Capitalism's Extinction Events

...And so it has always done...

...Have people ceased to buy things in Washington, or refrained from patronizing the merchants who replaced them...

...David Sarnoff ’s Radio Corporation of America (RCA) would someday exist largely as a trademark, or that the National Broadcasting Company (NBC), another invention of General Sarnoff ’s, would be purchased by General Electric, the light bulb people...

...I am, of course, being sarcastic here—although, as I hasten to point out, I acknowledge that Wall Street is unquestionably suffering one of its periodic anxiety attacks and recognize that the federal government is obliged, almost exclusively for political reasons, to do something—which means to spend taxpayers’ money— to promote stability and restore confi dence and appear prepared to prevent the economy from falling into the abyss...

...I confess that, residing hundreds of miles from Wall Street as I do, I had not often pondered the differences among institutions that buy and sell securities, or advise clients, and those saddled with stiff capital requirements and close federal regulation...

...For with Merrill Lynch, as with many economic behemoths in our time, growth, corporate obesity, and sudden decline (or transformation) have been the norm, not the exception, in a dynamic economy...

...Merrill Lynch...

...I was reminded of this as I listened last week to a Financial Times reporter explain, on television, that the travails of Bear Stearns or Lehman Brothers have little meaning for the average citizen, but that the sale of Merrill Lynch to the Bank of America would come as a shock, and push the crisis up to our doorstep...

...Not long before, I had absorbed the shock when their principal rivals— Lehman Brothers, Bear Stearns, and Merrill Lynch—had merged into larger banks or gone into bankruptcy protection...

...It has been awhile since I contemplated opening a bank account at Manufacturers Hanover Trust, or traveling to Wilmington on the Pennsylvania Railroad...

...Of course, what she should have said is that this latest metamorphosis of Merrill Lynch, one of many huge brokerage concerns in America, is not so signifi cant in itself, but that Merrill Lynch had benefi ted, over the years, from smart advertising campaigns (“Bullish on America”) that had impressed—perhaps exaggerated— its importance to potential clients and fi nancial journalists...

...It was that last note—the one about less profitability—that hit home with me...

...would be broken up by the government...

...But this was, in the Journal’s authoritative account, something else again: Wall Street as it has long been known—a coterie of independent brokerage fi rms that buy and sell securities, advise clients and are less regulated than old-fashioned banks—will cease to exist...

...Speaking of smart advertising campaigns, does anybody remember “My broker is E.F...

...For the time being, capital will be tighter than before, restricting credit— which is not always a bad thing— and businessmen will be reminded (as legislators, state and federal, seem never to learn) that neither bull markets nor recessions last indefi nitely...

...I was sitting at my desk, in my office here at THE WEEKLY STANDARD, reading the Wall Street Journal...

...This is a well-established pattern in the history of fi nancial upheaval— think of the period immediately following the great stock market crash of October 19, 1987—and will, I am sure, accomplish its object...

...This is something to remember the next time you plan to book a fl ight on TWA or Eastern Airlines or buy a phone from Western Electric...

...What appears to be huge, venerable, and fi nancially indestructible today can be gone tomorrow...

...Hutton, and Hutton says . . .”—and where is E.F...

...But profi tability is something I do comprehend, and now that these great banking houses will not be rolling in quite so much dough as before, I felt a twinge of compassion, and began to understand the severity of the crisis that has roiled the fi nancial markets and shaken political Washington...

...Philip Terzian is literary editor of THE WEEKLY STANDARD...

...To take a homely example, the four great department stores of my youth in Washington—Woodward & Lothrop, the Hecht Company, Lansburgh’s, and Julius Garfi nckel & Co.—all prosperous, ubiquitous, and seemingly unassailable at the commanding heights of retail, are all now gone, utterly disappeared, from the marketplace...

...Some fell into disrepair and went out of business, others merged and lost their identity in the transaction...

...But change, not stasis, is the hallmark of the free market, and now Toyota is a bigger deal than General Motors...

...This is a fundamental reality of capitalism that seems never to penetrate the minds of journalists or politicians: Markets expand, contract a bit, and expand again, revenue streams are not always smooth, and for economic enterprise, the cost of overconfi dence can be the same as the price of inertia: swift self-immolation...

...The fi nancial markets are unsteady at the moment, and Wall Street is undergoing elective surgery...

...Who would have guessed that Gen...

...But is this really the historic turning point it is advertised to be...

...Of course not...

...Or that American Motors, the merger of Nash Kelvinator and Hudson Motor Cars, the company that made Mitt Romney’s father rich and famous, would no longer be manufacturing Ramblers and Jeeps—in fact, would no longer exist...

...Or ABC by Walt Disney...

...For that matter, whatever happened to poor old Pierce, Fenner, and Smith of Merrill Lynch, Pierce, Fenner, and Smith, as it was in its formative years in the 1950s-70s...

...When asked what the market would do, J. Pierpont Morgan is supposed to have replied, “It will fl uctuate...

...she exclaimed...

...BY PHILIP TERZIAN Like most Americans, I suspect, I will always remember where I was, and what I was doing, when I learned that Goldman Sachs and Morgan Stanley would cease to be investment banking houses and become traditional bank holding companies...

...Or that the American Telephone & Telegraph Co...

...Wall Street’s two most prestigious institutions [Goldman Sachs and Morgan Stanley] will come under the close supervision of national bank regulators, subjecting them to new capital requirements, additional oversight, and far less profi tability than they have historically enjoyed...

...I am not so sure...

...Hutton today...