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OTHER PEOPLE. ' S MONEY. AND HOW THE BANKERS USE IT .. need money, and selling to those seeking invest ments. The banker performs, in this. Other People's Money, and How the Bankers Use It by Louis Dembitz Brandeis. Book Cover. Download; Bibrec. This is the greatest question of all; and to this, states- 2 OTHER PEOPLE'S MONEY men must address themselves with an earnest determination to serve the.

Other Peoples Money Pdf

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Other Peoples Money - - Ebook download as PDF File .pdf), Text File .txt) or read book online. Editorial Reviews. Review. "Thanks for writing this book. Only [John Kay] could have done it. This is going to be a classic." --Frank Partnoy, Professor of Law and . Other People's Money. By John Kay. (PublicAffairs, pages, $) rom to , the finance sector of the American economy grew to.

One way is to use your own money. One using your own money provides small-to-modest returns, takes a long time to pan out, and requires some financial intelligence. The other OPM provides large-to-infinite returns, creates incredible velocity of money, and requires a high financial intelligence.

Other People's Money: The Real Business of Finance

Which one would you prefer to use? Good debt is a type of OPM. By way of reminder, good debt is any debt that puts money in your pocket. By contrast, bad debt takes money out. So, a car loan, for instance, is bad debt. You pay for it each month while the car provides no income and in fact depreciates the minute you drive it off the lot.

Good debt, by contrast, would be a loan for an investment property where the rental income pays for the expense of the property, including the debt service, while also providing monthly income. In keeping with our real estate example, that is generally around 70 to 80 percent of the purchase price.

The rest of the money must be made up of equity from another source. Nearly two years before Mr. When started in Massachusetts. Wickersham could not have the time it made his report at was stated to have been made.

When it he succeeded in was through an exact he got Savings Bank Insurance was by being able to figure what it When he made the best contract between a city and a public utility that exists in this country. Brandeis wrote to the present editor of this paper a private letter in which he said: He could not have invented the preferential shop if that new idea had not been founded on a precise knowledge of the conditions in the garment trades.

Brandeis made his prophecy merely by analyzing the published Leading bankers in How did he win in the Pinchot-Glavis-Ballinger In various ways. A year before in- the actual crash came.

He is a person who fights against any odds while it is necessary to fight and stops fighting as soon as the fight is won. For a long time very respectable and work of honest leaders of finance said that his charges against the excusable.

I suggest the following as an epitaph or obituary notice: Arithmetic and the mother of safety. O Stranger. He fired the imagination of New England. New Haven were unsound and He kept ahead.

For a while he trampled with impunity on laws human and divine. In him his mind the two sides of his have worked together. His imagination is as not need will notable as his understanding of business. The arrangement between the Gas Company and the City of Boston rests on one of the guiding principles of Mr. Brandeis with an equally distinguished grasp of bearing and significance. The most important ideas put forth in the Armstrong Committee Report on insurance had been previously suggested by Mr.

Behind his understanding of the methods of obtaining insurance and the proper cost of it to the laboring man lay a philosophy of the vast advantage to the fibre and energy of the community that would come from devising methods by which the laboring classes could make themselves comfortable through their whole lives and thus perhaps mak- ing unnecessary elaborate systems of state help.

Time and arithmetic do the rest. Brandeis' s life. In the IMinimum from the State of Oregon.

Florence Kelley since it their hours "No man since Lincoln has understood common people as Louis Brandies does. The his relation to his Brandeis. These industrial activities are in large part an expression of liis deep and ever growing sympathy with the working people and understanding of them. Wage which is about to be heard before the Supreme Court. Business the for and Equitable policy more important the statesmanship were intimately combined in the Protocol in New York.

I do not think your motives in this agitation are good motives. Brandeis he came and sat down by me and said: The editorial printed above hints at how ho solved the mystery.

Brandeis's great progressive achievements have been connected with the industrial system. I have no respect for you. He knows as much about the Interior Department today as I do. Brandeis's final plea to needs. Possibly his work on railroads will turn out to be the most significant among Brandeis has done.

His power of intensive work. It is seldom that one not to say before the world. He was the first person effectively the doctrine that there is who set forth a limit to the size of greatest efficiency. Brandeis is xiii many it is ideas. Brandeis has sacrificed much in money.

Not less notable than the intellect and the constructive ability that have gone into Mr. Brandeis' s work are the exceptional moral qualities.

