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Quote of the Day
Old members of the Stock Exchange, remembering the parallel of event of the assassination of President Garfield and its effect marketwise, were prepared for a repetition of the market action then experienced. That repetition came – in almost identical fashion – showing how similar events events produce similar consequences.
September 7th – This Day in Stock Market History
September 7th, 1901 – Stocks fall 4.43% after the assassination attempt on President McKinley.
On September 6, 1901, U.S. President William McKinley was shot by an assassin. The news broke after markets closed, so when the New York Stock Exchange opened for a half-day session on Saturday, September 7, panic selling ensued.
Image Source: Library on Congress/New York Tribune
Investors feared political instability and a potential change in economic policy if McKinley died and Vice President Theodore Roosevelt (seen as more trust-busting) took office.
Over the weekend, however, McKinley appeared to be recovering, and when markets reopened on Monday, much of the loss was reversed. Although sadly, McKinley would tragically succumb a week later.
September 7th, 1988 – Drexel Burnham Lambert Inc. is charged with stock fraud by the S.E.C.
The 1980s junk bond boom came under serious legal fire on September 7, 1988.
On this day, the Securities and Exchange Commission (SEC) filed a landmark civil suit accusing Wall Street’s hottest firm, Drexel Burnham Lambert, and its star trader Michael Milken, of securities fraud.
The complaint alleged that Drexel, Milken (the “junk bond king”), and others engaged in a “secret arrangement” with convicted insider trader Ivan Boesky to manipulate stocks and violate securities laws throughout the mid-1980s.
This accusation sent shockwaves through the financial world. Drexel’s stock price tumbled as investors realized the firm was in serious trouble. Ultimately, this event led to Drexel pleading guilty to fraud charges and paying a $650 million fine in 1988, and Michael Milken himself being indicted and later pleading guilty to felony charges in 1990.
Drexel Burnham Lambert went bankrupt on February 13th, 1990, marking a dramatic collapse of a Wall Street giant once fueled by speculative high-yield debt.
September 7th, 2008 – Fannie Mae and Freddie Mac placed in government control as the mortgage crisis worsens.
Amid the 2008 financial crisis, September 7, 2008 marked a critical turning point: the U.S. government seized control of Fannie Mae and Freddie Mac, the two giant mortgage finance companies.
On this day, the director of the Federal Housing Finance Agency (FHFA) announced that Fannie and Freddie would be placed into conservatorship (government control) to prevent their collapse.
These government-sponsored enterprises, important parts of the American housing market, had been crippled by losses on subprime mortgages. The Treasury Department pledged up to $200 billion to backstop their obligations, effectively nationalizing the companies to ensure they didn’t fail.
This rescue – one of the largest in U.S. financial history – reassured markets temporarily and helped keep the mortgage market functioning. When trading resumed after the announcement, initially there was relief. However, equity shareholders of Fannie and Freddie were virtually wiped out, and the broader credit crisis still intensified with Lehman Brothers’ collapse a week later.
Read of the Day
For those looking for a more thorough understanding of the historic role that Fannie Mae and Freddie Mac had in the mortgage industry, this study by the CBO is a great detailed review of their basic duties, and why they failed.
Den of Thieves by James Stewart
This book is an account of the insider trading scandals that rocked Wall Street in the 1980s. Stewart follows the rise and fall of Ivan Boesky, Michael Milken, and Drexel Burnham Lambert, exposing how greed and corruption fueled the junk bond boom—and ultimately destroyed careers, fortunes, and one of Wall Street’s most powerful firms.
The book shows how excess and rule-breaking can create spectacular short-term gains but end in collapse. For today’s investors, it’s a reminder that behind every market frenzy, the line between innovation and exploitation can be dangerously thin.
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