At the turn of the 20th century, the board of directors of the Cleveland Trust Co. met weekly to go over the bank’s loans. The minutes show the directors carefully scrutinizing loan applications, especially from local entrepreneurs. Yet toward the end of the 1920s, the minutes start reflecting a board less interested in local business lending and more absorbed with sending money to New York to play the stock market. “There was none of the careful oversight of before,” says Margaret Levenstein, executive director of the Michigan Census Research Data Center at the University of Michigan, who examined the minutes as part of an ongoing research project. “They wanted to speculate.”
The bank’s finances took a hit when the stock market boom went bust in 1929. Cleveland Trust survived the Great Depression, including a 1933 bank run that ended after its president, Harris Creech, clambered on a desk and calmed down nervous customers. But its speculative splurge evokes the banking industry’s race to a fast buck 75 years later. And the rise and fall of Cleveland’s economy from the 1870s into the 1930s may help explain why entrepreneurship—a key engine of new job creation—is falling short in America today.
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Author:Chris Farrell
