Poor as in Standard & Poor’s

When Standard & Poor’s downgraded the United States government’s credit rating to AA from AAA, the world economical markets reacted accordingly as expected: they took a nose dive to dropping to an alarming stage. While the economists and political scientists focused on what the effects were, I wanted to know more about the S&P and its rating system. Believe it or not, there was once a real man named Henry Varnum Poor who travelled in the United States by train through the newly constructed railroads and took obsessive notes about how they operated, their service. He then added some statistical data on his notes, and voila: the era of “rating” started with no returning back! The competition between the railroad companies was a cut-throat fight, and it was just the right time and right place to be for Mr. Poor who understood the power of his work and decided establish his company.

Here is a piece from Wikipedia on the history of Standard & Poor’s: “The company traces its history back to 1860, with the publication by Henry Varnum Poor of “History of Railroads and Canals in the United States.” This book was an attempt to compile comprehensive information about the financial and operational state of U.S. railroad companies. Henry Varnum went on to establish H.V. and H.W. Poor Co. with his son, Henry William, and published annually updated versions of this book.
In 1906, Luther Lee Blake founded the Standard Statistics Bureau, with the view to providing financial information on non-railroad companies. Instead of an annually published book, Standard Statistics would use 5″ x 7″ cards, allowing for more frequent updates.
In 1941, Poor and Standard Statistics merged to become Standard & Poor’s Corp. In 1966, the company was acquired by The McGraw-Hill Companies, and now encompasses the Financial Services division.” (Yes, the same McGraw-Hill, publisher of the most of your textbooks!)

The first edition of Henry V. Poor’s “History of Railroads and Canals in the United States” can be found in the Lehigh’s Special Collections, the very book that set the standard for the “rating system”. The book contains detailed data about the local railroad companies, such as Asa Packer’s Lehigh Valley Rail Road Company, and also a rich advertisement section with handsome illustrations of railroad tools, equipment, and engine parts. It seems that Lehigh’s copy has been circulated frequently, especially in the 1960s and 1970s and was loaned to other institutions through Inter Library Loan.

Lehigh’s copy of Poor’s book’s bookplate and title page are another enigma: The bookplate indicates that this particular book was donated to Lehigh by Albert Brodhead, Class of 1888, who, in his will, also donated more than 50 real estate properties to Lehigh University in North and South Bethlehem, such as the block where the Tally-Ho Tavern is and where most of the offices along the West side of the Brodhead Avenue are — Lehigh still owns and maintains many of them. The library staff who accessioned the book on December 8, 1941, rubber stamped the book with a library accession stamp, but on a later date, strangely, probably a library user, dropped a note next to this date with a ballpoint pen: “A day that will live in infamy” –probably referring to Franklin D. Roosevelt’s famous line, “A date which live in infamy” from his “War speech” of December 8, 1941.

Can a book from 1860 still be relevant and, more importantly, how many stories can a book tell us? Inquiring minds can fetch countless stories from a simple book that is on the shelves of your library.

The “Industrial Age” has passed and the magnitude of the U.S. railroad system has diminished to a vanishing degree, but Mr. Poor’s rating system is still a solid “gold standard” in the economical markets that, ironically, the fate of our daily lives and our standard of living are determined by his clever invention. Books, on the other hand, are timeless and they are immune to predictions, while they contain every known prophecy.

Ilhan Citak

*If you’d like to take a look at Lehigh’s copy of Henry Varnum Poor’s “History of the Railroads and Canals of the United States of America” please send an email to Special Collections at inspc@lehigh.edu to make an appointment.


One thought on “Poor as in Standard & Poor’s

  1. “When Standard & Poor’s downgraded the United States government’s credit rating to AA from AAA, the world economical markets reacted accordingly as expected: they took a nose dive to dropping to an alarming stage.”

    Then why did interest rates on US bonds fall (i.e. demand increased)? If S&P really had any sway, then their reduction of the US’ credit rating should have actually decreased demand for US bonds (given that the downgrade is supposedly an evaluation of the US’ inability to pay back debt) and interest rates would have risen. Yes, the stock market took a hit, but it appears that investors moved into the shelter of…. government bonds. Government bonds from a government that is apparently unable to pay back its debt. I love America. Of course, nobody in the media is getting this right at all.

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