont, J. P. Morgan’s Chief Executive. Lanham, Md.: Madison Books, 1994. 242 Lamont, Thomas W. Land, Edwin H. (1909–1991) physicist, inven- tor, and manufacturer Born in Bridgeport, Connecticut, Land studied at Harvard, where he became interested in the physics of polarized light. After leaving college without a degree, he developed a polarizing material that was inex- pensive and easy to manufacture. From an early age, Land was preoccupied with the idea of polarized light, and he opened a laboratory in his home while still a college student. In 1929, he applied for a patent for a polarizer that resembled a sheet of glass. In 1932, he announced at a Har- vard conference that he had developed a com- plete solution for polarizing light. Building on this success, he opened the Land- Wheelwright Laboratories in collaboration with George Wheelwright in Boston and began selling his products to the Eastman Kodak Company. In 1937, he and Wheelwright founded the Polaroid Corporation, which began producing polarized products for civilian and military use. When World War II broke out, the company’s sales soared as it began selling rifle sights, filters, periscope filters, and goggles to the military. After the war, the company’s sales plunged, and Land began seeking new uses for his inventions. In 1943, he conceived the idea of a camera whose pictures could be developed within 60 sec- onds. The first Polaroid camera produced sepia- tone photographs quickly after being taken. In 1950, black and white pictures were available, and in 1963, the camera was adapted to produce color pictures. As a result, the company became one of the best-known American success stories of the immediate post–World War II period. The Polaroid camera underwent several gen- erations of development. In the early 1970s, the SX-70 model was able to produce a fully finished, or laminated, photograph within a minute of being taken. Land went on to collect more than 500 patents during his lifetime before retiring from the company in 1980. He was active in the 3-D movie process that was developed to great fanfare in the early 1950s. One of his later ideas, that of instant movies, proved a failure and never saw the light of day. During his retirement, he devoted his time to the Rowland Institute of Sci- ence, an organization he founded in 1960. Although Land never graduated from college, he later became a professor at the Massachusetts Institute of Technology and also lectured at Har- vard. He was inducted into the National Inven- tors Hall of Fame in 1977. The Polaroid Corporation became one of Wall Street’s favorite stocks in the 1960s and was one of the 50 most popular among investors because of its cutting edge technology. Despite the introduction of new models, the company began to lose market share and fell out of favor on Wall Street. Develop- ments in digital photography put the company under further pressure, and it filed for Chapter 11 bankruptcy protection in 2001. See also E ASTMAN, GEORGE. Further reading McElheny, Victor K. Insisting on the Impossible: The Life of Edwin Land. New York: Perseus, 1999. Olshaker , Mark. Instant Image: Edwin Land and the Polar oid Experience. New York: Stein & Day, 1978. Lazard Freres An INVESTMENT BANKING com- pany founded in New Orleans in 1848 by Lazard Freres 243 Edwin H. Land (LIBRARY OF CONGRESS) Alexandre, Lazare, and Simon Lazard, originally as a dry goods store. The three had emigrated from France in that year but a year later were forced to move the business to San Francisco because of a citywide fire in New Orleans. The gold rush had just begun in California, and the business soon began trading gold. Four years later, they opened a branch in Paris, now firmly established in the gold business. By the end of the Civil War, Lazard was a full- fledged international bank specializing in gold trading. A London branch was also established, and in 1880, a New York office was opened by Alexandre Weill; it became known as Lazard Freres. The New York office was only one of the branches of the bank; it specialized in gold trad- ing and underwriting of some securities issues but remained a small operation until World War II. During the war, Andre Meyer arrived in New York after working in the firm’s Paris office. Meyer already had a substantial background in finance, although he was not from an old family, as were the Weills. He took control of the office. After the war Lazard Freres emerged as a special- ist in MERGERS and acquisitions as well as main- taining its business in underwriting. The firm benefited from the postwar merger boom in the United States. Meyer and a younger partner, Felix Rohatyn, aligned themselves with Harold GENEEN at the ITT Corporation, and Lazard became ITT’s major merger banker. The firm helped the corporation with many of its major acquisitions as it built itself into a con- glomerate and also served other companies. Much of the firm’s success in the 1960s and 1970s was built around the relationship with ITT. Meyer died in 1979, and Lazard remained primarily a merger specialist but was also a part- nership through the late 1990s, when