Power of Finance

Bond trader’s workplace, about 2008

Bill Gross managed PIMCO, the largest bond fund in America. Sifting through mammoth amounts of data, he quickly determined what to buy and sell.

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Computers increased the speed of finance—and deregulation expanded its reach. Through their retirement plans, more Americans became investors. Professional money managers sought high profits by investing funds in increasingly complex and risky transactions that even they did not fully understand. Investors loved the strategy and returns—until they experienced losses.

Ed O’Connor’s trader’s jacket, 1990s

Ed O’Connor helped commodity and stock markets expand to dealing in security options, implement electronic trading, and use computers and mathematical models to guide trading decisions.

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Bloomberg terminal keyboard, about 2008

Laffer curve napkin, 1974

Economist Art Laffer sketched a new direction for the Republican Party on this napkin, illustrating his theory that lowering taxes increased economic activity. Wall Street Journal editor Jude Wanniski popularized it, and politicians Don Rumsfeld and Dick Cheney carried it out.

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Milton Friedman’s briefcase, about 2004

Many economists, including Nobel Prize-winning Milton Friedman, recommended less government regulation of financial markets. President Ronald Reagan built his economic policy on Friedman’s arguments.

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Ross Perot campaign material, 1992

Ross Perot campaign material, 1992

Business leader Ross Perot ran for President of the U.S. in 1992. He argued for balancing the federal budget and protecting American jobs.

Deal souvenirs from the finance and investment banking world commemorated the closing of a major business deal and were given to major participants as mementos. A deal souvenir is an elaborate presentation of a tombstone advertisement, the print announcement of an IPO or certain banking transaction, which were mandated by the Securities Act of 1933. A tombstone includes the basic details of the issue, the names of the major bankers, and the underwriters. As the influence of the financial sector and the size of deals grew, deal souvenirs often became more elaborate and colorful.

LeapFrog deal souvenir, 2002

This deal souvenir was given to venture capitalist Steven Fink when he and his partners at Knowledge Universe decided to take LeapFrog Enterprises, Inc., public in July 2002. Despite poor market conditions in early 2002 the LeapFrog initial public offering (IPO) did well.

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Southern California Edison deal souvenir, 2008

Southern California Edison deal souvenir, 2008

This deal souvenir was created to memorialize a southern California Edison bond offering in October 2008. It was given to Theodore craver, CEO of Edison international. The offering was significant because it was the first test of the capital markets (a relatively small $500 million offering) in the immediate aftermath of the financial meltdown of 2008. The sale was successful because it was extremely low risk – a utility bond from a solid company. Utility bonds were considered one of the few things safe enough that investors were willing to take during a turbulent time.

McCaw deal souvenir, 1998

McCaw deal souvenir, 1998

This deal souvenir was created to memorialize a $400 million bond offering in June 1988 managed by Drexel Burnham Lambert. It was given to Drexel employee Michael Milken, who was famed for developing and popularizing the concept of high-yield (junk) bonds and engineered this offering.

Venture Capital

One key to business success in the United States has been access to money (capital markets). Some business raised money through bank loans or selling bonds. Other business sold a stake in their company (equity) through partnership and stock. Venture capitalists invested money and managerial knowledge in young companies in exchange for partial ownership. Georges Doriot promoted the concept in the 1950s, but it was the entrance of pension fund money after 1978 that made venture capitalism grow.

Click here to read an interview with Bill Draper, one of the first venture capitalists in Silicon Valley.

 

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