In destroying the delusion that efficiency was a common emphasized the possibility incident of of efficiency size. Of the truths which are embodied in the essays printed in this book. No man could have done what he has done without being willing to devote his life to making his dreams come true. Brandeis and others have recently brought about changes.

The currency bill has been passed. The before articles reprinted November. Management" appeared Aug.

other people's money

Norman Hapgood. Harper's other articles. Nor should anyone make the mistake. A great industrial nation is controlled by its system of credit. The growth of the nation. So long this country is the as that exists. This is the greatest question of all. Our system of credit is concentrated. The acts of this inner group. The called facts upon How what to act. Additional remeCongress will soon be dies will be proposed.

Samuel Untermyer. On when. The facts. The key to their power is Combination concentration intensive and comprehensive advancing on three distinct lines: There is the obvious consolidation of banks and trust companies. Though properly but middlemen. There into is the consolidation of railroads huge systems. They became the directing power in railroads. Investment bankers. But combination. Thus four distinct functions.

It is to this union of business functions that the existence of the Money The development Trust is mainly due.: The makers of our own Constitution functions.

For a small investor to make an intelligent selection from these many corporate securities indeed. The bonds and stocks of the more important corporations are owned. Investors in corporate securities. The banker performs. Corporations for require the aid of a banker-middleman. The number of securities upon the market is very large. Only a part of these securities is listed on the New York Stock Exchange.

The per- manent capital of corporations is represented by bonds and stocks. This confidential banker to customers relation of the — and the knowledge of the customers' private afTairs acquired incidentally. But in the business of selling bonds and stocks.

Unless his to be little better than a gamble. The field of operations for securities. They desired to manufacture them also. They became promoters. The rapidly accumulating savings of our people sought investment. The volume of new security issues was greatly increased by huge railroad consolidations. They were not content merely to deal in securities. Morgan associates acquired their hold It Southern Railway.

But the banker's participation in the management of corporations was not limited to cases of promotion or reorganization. It was in this way also that Kuhn.

An urgent or extensive need of new money was considered a BufTicicnt reason board directors. Often they insured the continuance of such control by the device of the voting trust. The investment banker. Like other he wants to buy But when he becomes merchants. When once a Board— whatever may York. The is fact that there are other directors besides the banker on the Board.

Morgan into the management of the then prosperous New Hartford Railroad. The banker. This huge sum does not any issues marketed privately. Through voting- trusteeships. They saw 13 that if they could control the security-buyers. It was natural that the investment bankers proceeded to get control of the great life insurance companies. The numerous small investors cannot. The purchase the trust companies. A large part.

These controlled corporate investors are not only large customers.

Rich Dad Fundamentals: Other People’s Money (OPM)

They sometimes inconveniently reluctant. They had The New York legislature placed in certain restrictions upon their growth. At the time of the Armstrong investigation the average age of these tliree companies was The growth of assets in fifty-six years. The three great companies the New York Life. The life insurance companies are our leading Their huge surplus and institutions for savings. These three companies must. George W.. While remaining such he was made a partner in J..

The New York Life is a mutual company. Perkins was Vice- President of the New York the companies. The dividend on this stock is limited by law to seven per cent. The aggregate investments of these three companies on January 1. A large part of all life insurance surplus and reserves are invested bond in bonds. It was natural that the investment bankers should seek to control these never-failing reservoirs of capital.

Within five years all of these stocks, so far as distributed. Many of our national banks have invested in this manner a since of. The bond investsome banks exceed by far the aggretheir capital and surplus, and nearly. Vast fortunes like those They of the Astors are no doubt regrettable.

But the reservoir of other people's money, from which the investment bankers now draw their greatest power,. When bonds and stocks are issued to finance permanently these corporations, the bank deposcretion of those in control, be used to. The banker's own capital. Tight money nearly always makes them The control fall.

Their power over a is even greater. Its sale on the market may depend upon whether the secur- prices in particular security ity favored or discriminated against when is offered to the banks and trust companies.

And even the loanable. As the Pujo Committee finds: The latter is quite as former. This is accomplished by the simple device of becoming the bank of deposit of the controlled corporations. When J. Thus J. But the compensation taken by the tunities for the acquisition of wealth bankers as commissions or profits from reasonable. The syndicate formed by J.