most other investment banks had gone public. In the late 1990s, the firm began to suffer a loss of rank and prestige on Wall Street because of its small size and limited capital base. It was reorganized by Bruce Wasserstein, a Wall Street merger specialist who became the senior partner of the firm in 2001. The firm remained private, being the last of the traditional Wall Street pri- vate partnerships choosing not to sell shares to the public. It finally went public in 2005. Further reading Geisst, Charles R. The Last Partnerships: Inside the Great Wall Street Money Dynasties. New York: McGraw-Hill, 2001. Reich, Cary. Financier: The Biography of Andre Meyer . New York: William Morrow, 1983. Lee, Ivy L. (1877–1934) public relations expert Lee is generally considered the father of modern public and corporate relations. Born in Georgia, Lee attended Emory University and graduated from Princeton in 1898. After doing postgraduate work at Harvard Law School he dropped out when his money ran out. He then became a newspaperman at the New York Times and the New York World, specializing in business and finance while studying English at Columbia, before opening his own public relations firm. Along with George Parker, he opened the pub- lic relations firm of Parker & Lee in 1904. He then worked on assignment from the Democratic National Committee as a publicist and writer. Lee provided the creative side of the business, while Parker provided the connections and clients. Rec- ognizing a market for corporate public relations in the era of the MUCKRAKERS, Lee began providing the public with the business and industry side of business and social issues as a way of countering the attacks of writers in the press and in books. His method was to provide facts rather than advertising, in the hope that newspaper and jour- nal editors would print both sides of a financial or business story. In 1906, he joined the staff of the Pennsylvania Railroad as a full-time executive in charge of the company’s public relations, which were not in the best of shape. He continued to work for the railroad until 1914. In 1915, Lee began working for John D. Rockefeller Sr. after the “Ludlow Massacre” in 244 Lee, Ivy L. Colorado. The assignment proved successful, and the Rockefellers, like the Pennsylvania Rail- road before them, adopted a new, more straight- forward public relations policy than in the past. In 1916, Lee opened a new firm. After World War I, his reorganized firm took on many diverse assignments. He worked during the 1920s for greater acceptance of the Soviet Union, believing that a free flow of ideas and greater international understanding of Russia would lead to the demise of communism. He wrote several books on the Soviet Union and on the use of statistics. Throughout this period, he worked for many of the most visible financiers and the largest compa- nies in the country. During the early 1930s, his firm worked for several Wall Street investment houses that were being investigated at the Pecora hearings in 1933 about the causes of the stock market crash of 1929. A year later, work he had done on an assignment for a German company controlled by the Nazis led to his being investigated by the House Un-American Activities Committee. He died of a brain tumor in 1934 at age 57. Further reading Ewen, Stuart. PR!: A Social History of Spin. New York: Basic Books, 1996. Goldman, Eric. Two W ay Street: The Emergence of the Public Relations Counsel. New York: Bellman Pub- lishing, 1948. Hieber t, Ray E. Courtier to the Crowds: The Story of Ivy Lee and the Development of Public Relations. Ames: Iowa State University Press, 1966. Lehman Brothers An INVESTMENT BANKING house founded by Henry Lehman in Mont- gomery, Alabama, in 1845 as a dry goods mer- chandiser. Lehman was born in Germany in 1821 and immigrated to Alabama, where he established his general merchandise store. Lehman died in 1854, and the store passed to his two brothers. Emanuel Lehman opened an office in New York City in 1858, trading in cotton. Another brother, Mayer, had close ties with the Confederate gov- ernment in Richmond, and the company pros- pered before the Civil War supplying the Confederate Army. They became so prosperous trading commodities that they were able to loan the state of Alabama $100,000 after the war. In 1868, the New York City office continued to prosper, but the firm remained primarily a commodities trading firm until the 1890s. It was a member of many of the futures exchanges in New York, including the New York Cotton Exchange and Coffee Exchange. It was also a member of the NEW YORK STOCK EXCHANGE, hav- ing joined in 1887. The firm began turning its attention toward investment banking when Philip Lehman entered the firm in 1882. Born and educated in New York City, he became a partner five years later. In the 1890s, Lehman Brothers began estab- lishing banks in New York, the best-known of which was the Trust Company of America, founded in 1899. After the turn of the century, the firm began a rapid entry into the investment banking business. It underwrote stocks of newly emerging companies in growing