Augustus Heinze, United Copper, Scare of 1907: His brother Arthur P Heinze is my grandmother’s DAD! (and I’m a forex prodigy… go figure)

I was shocked to find out I am direct descendent of the family that caused the scare of 1907. Particularly since I’m a forex prodigy. Guess it was in my blood!
____________________________________________________
The United Copper Company was incorporated in late April, 1902.  The above stamp from May 1902 was likely used on documents regarding the incorporation of this new firm.  As you can see from the New York Times story fragment below, the incorporation of this new company was no small affair; the consolidation of the participating mining companies into United Copper required $80 million in 1902, over $2 billion in 2012 dollars.
New York Times, April 29, 1902
Augustus Heinze was a “copper king” in Butte, Montana, who arrived a bit late to the scene in 1889 but still managed to build a major mining enterprise and compete with the established “kings”.  After years of building his companies and mines, he left Butte for the east coast to dabble with the fortune and companies he had created.
Augustus Heinze in 1910
In 1907, Heinze moved to New York.  United Copper was based at 42 Broadway, just around the corner from Wall Street.  Heinze entered the banking business, forming a close alliance with Charles W. Morse.  With Morse, he served on the boards of several national banks, state banks, trust companies and insurance companies.

Across the corridor from Heinze and Morse were his brothers, Otto and Arthur P Heinze, who had a brokerage firm. With the experienced Morse, Otto conceived an ill-fated attempt to corner United Mining stock in October 1907.  Otto, however decided to go forward with the cornering attempt without the capital that Morse thought was necessary to insure success.  The result was that the corner dramatically failed, and its failure was the critical catalyst in a major US financial system collapse.

Scene in front of the New York Stock Exchange in October 1907 during the financial panic.

Otto Heinze had miscalculated.  He overestimated how much United Copper that Augustus and the family controlled. When he required short sellers to buy back stock, there was more than enough United Copper stock available in the open market for the “shorts” to cover their short sales.   When the collective market realized that Otto’s maneuver had failed, the price of United Copper stock collapsed.  Then panic spread as people pulled money out of banks associated with Heinze, and then from trust companies associated with those banks.  Augustus Heinze had supported his brother’s cornering attemp.  Augustus’ deep commitments across the financial system led to great personal losses. He would be barred from further involvement in financial institutions.

The Panic of 1907 was one of the most significant financial crises in American history.  Contributing factors included the costs of the 1906 San Francisco earthquake, yet it was the actions of the Heinze brothers that had caused much of the panic.  J. Pierpont Morgan, the premier financier of the day, was able to stabilize the financial markets through his own manipulation.  However, the US Government was not to leave the markets open to the solutions of private capital much longer.  The 1907 crash directly lead to the formation of the US Federal Reserve System in 1913.

________________________________

]JAIL TERM AND FINE FOR ARTHUR P. HEINZE;jail term doc

MUst Serve Ten Days and Pay $250 for Sending Copper Witness and Books Away. $2,500 BAIL PENDING A STAY Prisoner Denounced by Judge Roy for “Deliberate and Willful Obstruction of Justice.
Judge Ray, in the United States Circuit Court, announced yesterday that Arthur P. Heinze, brother of F.A. Heinze, the copper man, must go to jail for ten days and pay a fine of $250 as a penalty for his obstruction of justice last June in the Grand Jury investigation of the doings of F.A. Heinze in the Mercantile National Bank.

 

 

_____________________________________________

things from their home- passed down to my mother5 1 084

My great grandmother Ruth- Arthur Heinze’s wife.

5 1 094

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s