I cannot let this day end without acknowledging the 145th anniversary of the failure of Overend, Gurney, and Company, which set off one of the 19th century’s more spectacular financial crises. Writing the day after the failure, the Times of London argued that the firm could,”…rightly claim to be the greatest instrument of credit in the Kingdom.”
The bubble that burst in May 1866 bears more than a passing resemblance to our own subprime meltdown. The object of speculation during the Overend crisis was a new type of financial asset with solid backing: shares in limited liability companies. Sounds a lot like subprime mortgages to me.
Want to learn more? See pages 96-97 of Unsettled Account for a description of where the crisis came from and why the Bank of England decided not to undertake a bailout.