Of this received. The operations of these bankers are so vast and numerous that even a very reasonable compensation for the service performed by the bankers. Company was United the States sums were paid for companies of which it is large the capitalized stock. Commissioner of Corporations Herbert Knox Smith. For instance. The fined exaction of huge commissions trust to and other The Interborough Railway corporation. The bankers bound themselves That to take any of these six per cent. When the contract was made the New Haven's then outstanding six per cent.

The invasion the investment banker into the banks' of field of operation was followed by a counter invasion by the banks into the realm of the investment. And the bank officers naturally asked.

Why should not become investment bankers too. But the parture temptation was irresistible. It was obvious that control by the investment bankers of the deposits in banks and trust companies was an essential element in their securing these huge profits. The contending forces met as allies. There resulted the fullest "cooperation". Morgan Bank The resources of the firm have not been disclosed. Each of these gentlemen was formerly President.

Morhas huge resources. But it appears that they have available for their operations. George F. They constitute. Jacob H. The scale of his vestment in railroads may be inferred from former holdings in the Central Railroad of Jersey. His Morgan's Of Mr. He is a director in 28 other railroad companies. Baker's investments we know more. But that one use of "other people's money. Stillman's many investments. Schiff aptly described this as ''a very nice investment.

City Bank His Baker is a director in 22 corporations having. Baker's son arc direct National Bank. Baker dominates. The full extent of his fortune was not inquired into.

First National is represented in corporations That is. When laws. Baker saw little not surprising that Mr. The Pujo report shows that its directors including Mr. Mutual Life Insurance Company. Farmers' Loan and Trust Company. Burlington 3. Lehigh Haven. Public Service Corporations: Bank of New York. Industrial Corporations: Railroad [Companies: Baker's influence voting is exerted trustee.

Northern Pacific. Adams Express Company. Pullman Mr. Stillman tions. National Bank of Commerce. Twenty-two bilmore than three times the asthe property. But the huge sum is of twenty-two bilHon dollars not large enough to include to which the "influence" all of the corporations the three allies.

With what can we compare ''Twenty. The mind realizes size only through comparisons. The Pujo schedule does not include. Available publications disclose the capitalization of only 38 of these. It does not include those in which they are represented by dummies.

The Pujo schedule corporations which the Morgan associates in actually appear includes only the by name as directors. But these shown their humility many such. It is clear. That sum represents the bond and stock capital of the New Haven Railroad. National City. It has been buttressed on every side by joint ownerships and mutual stockholdings. Morgan and his partners acquired onesixth of the stock of the First National Bank.

Baker acquired together. IMorgan of the National City Bank. Davison and Mr. Stillman and or their dominant officers. They became trustees in great railroad systems. Boston and Chicago. New York. In Boston there are two large international banking houses Lee.

But centers P. Thus of 42 banking institutions. The Shawmut Bank. There are in Boston now also 23 trust companies. They are so still in some small.

Once Lee. Boston's banking concentration is not limited Around Boston to the legal confines of the city. Kinnicut or distributors of securities. And similar relations would doubtless be found to exist with the leading bankers of the other important financial centers of America. Somewhat between the and Chicago's great financial institutions its First National Bank.

The underwriting commissions on this inner issues made by group are usually easily earned and do. It was impossible to learn the identity of these corporations. As bankers frequently get huge commissions without themselves distributing any of the bonds.

Bankers and brokers are so anxious to be permitted to participate in these transactions under the lead the inner group that as a rule they join of when invited to do so. Morgan Mr. Pujo Committee reports] estimated that there were from to such underwriters who were apparently glad to agree that Messrs. Long ago monarchs invented. Their attitude reminds one of the "spheres of influence" with ample " hinterlands by which rapacious nations are adjusting differ- Important banking concerns. The Pujo Committee reports that they are ''quaUfied aUies of the inner group".

But even Kuhn. Can full are potent among the anthraMorgan associates them? And with like competition exist when cite coal railroads in all of conditions prevailing. But far more serious even than the suppression of competition industrial which this liberty. The intimidation which it effects extends far beyond "the banks. Its blighting and benumbing effect extends as well to the small and seemingly independent business man.

Nearly every enterprising business man and a large part of our professional men have something to sell to. Nearly every needs bank credit. But America. Break the control so by the investment bankers over railand industrial corporations. In either event it tends to inefficiency. IMorgan Co. The objection extends alike to contracts of a corporation whether with with a firm one of which he is a member.

