New York: Wall Street

Wall Street and its immediate area form one of the world’s great financial centers. The New York Stock Exchange, the American Stock Exchange, major banks and insurance companies are to be found there, and the World Trade Center is a few blocks away. New York City was the capital of the United States from 1789 to 1790, and George Washington was inaugurated in 1789 in Federal Hall on Wall Street. Many Wall Street buildings are historic landmarks, and the rebuilt Federal Hall is a National Memorial.

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Wall Street had its roots in the colonization of Manhattan’s southern end by the Dutch in 1626. As the settlement, called New Amsterdam, grew, a crude wall was erected across its northern end in 1644 to discourage attacks by Indians and English settlers living to the north. The path along this wall evolved into Wall Street. The English took over the colony peacefully in 1664. Renamed New York, it became a center for trade, with much of the commercial activity centered on Wall Street. The Dutch had improved the wall in 1653, constructing a wooden barrier, actually little more than a glorified fence the wooden planks of which were frequently stolen for use in settlers’ houses. The wall was dismantled in 1699.

Early History

Wall Street’s taverns, coffeehouses, and auction marts were gathering places for traders in shipping, insurance, commodities, and slaves almost from the beginning of English rule. Financial assets such as stocks and bonds, however, were seldom bought or offered for sale there in colonial days. Bonds and the shares of joint-stock companies–that is, companies with shares individually owned and freely transferable–were actively traded in London during the 1700’s, but few of these instruments were to be found in the American colonies. The American Revolution led indirectly to Wall Street’s coming financial prominence.

New York became the temporary national capital, and Congress met there, convening at the former city hall building, renamed Federal Hall, at what is now 26 Wall Street, near Nassau Street. In April, 1789, George Washington was inaugurated as the first U.S. president on a second-floor balcony of Federal Hall, wearing a simple brown suit to avoid any suggestion of royalty. Meanwhile the end of the Revolutionary War had seen veterans and creditors paid off with promissory notes called scrip since the money of the time was nearly worthless. Secretary of the Treasury Alexander Hamilton concocted a scheme to convert the equally worthless scrip into U.S. bonds at the face value of the scrip. Political insiders such as Hamilton and the U.S. Congress could accumulate scrip at less than face value and convert it into the more valuable bonds when the conversion was authorized by Congress. Some in Congress resisted this idea but Thomas Jefferson used his influence to help the bond legislation pass in return for guarantees that the capital would be relocated farther south, on the Potomac River. In 1790 the capital was relocated to Philadelphia and eventually to the new city of Washington, D.C. The bonds proved to be a bonanza for insiders and quickly became the first actively traded financial assets in the coffeehouses and along the curbs of Wall Street.

Trade in Stocks and Bonds Begins

Wall Street merchants and auctioneers who had dealt largely in commodities promptly turned to trading U.S. government bonds, and shares in the early joint-stock companies which were mostly banks founded by, among others, Alexander Hamilton and Aaron Burr, who would kill Hamilton in a duel in 1804. At first trading in stocks and bonds took place informally, much of it under a buttonwood tree in front of what is now 68 Wall Street or, during bad weather, in Wall Street coffeehouses. Twenty-four of the most active brokers signed an agreement on May 17, 1792, to cooperate with each other (at the expense of other traders) and to set fixed commission rates in their dealings. Known as the Buttonwood Agreement, this document can be considered the beginning of the New York Stock Exchange.

In 1793, the group moved into the newly built Tontine Coffee House. In 1817, a formal constitution was adopted and the traders took the name of New York Stock & Exchange Board. The name was changed to New York Stock Exchange in 1863, and in 1865 exchange memberships were made saleable; before that, each trader held his membership for life. Also in 1865, the exchange moved into its first permanent home on Broad Street just south of Wall. To accommodate increased business, a larger building, at the corner of Broad and Wall, was completed in 1903. That building continues in use today, having received various additions and improvements over the years. By the early 1990’s, more than two thousand companies had their stock traded on the New York Stock Exchange, and the exchange had more than five hundred member firms. The exchange allows visitors to view its operations from a gallery above the trading floor. Several other exchanges, including the nearby American Stock Exchange, have been established in New York and elsewhere; however, the New York Stock Exchange remains particularly large and influential.

Cornelius Vanderbilt

The history of Wall Street is crowded with the names of prominent, some would say notorious, business people, traders and speculators. Cornelius Vanderbilt (1794-1877) earned his title of “Commodore” by investing in steamboat transportation on the Hudson River and becoming the leading steamboat owner in the United States. He built a railroad, the Accessory Transit Company, across Nicaragua, and when local politicians interfered with the railroad, he hired a private army to seize the country and run it for him. Trading and manipulating railroad shares on Wall Street, he put together smaller lines to create the New York Central Railroad system. His career included the use of numerous speculative practices that later become illegal: the “corner,” by which a majority of a company’s stock was purchased and the short sellers (who had sold borrowed stock) were forced to pay exorbitant prices for shares; “watering” a company’s stock, whereby shares were printed and issued without the company’s authorization; and the dissemination of false information about a company’s prospects in order to manipulate the price of the company’s stock.

