First, I apologize for the delay. The past couple of days have been, to say the very least, rather busy.The “Cash for Clunkers” program continues. Can anyone explain how the destruction of a vehicle such as this, at the cost of more than $10,000 to the tax payer, benefits anyone? I have asked this before and am still waiting for a logical answer. At this juncture I would settle for an answer that has even a modicum of common sense.
As promised in a previous post I will continue the discussion on the Great Depression and the American auto industry in this post. First, let me update you on a few Route 66 and Kingman related items.
The railroad is the cornerstone for the community of Kingman. So, it is quite exciting to see work is finally underway to bring new life to the old train depot in Kingman.
As promised in a previous post I will continue the discussion on the Great Depression and the American auto industry in this post. First, let me update you on a few Route 66 and Kingman related items.The railroad is the cornerstone for the community of Kingman. So, it is quite exciting to see work is finally underway to bring new life to the old train depot in Kingman.
It looks as though transforming it into an Amtrak station as well as railroad museum will be a very long process but at least the ball is now rolling. My hope is the siding between Andy Devine Avenue (Route66) and the depot will be utilized for the placement of a vintage dining car to serve as a restaurant as has been discussed.
This photo is a Kingman sunset. I hope you will turn out next Saturday evening to enjoy one of these along with vintage cars, music, games, food, and a farmers market as well as the next installment of Chillin’ on Beale Street unfolds.
This photo is a Kingman sunset. I hope you will turn out next Saturday evening to enjoy one of these along with vintage cars, music, games, food, and a farmers market as well as the next installment of Chillin’ on Beale Street unfolds. Now, lets talk about the fallacy of “To Big to Fail” and the dangers of government bailouts for these firms. In particular lets take a look at the Guardian Group in Detroit and the Reconstruction Finance Corporation.
By 1932, the number of small bank failures that began with the post war recession was rapidly escalating, consumer confidence was collapsing, runs on banks were threatening the very financial fabric of the nation, and social unrest was becoming increasingly violent. In 1930, 1,350 banks closed, the following year the jumped to 2,293. In January of 1933 alone, 273 banks closed their doors.
Against this background Alfred Leyburn, chief national bank examiner from Chicago, informed the comptroller of currency the Guardian Group, a complicated banking organization based in Detroit that controlled an overwhelming percentage of all banking in Michigan, was in dire need of a cash infusion to avoid complete collapse.
The Guardian Group, a holding company, dominated banking in Detroit which meant the bank was a vital component of the auto industry. So, it should come as no surprise to learn that among the board of directors were a number of men with strong ties to automobile manufacturing, men like Edsel Ford and Roy Chapin, chairman of Hudson and commerce secretary to president Hoover.
As the economy spiraled downward auto sales collapsed causing unprecedented default on commercial loans. With increasing unemployment, foreclosures on residences skyrocketed and many people simply abandoned properties.
For the Guardian Group this meant a veritable hemorrhage of capital. In fact an application to the Reconstruction Refinance Corporation in early 1932 led to a review which found the Union Guardian Trust Company, one of the key members in the Guardian Group, had deposit liabilities of $20.5 million dollars but only $8 million available.
Compounding the problem was a near complete of value in assets. An overwhelming percentage of mortgages were on properties that had lost more than fifty percent of the original value.
Indicative of the dire straights of the Guardian Group are an examination of its stock price fluctuation. In mid 1929 stock was trading near $300 per share, by 1930 lows were approaching $75.
Enter the federal government and loans through the Reconstruction Refinance Corporation to bail out a poorly managed company that paid astounding bonus even as it balanced precariously on a precipice.
To be continued –