Morgan the bonds to the of a director. New Morgan York. Life Insurance or a partner sell Company. Morgan or a partner is a director. The New Haven spends the proceeds of the bonds in purchasing.

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Morgan or a partner supplies of a director. The Reading. The Steel Corporation. Morgan to the Western subsidiary or the of a partner Company is The Telegraph a director. The Reading buys its passenger cars from the Morgan Pullman or a Company. The Baldwin. The chain is Manu- indeed end-. This specific illustration tious. Each and every one of the companies last named markets its securities through J. Through all these alliances and the huge traffic it controls.

The aggregate ent corporations — through exert their influence United States assets of these differ- which these few men over the business of the —exceeds sixteen billion dollars. These same are also directors in twelve steel-using street railway systems. The prohibition will not be an in- It will merely give full legal sanction fundamental law of morals and of human nature: For no rule of law has.

Courts held that even where a comthis. Courts held valid contracts between a corporation and a director. For trustees. The first limitation ignored the rule of law that a beneficiary is entitled to disinterested advice and not merely from some.

Every one knows that the most effective work is done before any vote is taken. The second in the making participates of — by which contracts. Every one should know that the denial of minority repre- sentation on boards of directors has resulted in the domination of most corporations by one or two men. Indeed the Pujo Committee reports: Directors and even an appealing party.

It is the directors corporate action. Appeals from Philip drunk to Philip sober are not of frequent But here we lack occurrence.

And membership are radical changes rare. Harvard Law Review. Max Pam proposed in the April. But to be effective. Pam's directorates are As counsel promi- nently identified with the organization of trusts. In the case of railroads and public-service corporations industrial manded.

For even more important than efficiency are industrial and political liberty.

For contracts are But the compelling reason interlocking directorates is prohibiting for neither the protection of stockholders. And this is particularly true in railroading. They are almost as essential a factor in commerce as our railways. Receiving deposits and making loans therefrom should be treated by the law not as a private part of our currency business. It carrier to use its up or specifically to businesses.

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The granting to powers destroy other or withholding of a loan should be determined. But bank resources are. Nearly threeloans of safely be allowed to grant or to their own money to fourths of the aggregate resources of the thirty-.

Senator Owen. Chairman of the Committee on Banking and Currency. The beyond escape. All banks in the United States. Mere honesty to the stockholders demands that the interests to be considered the interests of of the part of ors. The a stricter duty. And we should bear this in mind: If privately. But that difficulty merely emphasizes the im- portance of making absolute the rule that banks make any loan nor engage in which a director has a private interest.

But that honestly discretion should be exercised. The statement of Mr.

An Interstate Commerce Commissioner is prohibited from owning any bonds or stocks in any corpora-. On the contrary we are of opinion that it may go on from regulation to prohibition except upon such conditions as it may prescribe.

It might make a bank in director dispose of some of his investments and from making others. A judge is disqualified from sitting in any case in which he has even the smallest financial and most judges.

And the directors of our great banking in- bank stitutions. Shall it be applied to all banks? Shall locking the principle directorates in of prohibiting potentially inter- competing corporations be applied to state banking institutions.

Shall the principle be applied so as to prohibit transactions with another corporation in which one of its directors is interested merely as a stockholder?

Their diagnosis discloses intense financial concentra- and the means by which tion Combination. With a view to freeing inis to dustry. Provided further. That a I. The Committee recognizes that a corporation should not make a contract in which one of the management has a private interest.

The objection to com- directors. The prohibition of corporate contracts in which one of the management has a private interest should apply to du-ectors.

The Money Trust snake The scotched. Let us examine this further: When we find. The Bank National of England. In order that the banks may not be controlled by a few financiers. That statute was passed in These banks are separate and distinct. Massachusetts attempted thus to curb the power of the individual financier.

A few years ago it was supplemented by providing that none of the executive officers of a savings bank could hold a similar office in any national bank. The Committee's recommendation is also in harmony with laws enacted by the Commonwealth of Massachusetts more than a generation ago designed to curb financial concentration through the savings banks.

English ASIN: BQA6 Text-to-Speech: Enabled X-Ray: Share your thoughts with other customers. Write a customer review. Read reviews that mention people money john kay financial sector financial system financial services financial crisis conflicts of interest financial institutions regulatory arbitrage finance industry adam smith high frequency financial industry credit default real economy must read author also gone gone default swaps best book.

