Reading through papers and books of economic history of early financial innovations, I came across this nice little setup.Also at Macro Exposure:
The year was 1899. Henry Rogers and William Rockefeller wanted to buy Anaconda Copper Company without the expenditure of a single dollar. Here’s how to do that:
Simplicity itself, albeit with a fair amount of “staggeringly dishonesty,” as Robert L. Heilbroner writes. This story is from his excellent book, the Worldly Philosophers.
- Rogers and Rockefeller gave a check for $39 million to Marcus Daly for the Anaconda properties, on the condition that he would deposit it in the National City Bank and leave it untouched for a specified period.
- They then set up a paper organization known as Amalgamated Copper Company, with their own clerks as dummy directors, and caused Amalgamated to buy Anaconda — not for cash, but for $75 million in Amalgamated stock which was conveniently printed for the purpose.
- From the National City Bank, Rogers and Rockefeller now borrowed $39 million to cover the check they had given to Marcus Daly, and as collateral for this loan they used the $75 million in Amalgamated stock.
- They now sold the Amalgamated stock on the market (first haven touted it through their brokers) for $75 million.
- With the proceeds, they retired the $39-million loan from National City Bank, and pocketed $36 million as their own profit on the deal.
Probability the Danish krone breaks its ERM-II peg
