Apr 28, 2014

Sources of Funding

When amidst the Great Depression in 1931 John Rockefeller, Jr. found himself saddled with over two hundred old brownstones in midtown Manhattan, shortly after the Metropolitan Opera had withdrawn its plans for building a new opera house on the land where the brownstones were located, it looked as if the lack of funding was going to ruin yet another visionary project. To everyone's surprise, the stream of funding resumed shortly after because Junior had decided to turn unfortunate circumstances into an opportunity, make the best use of the land, and personally finance the construction of a new massive project, to be later known as the Rockefeller Center (Chernow, 1999). In the next several years, Junior was able to see the project completed to the end throughout very difficult economic times not so much because he had deep pockets, but because he did not waiver in front of the unpredictable future and the capital continued flowing in.

During financial crises, the type and composition of funding is what distinguishes a firm that fails from a firm that stays afloat. The following analysis looks at how key, yet soon-to-be-defunct firms financed their operations during various historical crises. The structure of this piece is as follows:

1980s Savings & Loan crisis
Securitization of late the 1990s
2008 Financial crisis