industries, notably retailing. Before World War I, it joined with GOLDMAN SACHS in underwriting many new issues, the best known of which was for SEARS, ROEBUCK & CO. in 1906. The first nonfamily member of the firm was not admitted to a partnership until 1924. Most of the partners were members of the Lehman family. The best-known outside of banking circles was Herbert Lehman, who became a partner in 1908 and retired in 1928. Subsequently he was elected governor of New York and a U.S. senator from New York. In the first quarter of the century, Lehman underwrote new stock issues for companies such as the Underwood Corp., the Studebaker Corp., and the F. W. Woolworth Corp. After the Glass- Steagall Act was passed in 1933, Lehman Broth- ers became purely an investment banking firm and remained a partnership in the post–World War II years. From 1928, the firm was run by Lehman Brothers 245 Robert “Bobbie” Lehman, the son of Philip Lehman, who was responsible for shaping the firm for the remainder of the 20th century. In the 1970s, Peter G. Peterson became chairman of the firm. He helped reorganize it after several years of poor performance and was succeeded by Lewis Glucksman. In 1977, the firm acquired KUHN LOEB &CO., and in 1984, merger talks were held with Shearson American Express. Lehman Brothers was acquired by Shearson, and the company changed its name to Shearson Lehman American Express, becoming the second-largest securities house on Wall Street. In the mid-1990s, A MERICAN EXPRESS began to restructure itself, and Lehman Broth- ers was spun off as a public company, assuming its original name. It remains one of Wall Street’s best-known and oldest investment banking firms. Further reading Auletta, Ken. Greed and Glory on Wall Street: The Fall of the House of Lehman. New York: Random House, 1986. Geisst, Charles R. The Last Partnerships: Inside the Great Wall Str eet Money Dynasties. New York: McGraw-Hill, 2001. Levittown A suburban town on Long Island, New York, that was the first purpose-built sub- urb in the United States. The town was built by Levitt & Sons, a family-run firm founded in 1929 that first conceived the idea in 1947. The firm was headed by William J. Levitt, who got into the real estate and building business when he sold a home for his brother. The success of the small transaction encouraged them, and Levitt & Sons was formed. The firm first attempted a large-scale housing development in Norfolk, Virginia, in 1945, when it built 1,600 small houses. The marketing for the homes was unsuccessful during the war. The company did not make a profit for its efforts, but it did not abandon the concept. William Levitt realized that the millions of returning service- men discharged after the war would need hous- ing. Using knowledge acquired from other small developments built during the war, the idea of Levittown was born. After purchasing a 1,000-acre farm located midway between New York City and the Long Island towns where major defense contractors were located, the company proceeded to build more than 17,000 ranch-style homes on the site. Each unit averaged about 750 square feet and had amenities built in that were not often used in mass housing, such as built-in storage units, appliances, and kitchens located in the front of the house rather than the rear. The homes sold for $7,990 each, considerably less than competi- tors’ homes. But they still made a profit for the company because of the quantity built. Levittown marketed its homes to whites only and lured city dwellers from Brooklyn and Queens. The community contributed to the urban flight that characterized the 1950s and 1960s and was a major factor in the rapid subur- banization of Long Island. It also indirectly applied pressure on New York banking laws, which until that time prohibited New York City banks from crossing county lines. Many banks lobbied for changes in the laws so that they could follow the exodus. In 1967, Levitt & Sons was sold for $92 mil- lion to conglomerate ITT, which viewed Levitt’s communities as a potential customer for many of its diverse products. The suburban concept was imitated many times around the country as builders adopted the marketing concept of building many units at smaller profit margins than on larger houses. For future generations, the name Levittown became a metaphor for the advantages and disadvantages of suburban liv- ing in America and was also the model for hun- dreds of similar projects around the country that capitalized on the post–World War II demand for new housing. See also CONGLOMERATES. 