Hetty Green is remembered as “the world’s greatest miser” and the “witch of Wall Street,” but nowadays Green would probably be seen as an eccentric investment icon. After all, while she became known for her frugal nature and gruff exterior, Green pioneered value investing strategies that have made many of today’s top investors billionaires. And when the situation got worse, when people really needed help, the whaling heiress became independent investor, business mogul and richest woman in the world, she often used her fortune to save the day.
There is perhaps no better example of Green’s misunderstood legacy than the knickerbocker crisis. Also known as the Panic of 1907, the Knickerbocker Crisis is largely forgotten today, but the economic nightmare has remained seared in the memories of those who lived in the early 20th century. It had rather complex origins, but in short it’s this: Wall Street greed turned ugly, eventually leading to bank runs and a severe recession.
In the span of three weeks after the panic began, on October 22, 1907, the New York Stock Exchange plummeted nearly 50 percent from its 1906 peak. And a year later, in 1908, the Gross National Product (GNP) , a measure similar to today’s Gross Domestic Product (GDP), fell 12%. The problems for the banking system were so severe during the Knickerbockers crisis that they spurred the creation of the Federal Reserve system.
It all began when a copper magnate, F. Augustus Heinze, and the “Ice King” (who literally sold ice), Charles Morse, attempted to artificially inflate the price of United Copper stock, a practice that is now illegal . Heinze and Morse went into heavy debt to invest in United Copper and drive up the stock, but when that ploy didn’t work, they defaulted on a series of large loans. This led to problems for some key banks that typically did not hold much cash in reserves at the time, including the Knickerbocker Trust (hence the name of the crisis).
Problems at banks and trust companies eventually sparked widespread panic with bank runs in many parts of the country. As the situation worsened, John Pierpont Morgan, the American financier who founded what is now JPMorgan Chase, was eventually forced to convene a group of Wall Street’s best and brightest at the Morgan Library to decide how to shore up the ailing economy and Actions. market. Hetty Green was the only woman invited to attend that meeting in the midst of the panic.
Why? His position on Wall Street certainly helped, but he also predicted everything.
A question of The Literary Digest in 1916 he described an earlier one New York Tribune article that contained quotes from Green about how he predicted the Panic of 1907 and then proceeded to save more than his fair share of investors, businesses, and even the city of New York.
“I saw this situation coming,” he said, noting that there were undeniable signs of stress. “Some of the most solid men on the Street came to me and wanted to unload all kinds of things, from palatial residences to automobiles.”
Green said she then gave the New York Central Railroad company a “big loan” after they came knocking, and it made her “sit down and think a little bit.” He decided to start raising as much money as possible, realizing that panic might be coming.
“When the accident came I had money, and I was one of the very few who actually had it. The others had their ‘titles’ and their ‘values’. I had the money and it had to come to me,” she said.
Green described how men came to New York from all over the country to ask for loans during the Panic of 1907. But despite being labeled a “stingy” her entire life, she did not take advantage of the situation.
“Those I lent money to got it at 6%. I could have easily secured 40%,” she explained. “Never in my life, despite what has been said against me, have I practiced usury, and no one knows this better than the rich men who have done business with me.”
Usury, or charging excessive interest on a loan, was against Green’s moral code, born of his Quaker roots. And she seemed to relish the idea that some of the world’s most powerful men, businesses and even local governments turned to her when they needed a bailout.
Green then loaned the New York City government $1.1 million at the height of the Panic of 1907, which is equivalent to about $33 million in today’s dollars. And it wasn’t the first time he offered his support, according to the 1930 book titled The Witch of Wall Street: Hetty Green. Months before the panic, he had given the city a $4.5 million loan, which today is worth nearly $150 million.
“On more than one occasion, when New York was short of money, she lent the city money,” explained Charles Slack, the author of Green’s biography, Hetty: the genius and madness of America’s first female tycoon. “And she always did it at reasonable prices. He didn’t dig in or hold the city on a barrel.