Wall Street Plutocracy and Panic: 1892 Edition

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Oliver P. Quilla for CNBC.com
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Blackstone founder Stephen Schwarzman's 60th birthday party at New York's Park Avenue Armory in February 2007 is now the stuff of Wall Street legend.

In hindsight, it was the bell tolling the end of the "gilded age."

Even at the time, many people worried about the shocking extravagance.

It was a show of hubris that just begged the Gods of Finance to destroy the markets.

Just 13 months later, Bear Stearns needed to be rescued. A few months after that, everyone did.

But this was not the first time a party for the plutocracy was followed by panic a year later. Our reading today brought us across an 1892 report of the wedding of Helen Hay Downing, the daughter of Augustus Downing. These days almost no one remembers who Augustus was but at the time he was a very prominent Wall Street banker who lived at 860 Fifth Avenue.

The New York Times article about the wedding reports there were 2,000 guests invited. The bride was adorned with "immense diamonds" in her hair and on her neck. Her satin dress's train was "unusually long."

You get the point. This was an immense show of Wall Street wealth and power. It followed a long boom, largely built on a speculative railroad bubble.

The following year, however, everything fell apart. A credit crunch was followed by a run on the banks. Panic in Europe and the UK caused investors to seek the security of U.S. dollars. Banks failed, railroads collapsed and the country sank into an economic depression from which it did not even begin to recover until 1897.

As someone once said, all this has happened before. All this will happen again.


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