246 Levittown Further reading Kelly, Barbara M. Expanding the American Dream: Building and Rebuilding Levittown. Albany: State University of New Y ork Press, 1993. Sobel, Robert. The Great Boom, 1950–2000: How a Generation of Americans Cr eated the World’s Most Prosperous Society. New York: St. Mar tin’s Press, 2001. Levittown 247 Aerial view of Levittown, 1954 (LIBRARY OF CONGRESS) Lewis, John L. (1880–1969) labor leader Born in Iowa to Welsh immigrant parents, Lewis became a miner while still in his teens. In his late 20s, he began serving in the UNITED MINE WORK- ERS OF AMERICA (UMWA) and became acting president of the union in 1919. Also, in 1911 he became an organizer for the AMERICAN FEDERA- TION OF LABOR (AFL). He was elected president of the UMWA in 1920, holding the job until he retired in 1960. In his 40 years as head of the union, he often clashed with other unions and embarked on long strikes. His bitterest clash with other unions occurred when he split with the American Federation of Labor and formed the Committee for Industrial Organization, or CIO, in 1935. Unions that joined Lewis were expelled from the AFL, stirring great animosity within the union movement. His new efforts were successful, however, because by the late 1930s the CIO had more members than the AFL. In 1938, the CIO changed its name to the Congress of Industrial Organizations and began organizing unions in the heavy manufacturing, mass-production industries. Originally a Republican, Lewis became a sup- porter of Franklin Roosevelt and endorsed him in 1932 and 1936. Lewis decided to support Wendell Willkie for president in 1940 and threat- ened to resign from the CIO if the president stood again and won reelection. Lewis then made good on his promise and resigned as president of the CIO after Roosevelt won the election; two years later the UMWA withdrew from the CIO. During World War II, the public became increasingly disillusioned with the miners because of many strikes called during wartime. Most were successful, however, in winning increased wages. In 1946, immediately after the war, the UMWA again joined the CIO but broke away the following year. Congress responded to the uneasy labor situation by passing the T AFT- HARTLEY ACT in 1947. A coal strike in 1948 during the Truman administration led to a crisis in industrial rela- tions and finally led to a moderation in Lewis’s tactics. Lewis also helped create the UMWA Wel- fare and Retirement Fund in conjunction with the federal government, and it was signed into law during the Truman administration. The fund provided health care to coal workers. He retired from the union in 1960, administering the fund until his death in 1969. See also GOMPERS, SAMUEL;MEANY, GEORGE. Further reading Alinsky, Saul. John L. Lewis: An Unauthorized Biogra- phy. New York: G. P. Putnam’ s Sons, 1949. Dobofsky, Melvyn, and Warren Van Tine. John L. Lewis. Urbana: University of Illinois Press, 1977. W echsler, James A. Labor Baron: A Portrait of John L. Lewis. New York: William Morrow, 1944. Livingston, Robert R. (1746–1813) diplo- mat Robert Livingston was born in New York City on November 27, 1746, the scion of an 248 Lewis, John L. John L. Lewis (LIBRARY OF CONGRESS) influential colonial family with roots dating to the 17th century. Raised in an aristocratic envi- ronment, Livingston was well educated privately and graduated from Kings College (now Colum- bia University) in 1765. He was admitted to the bar three years later and commenced a lucrative business in concert with his partner, John Jay. At that time, the first rumblings of revolution were manifested against such British policies as the Stamp Act. Livingston urged caution, but once hostilities finally commenced in 1775 he reluc- tantly endorsed independence as a necessary evil. That year, Livingston attended the Second Continental Congress as a New York delegate, where he was appointed to serve with the com- mittee drafting the Declaration of Independence. Returning to New York, he subsequently took an active role in drafting the New York constitution of 1777 and was rewarded with an appointment as chancellor of the Court of Chancellory. Liv- ingston resumed his seat in Congress two years later, and after independence he functioned as secretary for foreign affairs. In 1788 he attended the constitutional convention in Philadelphia as a delegate, and the following year Livingston administered the oath of office to the new presi- dent, George Washington, in the temporary capi- tal of New York City. Though conservative by nature and nominally a Federalist, Livingston felt increasingly at odds with the faction headed by Alexander H AMILTON and its promotion of the Jay Treaty, which he felt sold out to Great Britain. In concert with Thomas Jefferson’s newly emerging Democratic Republi- can Party, Livingston was strongly disposed to support the French Revolution. This made him a pariah in conservative circles, but in 1801 the new president, Jefferson, appointed him minister to France. It was in this capacity that Livingston made indelible contributions to the United States by successfully negotiating the purchase of the Louisiana Territory from First Consul Napoleon Bonaparte in 1803. This virtually doubled the size of the young republic and, by dint of acquiring New Orleans, facilitated internal trade via the Mississippi River. It proved one of the greatest diplomatic coups in history and a crucial step in the economic viability of the young nation. Liv- ingston remained in Paris two more years before returning home to his estate at Clermont, New York, to engage in scientific farming. He was especially interested in the breeding of Merino