This week in financial history has seen two important pieces of legislation come into being, as well as the beginnings of a company that would one day create "the happiest place on earth". But we'll start with a very big billing error. (Missed last week's article? Check out Wall Street History: Franklin Folds And Google Buys Youtube.)

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A Slight Premium
On October 13, 1988, Sundstrand Corporation was assessed a $115 million dollar fine for overcharging the Pentagon - the largest financial settlement ever sought against defense contractor up to that point. The company added millions to bills and went as far as charging the Pentagon for the costs of servants, sauna trips and much more. (Check out these stories about fines and false charges in 4 History-Making Wall Street Crooks.)

Although the settlement seemed huge, over 90% of it was simply damages equaling the amount of the overcharging. It was also found, unsurprisingly, that many no-bid contracts were awarded thanks to the company's aggressive policy of wining and dining key pentagon officials. The '80s were plagued with defense spending scandals like the $400 hammer, $9,000 wrench and $600 toilet seats.

The Morganization of Electricity
October 15, 1878, saw J.P. Morgan once again take a prominent role in the history of American finance. Thomas Edison was already a successful inventor, but as of 1878, Edison did not have the capital to make his half-developed light bulb a working reality. Morgan arranged the funding for Edison to found the Edison Electric Light Company and was also the driving force in convincing Edison to merge with his competitors to create GE later on.

Antitrust Gets an Update
On October 15, 1914, the Clayton Antitrust Act was passed. This law built upon the Sherman Antitrust Act by listing specific practices that would result in legal scrutiny. Prior to this act, many of the antitrust cases were pursued (or not pursued) for political reasons as much as legal ones. Several of the largest monopolies like International Harvester were never challenged because agriculture depended on them. Others, like U.S. Steel were overlooked as a political favor.

The Clayton act brought clarity and some degree of fairness to the process, but it also gave the antitrust contingent the power to regulate all mergers and acquisitions - not just ones that would result in a monopoly. Under the Clayton act, the government can block any merger that would reduce competition, whereas the Sherman act could only stop mergers that eliminated all competition - i.e. the only two steel makers combine into one. Both the Sherman and Clayton act were buffed up and reformed in 1950 with the Celler-Kefauver Act.

Happy Birthday, Disney
On October 16, 1923, Walt and Roy Disney started the Walt Disney company with a $500 loan from an uncle. The Disney story is fairly well-known, but less well known is the fate of the uncle's loan. When the Disney Company was starting to profit and switched to a corporate structure, the brothers offered their uncle stock or cash as a repayment. The uncle chose the cash. (Learn more about Disney's history in Wall Street History: Disney, Kodak And Astor.)

There's no accurate way to calculate how much Disney stock he would have been granted and what it would have been worth, but no doubt it would have been substantially more than $500. Within five years, Disney had its first big hits with Mickey Mouse. Fourteen years later in 1937, Snow White and the Seven Dwarfs grossed $8 million - $121 million in today's dollars - during a depression. Still, the Disney Brothers' uncle can take comfort in the fact that he didn't lose money on the deal.

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Short On Oil
On October 17, 1973, the Arab members of OPEC started an oil embargo against the U.S. for helping Israel in its war against Syria. The cost of a barrel of oil quadrupled and President Nixon introduced price controls and rationing. Speed limits were dropped and initiatives to make America energy independent were introduced. Of course, the stock market also tumbled. The oil crisis came at a terrible time and teamed up with inflation, bad government and myriad other factors to make the '70s a period of stagflation.

A Narrowing Window for Clean Slate Bankruptcy
Perhaps the most significant event in October occurred on October 17, 2005. On this day, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 went into effect. This legislation reduced the chances of a "fresh start" Chapter 7 filing by raising the filing standards. These included a much more rigorous means and income test. The changes have forced more debtors into the Chapter 13 filing, which is less of a clean slate process for clearing debt than it is a court-ordered repayment plan.

That's all for this week. Next week we'll look at the first of October's Black Days, more Morgan and much else.

Check out the latest financial news in Water Cooler Finance: History's Biggest Rogue Trading Scandal.

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