Top Reviews Most recent Top Reviews. There was a problem filtering reviews right now. Please try again later. Hardcover Verified Purchase. I liked this book because it gives an overview of the banking industry which i have not seen in other books and articles I have read, especially regarding the crisis of and the role played by the financial system in this. Rather than just finding serious flaws in this or that aspect of the banking system, which he does, the author provides convincing reasons how and why the entire financial system in developed countries basically lost its compass, and has ended up as something entirely different from its original purpose.

He advocates scrapping or seriously reducing much of the activity which characterises modern banking, and provides original insights for approaches to regulation and reform to encourage this. The author's style is somewhat desultory, branching off occasionally from the themes he expounds with small related anecdotes or related thoughts, which can make the reading a little heavy. However, these fill the book with fascinating gems wittily questioning the standard wisdom, and even the basic tenets, of modern financial theory, and its application to the banking industry.

The chapter on risk I found particularly enlightening. All through the author condemns the lack of ethical standards and attributes this to the rise of "gesselschaft" vs "gemeinschaft" in managing risk, the broad berth given by common law to boiler-plate derivative contracts, and other factors.

The author wraps up profound insights and trenchant observations in a colloquial writing style. However, i found the book deep enough to merit a second reading, which I am in the process of doing. Really found this book insightful and thought-provoking. I'm probably a little too young and not well versed enough in finance to have understood everything, which is to say, at times it was a little over my head.

However, for it being a finance book, it was rather engaging and I liked the writing style of the author. He seemed like an exceptionally smart and reasonable guy and I found the arguments he presented in the book to be very sensible. It helped that this book didn't have an overt political sway, in fact, I found it difficult to figure out exactly where the author stood.

So don't be afraid that if you read this book you're going to be necessarily politically persuaded in some way or another, as it's not really focused on that. The author was also able to describe our financial system almost in a detached, very critical and observational type of way but, as well, he also had an insiders perspective. The gist is that our financial system is too complex and interdependent and this is the source of it's underlying fragility. As well, we have a lot of misconceived regulation.

Overall, I really appreciated what I learned from this book, definitely buy it if you are unsure. It's very relevant. Kindle Edition Verified Purchase. Author John Kay sets forth the theme of his book, and its title, at the beginning: He advises governments on financial policy. It pulls you along by explaining financial issues with everyday real-life examples that all readers can understand. He backs up his explanations with delightful anecdotes from the past and present. The finance sector has experienced actual criminality on a wide scale, from liar loans to LIBOR rate-fixing.

Financial innovation was critical to the creation of an industrial society; it does not follow that every modern financial innovation contributes to economic growth. Many good ideas become bad ideas when pursued to excess. How did it come to be that: A So many bankers became so corrupt? Those are the deeper issues that McKay seeks to explain.

Large companies no longer invest in physical structures such as office buildings and factories. They lease their offices and contract the manufacture of their products to cheap-labor subcontractors in the Third World. Government policy is therefore bent toward favoring bankers. When banks and businesses fail, their management rarely suffers. The rank-and-file employees lose their jobs, and the vendors and creditors are stiffed by bankruptcy, which voids debt.

Financialization transfers wealth away from the majority of people who earn their livelihood as wage earners and to the tiny fraction that makes it money managing financial instruments. It is Robin Hood in reverse, and explains why the standard of living of the middle glass appears to be in free fall. But that is not the case. He believes that written regulations are easily subverted and that bankers will in any case ignore them whenever they perceive profitable ways to scam the public.

There seems to be no sense of shame in large publicly traded business and banks, and therefore it will be difficult to get started with a tradition of integrity where none exists. But how can this be accomplished without regulation? For that reason I took one star off the five I would have otherwise given it. Even so, the book remains a most valuable read.

It will educate lay readers to the way the financial systems of the USA, Britain, and Europe operate why they failed in and why they remain far less sound than they should be. This knowledge is indispensable to anyone who invests in the markets or who depends upon financial institutions to manage their savings. I thought it was the best book on banks and finance I have ever read. I have now reread it two more times.But populist suspicion of finance, and the wide US attachment to the life of small communities, limited the development of interstate banking.

Massachusetts has 33 cities. Wikipedia citation Close. Paul stock. The gist is that our financial system is too complex and interdependent and this is the source of it's underlying fragility.

Instead, they rely on people with the proper financial education, skill set, and drive to bring deals to them. The Great Convergence. The industrial trusts are among its most effective feeders.