sheep and penned several noted tracts on that subject and on agricultural progress in general. Livingston’s reputation as a leading economic figure in American history dates to 1797, when he became actively involved in steam navigation. The nascent technology seemed promising but had proved untenable after many failed experi- ments at building a viable steamship. It was not until 1802 that he agreed to underwrite noted inventor Robert FULTON in a similar endeavor. Many years of trial and error lapsed before the steamship Clermont finally made its historic pas- sage up the Hudson River in 1807. This voyage ushered in the age of steam navigation in Amer- ica, along with the rise of monopolies to control its employment. Livingston never obtained the national celebrity of Fulton, but his extensive backing proved instrumental to their mutual suc- cess. He then used his political leverage to acquire a monopoly for shipping on both the Hudson and Mississippi Rivers. But despite the promise of profit, the limitations of the new steam technology remained legion and failed to produce the windfall anticipated, although the practice of states granting steamship monopolies was vanquished by the U.S. Supreme Court in 1824. By the time Livingston died at his estate at Clermont on February 26, 1813, his varied, far- ranging, and multifaceted career in politics, diplomacy, and science had proved of consider- able importance to the young republic. He also provided an undeniable impetus to the commer- cial applications of steam technology, which suc- cessfully matured a few decades after his passing. Further reading Brandt, Clare. An American Aristocracy: The Livingstons. Garden City, N.Y.: Doubleday, 1986. Livingston, Robert R. 249 Dangerfield, George. Chancellor Robert R. Livingston of New York, 1746–1813. New York: Harcourt, Brace, 1960. W iles, Richard C., and Andrea K. Zimmermann, eds. The Livingston Legacy: Three Centuries of Ameri- can History. Annandale-on-Hudson, N.Y.: Bard College, 1987. John C. Fr edriksen Long-Term Capital Management A giant hedge fund in Greenwich, Connecticut, the near- collapse of which in September 1998 shook Wall Street and drew public attention to the role of hedge funds in the marketplace. The fund was established in 1994 by John W. Meriwether, a bond trader at SALOMON BROTHERS who had hired a team of mathematicians and economists from academia to give his unit an edge in the fierce competition for arbitrage opportunities. When Meriwether left Salomon Brothers in 1994 after a trader he supervised was caught manipulating bids on TREASURY BONDS, most of his intensely loyal traders followed him to Long- Term Capital. He also recruited, as partners, Robert C. Merton and Myron S. Scholes, who later were awarded the 1997 Nobel Memorial Prize in economic science, and David W. Mullins, a former vice chairman of the Federal Reserve Board. As a group, the fund’s partners believed passionately in rational, efficient markets, and their trading strategies reflected those beliefs. The celebrity-studded fund, whose investors included top banks and institutions from around the world, was enormously successful at first. Trading largely with borrowed money, the fund produced returns, net of its own fees, of 43 per- cent in 1995 and 41 percent in 1996. But in 1997, as arbitrage opportunities faded and Asian cur- rency devaluations roiled markets, it earned just 17 percent after its own fees. As that year ended, the fund’s still-optimistic partners decided to return roughly $2.3 billion to their outside investors, paring the fund’s capital to about $4.7 billion, from roughly $7 billion at its peak. It was an ill-timed decision. The fund’s core strategy was to bet that volatile security prices in markets around the world would gradually become more stable. But in 1998 global markets grew ever more treacherous. By August, when Russia defaulted on its debt, risk-averse investors were buying only the most liquid Treasury bonds, driving down the prices of virtually every- thing else. Meriwether’s capital, which totaled $3.7 billion at mid-August, was simply melting away. By mid-September, the fund was on the brink of collapse. Since it owed money to almost every major bank on Wall Street, its dire condi- tion drew the attention of the Federal Reserve Bank, which feared that the fund’s failure would trigger a marketwide panic. On September 23, 1998, after long negotiating sessions at the Fed- eral Reserve Bank of New York, a consortium of 14 American and European investment firms agreed to inject $3.6 billion into the fund, in exchange for most of the partners’ equity. By that point, every dollar invested in the fund had shrunk to 23 cents, net of fees. The rescue, which drew widespread public criticism, kept the fund afloat for another year, but its returns were meager. The stock and bond markets became very unsettled during the months following the collapse, and G OLDMAN SACHS, one of the fund’s trading partners, had to postpone its initial public offering as a result. By early 2000, the consortium had retrieved its cap- ital, and the fund was essentially liquidated. By then, Meriwether and many of his partners were once again managing other people’s money from their offices in Greenwich. Further reading Dunbar, Nicholas. Inventing Money: The Story of Long- Term Capital Management and the Legends Behind It. New York: John Wiley & Sons, 2000. Lowenstein, Roger . When Genius Failed: The Rise and Fall of Long-T erm Capital Management. New York: Random House, 2000. Diana B. Henriques 250 Long-Term Capital Management [...]