History 479B

Devine

Fall 2012

Mitchell, The Speculation Economy – Chapters 7-10

 

Chapter 7

 

  1. The author notes that the Panic of 1907 resulted from a run on the banks. How was this run on the banks related to the new speculation economy and the growth of the stock market? (168)

 

 

  1. Why did the issue of “uncertainty” lead many businesses contemplating mergers to support federal regulations on corporations? (170-171)

 

 

  1. Why did Theodore Roosevelt’s desire to be an activist president and his decision to make regulation of the trusts his “crusade” end up undermining reform? (173-174)

 

 

  1. What two goals would be achieved by corporations being required to release “publicity” about their financial status? (174-175)

 

 

  1. The author notes the connections between “the creation of the giant trusts, monopoly, speculation, and investor fraud.” (176)  What were the connections?

 

 

  1. What was the difference between seeing securities regulation as consumer protection and seeing securities regulation for consumer protection?  Why, in 1907, did the supporters of regulation not yet see regulation as as consumer protection? (177)

 

 

  1. What did Taft mean when he said that finance had to be made to serve industry rather than the other way around? (181-182)

 

 

  1. Why did many elected officials (particularly those from outside the northeast part of the country) believe that protecting investors/stockholders conflicted with protecting consumers? (186-187)

 

 

  1. What was the difference between common stock and bonds?  Why was one a safer investment than the other? (191)

 

 

Chapter 8

 

  1. As the twentieth century proceeded, common stock became the investment of choice. How did this fuel the speculation economy and lead companies to put “business” over “industry”?  What kind of leverage did common stockholders have over companies? (196-197)

 

 

  1. Throughout the chapter, what evidence does the author cite to support his contention that more “average Americans” were becoming involved in the speculation economy?

 

 

  1. What factors helped draw more investors of average means into the speculation economy? (204-205)

 

 

  1. How did stockholders’ expectations change during the early twentieth century?  If they had once expected steady income from dividends, what did they now expect from their investments in common stock? (206)

 

 

  1. According to Mitchell, what was the difference between pre-World War I stock buyers and post-World War I stock buyers?  How did this difference demonstrate the larger trend toward a speculation economy? (207)

 

 

  1. Why did some commentators believe that “responsible speculation” was good for the economy and good for the country?  (208)

 

 

 

Chapter 9

 

  1. What were Woodrow Wilson’s views on competition? On big business?  How were these views reflected in his approach to governmental regulation of business?  In what ways was this “progressive” president also conservative? (212-214)

 

 

  1. How did the “yeoman farmer” differ from the “yeoman stockholder”?  To an extent, both “owned” something, but what had changed? (215)

 

 

  1. How did Wilson’s belief in a regulated free market affect his approach to securities regulation? (217)

 

 

[You may skip pages 219-234]

 

 

  1. Why were Wilson’s relations with business so rocky even though he saw himself as a friend of business?  (235-241)

 

 

Chapter 10

 

  1. How did banks get around laws intended to keep them from becoming involved in securities markets? (246)

 

 

  1. How did the Liberty Loan drives transform the American middle class into the American investing class?  (247, 251-254)

 

 

  1. How did the Liberty Loan drives affect bankers and their relationships with potential investors?  Why does Mitchell say the Loan drives were “a graduate education for bankers”? (254-255)

 

 

  1. As businesses struggled to meet war demand, why did they find access to capital was limited?  Why was it paradoxical that the private sector was competing with the government for capital? (256-257)

 

 

 

  1. Market forces generally determined where capital was invested. How did World War I and the mobilization effort change this and create a larger and far more intrusive role for government? How was the Capital Issues Committee involved in shaping the capital markets? (257-260)

 

 

  1. The Liberty Loan drives made investors of many Americans. Why did this new reality spur new calls for securities regulation?  What did reformers fear would happen now that so many people were “in the market”? (261)

 

 

  1. Identify the three waves of stock market development and the three stages of securities regulation. (261-263)

 

 

 

  1. How might the proposed “Taylor bill” have made the world “safe for stockholders”? Could one speculate that such legislation might have prevented the “Great Crash” of 1929? (266-267)

 

 

Epilogue

 

  1. Why does the author conclude his account of the speculation economy’s rise in 1919 rather than continuing it through the Great Bull Market of the 1920s and the 1929 crash? What larger point is he trying to make? (269-270)

 

 

  1. What are the pros and cons of managerial control of corporations?  Do stockholders (and consumers) benefit or suffer when large stockholders control corporate decisions?  How does managerial control keep in check the pressures exerted by the speculation economy? (271-274)

 

 

  1. How does CAPM separate stock from business? (274-275)

 

 

  1. As managerial control broke down during the 1970s, how did stockholder greed help to undermine American corporations? (276-277)

 

 

  1. Would you rather that a company in which you owned stock was controlled by concentrated ownership or a dispersed ownership of stockholders?