Poor Louis Menage. He was a wayward financier way ahead of his time.
As much as any member of the Dayton, Lowry, Walker, or Pillsbury clan, Menage has a legitimate claim to being one of the City Fathers of Minneapolis. But you’ve probably never heard of him, right?
That’s not surprising, given that he cost some members of those very same families a ton of money. In return, they made sure his memory was expunged from official histories of Minneapolis. But had he born a century later he’d no doubt be raking in TARP-funded bonuses and living beyond the reach of the law.
Menage arrived in Minnesota in 1871 on the recommendation of his doctor who believed the state’s “bracing climate” just the thing for Menage’s diagnosis of “weak lungs” – in those days a precursor to TB, from which Menage’s own father had died.
His first winter here, that bracing climate led Louis to go to ground in Minneapolis, where he taught shorthand. The following spring he found work as a clerk and timekeeper in a lumber camp.
By 1874, he was back in Minneapolis, ready to take the town by storm. From his real estate office on Washington Avenue, Menage shrewdly gobbled up tracts of land directly in the city’s growth path, buying, platting, and developing Prospect Park, much of south Minneapolis, and almost all of the Lake District.
In 1883, he created instant traffic for his friend Thomas Lowry’s new urban rail line by building the Lyndale Hotel, a world-class luxury resort on the eastern banks of Lake Calhoun. Over the next few years, he would go on to underwrite the bell in the Minneapolis First Baptist Church and join the board of the Minnesota Academy of Science, where he put the organization’s other philanthropists to shame by pledging $10,000 to fund a multi-year collecting expedition to the Philippines and Southeast East.
By now, Menage had expanded his business portfolio far beyond development into mortgage banking and insurance. In 1890, less than 20 years after he arrived in Minnesota, he opened his own office tower, the Guaranty Loan Building, the first skyscraper (the building was 12 stories high) west of Chicago.
But there was a dark side to Menage’s wheeling-and-dealing.
In the mid-1870s he got involved in a convoluted scheme to divest William S. King, an absentee landowner, of Lyndale Farm, a 1200 acre tract of prime development property just east of Lake Harriet.
When King finally tumbled to the fact that he’d been swindled, he sued. Though Menage was never officially accused of any wrongdoing, he ended up forking over $2 million to King – and returning the now improved land to its rightful owner.
Publicly, Menage shrugged off the set-back. Privately, he admitted that the financial reversal caused him sleepless nights. That anxiety propelled his next and costliest misadventure.
Having developed the industrial community of Gary, Indiana, Menage now decided to do the same on several thousands acres of land he’d purchased at the head of Puget Sound. Traveling to the East Coast and Europe, he drew upon his own reputation for probity and shrewdness to sell some $4 million worth of mortgages into the secondary market.
From that point on, things might have gone fine – if it weren’t for the Panic of 1893.
The panic, which lasted four years, led investors holding the Menage mortgages to call in their chips. But the paper was worthless. The “mortgagees” turned out to be names Menage culled from phone books around the country. In today’s terminology, the Puget Sound notes were “toxic assets.”
A warrant for embezzlement was sworn out for Menage even though in those glorious pre-financial regulation days he hadn’t technically broken any laws. Suddenly a prudent man, he discovered he had urgent business to attend to in Central America.
Meanwhile, corporate law in 1893 held the trustees of a corporation personally liable for company debts. One by one, members of Guaranty Trust’s board of directors – those City Fathers who thought they knew Louis Menage – had to cough up the money to cover the mortgage bank’s losses.
Hence the collective amnesia.
Menage never did time for his ethical lapses, but other contemporary financial wizards did. What’s more, public outrage over the economic collapse ushered in a great wave of reform and regulation that we have come to think of as the Progressive Movement. Similar reactions – investigations, prosecutions, incarceration and reform – have followed in the wake of each successive panic that has afflicted the United States, from Crédit Mobilier to the Panic of 1893 to Teapot Dome to the 1929 Crash to the S&L bubble in the 1980s to the dot-com and tech bubbles of the late 1990s and early 2000s.
Each and every time financiers have conspired to swindle the American public, they’ve ended up with their wings clipped and with at least some of their more notorious offenders behind bars, even when the stunts they’d been pulling were not, as in the Menage affair, strictly illegal under the statutes of the day.
That is, until the Crash of 2008.
Oh sure, Bernie Madoff’s doing several lifetimes of penance right now in federal custody, as are a handful of other Ponzi schemers. But Bernie and his ilk were not only bilking other rich people – whose squeaky wheels tend to get lots of attention – they were also engaging in activities that have been illegal for decades.
Meanwhile, the individuals and institutions who created the real mess have, almost without exception, not only escaped punishment but ended up reaping huge rewards at taxpayer expense.
To my knowledge, the only Wall Street traders doing any time are a trio of employees from Bear-Stearns – whose bankruptcy signaled the beginning of the economic collapse – who misled clients into purchasing securitized assets that company knew were worthless. The punishment meted out for this multi-billion dollar swindle? Twenty-four months in federal prison camp, with time off for good behavior.
Why has the response to the worst financial crisis since the Great Depression been so muted? Why have the malefactors of great wealth not been punished or even investigated with any rigor? It’s not like there isn’t evidence lying about. Emails uncovered at Goldman Sachs reveal that the company was urging clients to buy stocks the company itself was planning to short. In other words, company officials and traders were knowingly committing fraud. So how come Lloyd Blankfein hasn’t lit out for Honduras?
Is it simply that Obama is feckless and too beholden to Wall Street? True – but investigations and reform have not always emanated from the Executive Branch. Is it because the United States has achieved some new level of political corruption? Not really. The rich and the powerful have been buying and selling politicians from the very beginning of the Republic – at times, like in the last half of the 19th Century, far more blatantly even than today.
No, the one great difference between then and now is that in each earlier instance of economic collapse, the country had a free and independent news media that possessed the resources and the clout to initiate complex investigations and lead the call for reform.
This time around, we don’t.
What truly independent news media we do have – like the Daily Planet – operate on a shoestring. The news outlets that possess resources are no longer members of a Fourth Estate keeping an eye on concentrations of power in government and business and letting us know about abuses.
Today, the mainstream news media is unabashedly part of The Team. The communications wing of the unfettered, hydra-headed corporate monster that increasingly rules the world. The Great Recession may consitute the most shameless failure of the mainstream press since — well — since the great WMD fraud retailed to the public to gin up support for the invasion of Iraq.
In the run up to the collapse the mainstream media openly shilled for the banksters cooking up the housing bubble; in the aftermath of the collapse, the same media continue to offer up “news” content meant to distract, confuse, and mislead the public.
Frankly, it’s enough to make me wonder if we just shouldn’t go ahead and revoke the First Amendment. Threatened by such a loss, maybe the mainstream media will remember why the right to a free press was written into the Bill of Rights in the first place.
It wasn’t because the Founders much liked the press. And it certainly wasn’t because they were attending lush dinner parties at the estate of some 18th Century equivalent of Rupert Murdoch. It was in recognition of the fact that a free and independent press was the only way to guarantee the existence of the citizenry required for the survival of a functioning democracy.
Unlike the dysfunctional one we have today.
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