In a time of economic exuberance, even sophisticated investors, bankers, and brokerages were not too interested in where the dividends came from. This is the story in detail of one of the greatest collapses - or was it fraud - of the 20th century. [364.1680924]
It would seem that every book about the 1929 Wall Street crash makes passing reference to Ivar Kreuger and the collapse of his "Match Empire." Although, his name is often teamed in such histories with those of Samuel Insull and Charles Ponzi, there is a critical difference. Ponzi's scheme was limited and had no hope of being a legitimate investment; Insull's network of utilities and holding companies was merely regional; Kreuger built an international enterprise that was capable of lending funds to sovereign governments, that developed new financial tools (such as nonvoting Class B shares and convertible debentures), and that could rival the House of Morgan. Ivar Kreuger and his match monopolies were in a different league - almost appropriately the same league as the South Sea Bubble.
This book is more than a recounting of some facts; it is the biography of an enigma. How much about Kreuger's life or business dealings was real? how much was sleight of hand? Further, why would a old banking house like Lee Higginson participate so willingly in raising funds for International Match or the firm of Kreuger and Toll when they really knew so little about the business? How could the most cursory of financial data be trusted as a guide to understanding a complex firm? Here is a look at how financial markets operated before requirements for audited financial statements or registration of securities became standard. In good times, as many subsequent market booms have shown, investors do not really want to look too carefully under the hood of the engine that is generating profits. It did not seem to trouble investors that their investments paid a 25% dividend on money lent to Germany for 6%. In the absence of solid accounting data, funds could be raised and shifted among a number of off-balance sheet vehicles and firms without the knowledge of investors or the firms' bankers. Today, an investor will study the 10-Ks and 10-Qs of prospective investments. These tools only came into being after, and partly because of, the collapse in 1932 of Kreuger's empire once the search for remedies for the losses that all came with the end of the 1920s bull market began.
After every collapse, there is a desperate search for a single, simple cause or villain to blame and widespread human greed or blindness is never really an acceptable explanation because it spreads guilt too broadly - it might include ourselves. Although the International Match shares held their value for almost two years after the crash of most other share prices, when they fell, they became the focus of blame. Suddenly, the now-dead Kreuger could not defend himself against harsh, self-interested accusations. Some of these charges are believable. (The forged Italian treasury bills that Kreuger had used argue that.) Time, however, would reveal that many of the assets of International Match and its associated companies were genuine. The author leaves his conclusions mixed: part blameworthy, part exculpatory for Ivar Kreuger. That is, perhaps, the most satisfactory approach.
This book is recommended with the note that some readers may wish to reconstruct some basic accounting statements to better understand the whole.
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