On this day in economic and business history …
June 16 is a particularly eventful day for American business. Several of the world’s most iconic companies were founded on June 16ths throughout history. Let’s take a quick look at the origins of these businesses — and at some other important events in the history of American capitalism that also happened to take place today.
Birth of the blue oval
Here’s an example of how transformative Ford Motor Company (NYSE:F)’s influence was on the auto industry: Only 11,235 motor vehicles were built in 1903, and about 15% of them were Ford Motor Company (NYSE:F) autos. In 1909, the year after Ford built its first Model T, total production had risen to 124,000 passenger cars. When the 10 millionth Model T rolled off the assembly line in 1924, it was one of 3.2 million passenger cars built that year, and more than half of them were Fords.
Tabulating a dynasty
Another business-oriented computing leader begins
Maybe you should have stuck to the city
The City Bank of New York — forerunner to Citigroup Inc (NYSE:C) — was formed in New York City on June 16, 1812, just as the United States was about to enter its second war with England. According to Citigroup Inc (NYSE:C) itself, the bank began with $2 million in capital and 22 employees. Revolutionary War Col. Samuel Osgood is credited with founding the bank, and he brought the lessons he’d learned as director of the Bank of North America to bear on expanding banking in then-finance-unfriendly New York City.
Strange as it may seem, there was a time when New York City didn’t like the financial industry, and it took the bank more than a year to get chartered. Despite this opposition, Osgood persevered, and the City Bank took up residence on Wall Street alongside the Bank of New York and the Bank of the United States.
Citigroup Inc (NYSE:C) has expanded enormously in the ensuing 200 years, although the recent financial crisis showed that this growth was sometimes more trouble than it was worth. Today, Citigroup Inc (NYSE:C) counts more than 200 million customers in more than 160 countries and territories. It’s one of the largest banks in the world by both assets and market cap, with $1.9 trillion in assets and a market cap of more than $140 billion.
The wall that was broken
The last major global financial crisis brought about legislation many have credited (rightly or not) with preventing the sort of meltdown that occurred in 2008. That legislation, the Banking Act of 1933, is popularly known as Glass-Steagall, and it became law with the stroke of President Franklin D. Roosevelt’s pen on June 16, 1933.
Glass-Steagall created the Federal Deposit Insurance Corporation to backstop floundering retail banks up to a certain amount per customer account. However, it was Glass-Steagall’s restrictions on the activities of these banks that we usually refer to when we invoke this law. The bill prohibited chartered banks from engaging in stock ownership, restricting them to government bonds or indirect holdings on behalf of a customer. Further rules set up a supposedly iron wall between commercial and investment banks that would last until 1999. Citigroup Inc (NYSE:C) was the driving force behind the destruction of Glass-Steagall, as it sought to merge with insurer Travelers Companies Inc (NYSE:TRV) and could not legally do so while the iron wall stood in place.
It wasn’t until passage of the Gramm-Leach-Bliley Act that the wall between commercial and investment banking was completely torn down. However, Glass-Steagall had been supported by several other key pieces of banking legislation throughout the Depression and postwar eras. By 1999, these supports were virtually destroyed, so it’s difficult to claim that Glass-Steagall alone saved us, or that its absence alone doomed the financial system.
The article A Day Full of Legendary Origins originally appeared on Fool.com is written by Alex Planes.
Fool contributor Alex Planes has no position in any stocks mentioned. The Motley Fool recommends Ford and owns shares of Citigroup, Ford, IBM, and Oracle.
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