... dramatically or to close The proportion of lumber produced from the West slowly fell to just under half by 1999 as a result of declining levels of timber from public lands and increasing levels of production in the South In 1990, the South became the nation’s largest lumber producing region, accounting for 36 percent of all softwood lumber and 78 percent of all hardwoods Of the region’s 215 million forest... forced many of these lumber companies out of business by the late 1920s With most of the easily accessible timber harvested, only large timber companies could afford the machinery to open up and develop the interior regions The enormous size of the logs initially presented problems for sawmill operators in the Pacific Northwest Consequently, many of the innovations in the lumber industry came out of that... Sullivan, George By Chance a Winner: The History of Lotteries New York: Dodd, Mead, 1972 lumber industry From the time of the first European settlements in the early 1600s, the lumber industry has been vital to the growth of the nation Lumbering requires three basic components for sustained, long-term success: the availability of woodlands, the development of a market for forest products, and a means... experience the spectacular rise and subsequent decline of production of the Northeast or the lake states because they lacked the large volume of valued softwood timber in 253 those regions From the mid-1800s until 1916, when the South surpassed it, the central states were the most productive hardwood region in the country (often around 90 percent of the region’s production was in hardwoods) Though the... widespread basis Pine plantations for pulp production became big business and brought much-desired industry to the region by 1940 The dominant source of pulpwood since the 1940s, the South increased its share of production to more than three-quarters of the country’s pulpwood in 1993 Within 40 years of implementing the Weeks Act, the amount of annual growth in the southern forest outpaced timber removal,... the early 1900s, the company became part of the “tobacco trust,” better known as the AMERICAN TOBACCO CO headed by James B DUKE After the breakup of the company ordered by the Supreme Court in 1911—one of the classic ANTITRUST cases—the company reverted to being an independent as P Lorillard & Co The Lorillard family became well known as socialites and developers of real estate Pierre 251 Lorillard... economically feasible after the war because of warsurplus trucks The use of trucks allowed most sawmills to remain at permanent sites, further lowering costs, and largely helped bring to an end the migratory nature of lumbering During the Great Depression, the bottom fell out of the national lumber market Overproduction drove prices down and touched off a cycle of declining output and prices William Greeley,... machinery and regeneration would allow it to intensively manage certain parts of a forest and produce higher amounts of timber through clear-cutting, while leaving other parts of the forest for recreational use Continued controversy over clear-cutting led the federal government in the late 1980s and early 1990s to remove large areas of federally owned land in the West (the Rocky Mountain and Pacific coast... large sums of money for varied causes They also proved useful when borrowing by institutions was not considered ethical or practical in many parts of the country As a result, selling lottery tickets to large numbers of people was the predecessor to INVESTMENT BANKING on the East Coast The popularity of lotteries quickly spread in the 18th century They were established to raise money for a host of public... percent of lumber consumption, manufacturing for 12 percent, shipping (pallets, containers, and packing materials) for 10 percent, and 11 percent for all other uses Overall, about 60 percent of lumber consumed in 1999 was used in housing construction The manufacturing of lumber and wood products has fallen from the fourth-ranked overall industry in 1900 in terms of dollar value to a ranking of 13th, . the policies of progressivism began to attack the lenient attitude of government toward business. The administration of William McKinley was the last in which a hands-off policy toward business was. best known of which was for SEARS, ROEBUCK & CO. in 1906. The first nonfamily member of the firm was not admitted to a partnership until 1924. Most of the partners were members of the Lehman. sides of a financial or business story. In 1906, he joined the staff of the Pennsylvania Railroad as a full-time executive in charge of the company’s public relations, which were not in the best of