Acceptable Risk: Law, regulation, and the politics of American financial markets, 1878--1930

"Acceptable Risk" uncovers the history of early twentieth-century securities regulation and shows how laws and policies aimed at new small investors shaped the ideas and institutions that defined the modern stock market. As more Americans began to speculate in corporate stocks, lawmakers, regulators, and financial leaders sought to structure new investor behavior by controlling the investments they were offered and the institutions in which they operated. In the process, they raised important questions about how best to balance economic growth with financial stability and market democratization with investor safety. State public utility commissions sought to curb "watered" stock (whose par value was in excess of physical assets) in gas, electric, and railroad corporations in order to purge the speculative element from those industries and make them safe investments for the public. With the cooperation of the nation's stock exchanges, lawmakers moved to shut down so-called buckets shops---where only pretend buying and selling of stocks took place---and distinguish between gambling and legitimate speculation. State "blue sky" commissions sought to limit high risk and fraudulent stock promotions in order to preserve public savings and encourage conservative investment---a cause also taken up by the federal government during World War Ito assist in the sale of Liberty Bonds. Finally, financial leaders responded to new government action by policing the margins of their industry through new self-regulatory institutions, instructing the public on the principles of investment, and pushing for changes to corporate law that emphasized the intangible, market-driven nature of economic value. By the mid-1920s, the new mix of public and private institutions brought Americans from the margins to the center of the national securities market.