I was reading Gotham last night and almost did a double-take after reading the beginning of Chapter 58, which discusses the financial crises of 1873, on which Wikipedia also has a page.
So many aspects of the current financial crisis have counterparts in past crises, this one in particular. That is to say, financial crises are certainly not new. The sad part is that despite all this knowledge, we seem to have remained powerless to stop them.
The collapse in railroad stocks led to a general banking panic and a multi-year recession. Here's a quote from the book (page 1021) attributed to Cornelius Vanderbilt, where if you just replace "railroads" with "subprime mortgages," you'd describe the current situation quite well:
"There are," he argued, "many worthless railroads started in this country without any means to carry them through." To raise money, entrepreneurs had turned to "respectable banking houses in New York, so called," who affixed them with "a kind of moral guarantee of their secureness" and sold the bonds in Europe. But the roads, many of which went "from nowhere to nowhere," soon got into difficulties. "If people will carry on business in this madcap manner," he concluded, "they must run amuck."
