Credit Crises Nothing New -- 1907 Tells Us So

Anyone gripped by the tale of beleaguered mortgage lender Countrywide Financial (CFC) should find a new book about a long-ago financial crisis compelling reading.

Apart from some trivial details, The Panic of 1907 by Robert Bruner and Sean Carr, which gives a blow-by-blow account of a particularly trying period in U.S. economic history, reads like the coverage of the present crisis chronicled on these Web pages.

What's more, the authors' analysis goes a long way to spotlighting the reality that there may be worse yet to come in our contemporary situation, despite last week's Federal Reserve move to provide the markets some relief by lowering the interest rate at which it lends to banks.

Radiating Panic

The book begins with the 1906 San Francisco earthquake and charts the lurches, lists and gyrations of the financial markets through the apex of the crisis in October 1907 and the return of relative tranquility a month later.

The quake, and subsequent fire that destroyed San Francisco, came after a period of very robust economic growth and placed the entire financial system under a huge strain. As the magnitude of the damage to San Francisco became clear, British insurers sold their stock holdings and shipped gold off to the U.S. West Coast to fund the city's reconstruction.

Then, unlike now, there was no central bank to provide an economic cushion -- looser monetary policy -- in the wake of the disaster.