Creditanstalt. Remember the name.
But first a family story:
He was an ambitious young man in the Roaring Twenties, fresh out of the University of Texas where he'd been, as they used to say, well-liked. And the young man deserved to be: He had a gift for numbers and friendship.
Eager to help, he knew everybody on campus and 'most everybody knew him. He not only had a flivver and a flapper but a whole marching band. As drum major, complete with baton and high plumed hat, he'd led the Longhorn band into the then new Texas Stadium (and would return 50 years later to lead it into the newer one). Robert Preston in "The Music Man" had nothing on young Robert E. Levy of little Marlin, Tex.
The young man was going places -- everyone said so -- and the place to go was Wall Street. For it was the best of times and, as always in the best of times, they would never end. Everyone said so. Things would just get better and better. Everything that rises would no longer fall; they would just keep rising.
This was the New Era. Man had mastered the economy, and the Roaring Twenties would just go on roaring. The way the New Paradigm was going to do in the 1990s. The business cycle was as dead as the medieval idea of the Just Price; boom would never lead to bust again. It was a new world with a new physics. The law of (fiscal) gravity had been repealed.
And if New York was the place to go, 1929 was the year to go there. Ain't we got fun? There was an electricity in the air, the kind that made The Great Gatsby great. The young man had friends up there and his sweetheart wasn't far away at Goucher. Even as an old man, he would remember being impressed by her limousine and chauffeur, for she was a Texas heiress. At least before the Crash changed everything.
. .One of his first visits in the big city was to the Polo Grounds to see John J. McGraw, legendary manager of the Giants. The team spent spring training every year at the hotel the young man's family ran in Marlin, where its stars could shape up and dry out for the coming season. (The ballplayers would entertain themselves by shooting out the light bulbs that spelled out the hotel's name on its outsized marquee.) Once in New York, the young man sent his card to Mr. McGraw, and was invited to watch the game from the dug-out.
. .Talk about high cotton. Those were the days, my friend, they thought they'd never end. To quote the then famed economist Irving Fisher, the Alan Greenspan/Ben Bernanke of his prosperous day, "Stock prices have reached what looks like a permanently high plateau."
Then came October 29, 1929. Black Tuesday. Looking back, Robert E. Levy would recall walking from the brokerage house on Wall Street all the way up Broadway to his boarding house, watching the crowds of desperate depositors form at every bank he passed. The great bank run was on.
What he remembered most about that day was the taste of strawberries. Still a Texas boy, he'd stop and buy a handful at every fruit stand he passed, and keep walking through the panic. (The apple stands of the Great Depression would come only later, manned by former bankers and stockjobbers.) By the time Robert E. Levy got uptown, a realization had formed: Texas was the place to be.
His friends urged him to stay. This was just a blip, they assured him. It would pass and the market would recover. It did -- in about 50 years. People forget now, but the Depression, The Depression, didn't come on all of a sudden, despite the drama of the Crash. It came in dips and dabs, ups and downs. The market actually showed signs of recovery for a time. This, too, would pass, said the wise old heads, older than they were wise. Why, prosperity was just around the corner. The president of the United States said so. (Sound familiar?)
All of which brings us back to Creditanstalt. A forgotten name today, it would make headlines all over Europe in May of 1931: Viennese Bank Fails/ Bank Runs Spread. The news didn't get much play here. That year's Banking Crisis was happening in far-away Europe. In a little country that didn't matter. It could never happen here.
Today the bank runs are forming on a little island in the Mediterranean far away from the banking centers of Europe. Be assured that the euro is ... sound as a dollar, as they used to say. Relax. Europe's bankers will muddle through as they always have, maybe with a little help from our own Ben Bernankes and Timothy Geithners. Not to mention Jamie Dimon of JPMorgan Chase and Whale Trades. All those fiscal savants. They know.
Compared to the assurances of sophisticated financiers like these, the simple words of an English housewife -- who somehow became the most successful British prime minister in recent times -- are now as forgotten as she is:
"The European single currency is bound to fail, economically, politically and indeed socially, though the timing, occasion and full consequences are all necessarily still unclear." --Margaret Thatcher.
Why? Because, not to put too fine a point on it, not everybody on that continent can live off the Germans, and the Germans themselves grow tired of supporting the rest of Europe.
Today's financial crisis in Europe may yet be papered over, just as the collapse of Creditanstalt was decades ago. But where will the next crack in the facade appear?
Today's little country that isn't supposed to matter, today's first shaking domino in a long row, is called Cyprus. Remember the name.