J. P. Morgan

The title of Wall Street’s most famous and influential financier belongs to John Pierpont Morgan (1837-1913). Taking over his millionaire father’s banking firm, J. P. Morgan quickly became a leader in financing American business. He attracted Wall Street’s attention by defeating Jay Gould and Jim Fisk in a battle for control of the Albany and Susquehanna Railroad in 1869. In 1879 he organized a syndicate to purchase the controlling stock in the New York Central Railroad from Commodore Vanderbilt’s son, William K. Vanderbilt. An attempt by Morgan to take over the Northern Pacific Railroad in 1901 led to an antitrust battle with President Theodore Roosevelt which Roosevelt won after a controversial 1904 U.S. Supreme Court decision against Morgan’s interests.

In 1901 Morgan staged his greatest coup when he organized the United States Steel Corporation, then the largest corporation in the world, from the steel holdings of Andrew Carnegie and other steel, shipping, and mining interests. His firm played a major role in financing International Harvester, American Telephone and Telegraph, General Electric, and many other major industrial companies and railroads. Morgan did attract enemies. On September 16, 1920, a bomb concealed in a horse-drawn wagon exploded in front of the Morgan bank at the southeast corner of Broad and Wall Streets. Thirty-three people were killed and many injured. The attack was subsequently blamed on anarchists but the perpetrators were never found. (The event was strangely echoed by the 1993 bombing of the World Trade Center building only a few blocks from Wall Street.) Scars from the 1920 explosion could be seen for a long time on the austere marble building at 23 Wall Street. A modern forty-seven-story building completed in 1989 at 60 Wall Street is the current headquarters of J. P. Morgan & Company.

The list of prominent Wall Street operators is long: Daniel Drew, who controlled and looted the Erie Railroad; Jay Gould, speculator and railroad builder best known for the Union Pacific Railroad; Russell Sage, who used his speculative gains to found a college in Troy, New York, named for himself; Hetty Green, a ruthless speculator and a rare example of a woman operating successfully on her own on nineteeth century Wall Street (the stockbroking sisters Tennie C. Claflin and Victoria Woodhull were protégées of Commodore Vanderbilt); and Jesse Livermore, who made millions on Wall Street, much of it while lounging on his yacht, and committed suicide in 1940 after the Great Depression of the 1930’s ended his speculative career.

The Great Crash of 1929

For Wall Street the great historic event of the twentieth century was the crash of October 29, 1929, when heavy, uncontrollable selling wiped out years of price increases in one day. This is considered, in the United States at any rate, the beginning of the Great Depression of the 1930’s. During the decade massive unemployment, business failures, and widespread poverty caused economic trauma for U.S. residents, not really relieved until the start of World War II. Many citizens blamed the Wall Street financial community, and called for reform. The election of Franklin D. Roosevelt as president in 1932 led to prompt legislative action.

The Banking Act of 1933 separated investment banking from commercial banking. For example, J. P. Morgan & Company was split into two companies, the new firm of Morgan, Stanley and Company taking over the investment operations. “Truth in securities” was mandated by the Securities Act of 1933, which required complete disclosure of all significant facts about a company in which stock was sold. The Securities Exchange Act of 1934 established the Securities and Exchange Commission (SEC) with powers to regulate all U.S. stock exchanges.

Wall Street as a Symbol

To a large extent Wall Street has become more than a place but also a symbol, dominating the nation’s concept of big business, financial power, and national prestige. The very words “Wall Street” have been personified so that observers say that “Wall Street thinks . . . ” or “Wall Street believes . . . ,” as though the street was not just a collection of large financial institutions but an actual thinking being. Thanks to the powerful linkages created by modern computers and telecommunications, this is not an entirely fanciful idea. Nevertheless, Wall Street is not just a process whereby hundreds of millions of shares and billions of dollars of value are exchanged every working day. It is also a place, a physical street lined with large buildings of diverse architectural styles from Ancient Greek to the most modern office towers, and many of these are historically significant.

Trinity Church

One of the most famous buildings related to Wall Street is not a business place at all but a church. Trinity Church’s location on the west side of Broadway facing the intersection of Broadway and Wall Street has made it one of the best known and most photographed landmark churches in New York City. The present church in the Gothic Revival style is the third church building on the site, the first one dating from 1697 and the second from about 1780. The present structure dates from 1846 and includes a small museum of New York history, which is open to the public. Alexander Hamilton, Robert Fulton, and other dignitaries are interred in the burial ground surrounding the church.

Another notable and historic building is Federal Hall at the northeast corner of Broad and Wall Streets near Nassau Street. The first Federal Hall, originally a city hall building, was the nation’s capitol building until 1790 and the site of George Washington’s first inauguration and the first meetings of the Congress. The original building was scrapped in 1812 and rebuilt in its present Greek-revival form in 1842. It served as a U.S. Custom House until 1862, when it became a subtreasury building. The building was designated a National Historic Site in 1939 and a National Memorial in 1955. It contains a museum of democratic government. In addition to the stock exchanges and headquarters of various financial firms, another business-related site is the Museum of American Financial History at 24 Broadway. It contains many examples of Wall Street memorabilia such as obsolete stock tickertape machines and antique stock and bond certificates.

For Further Information

  • Clews, Henry. Fifty Years in Wall Street. New York: Irving Press, 1908. Clews was one of the best known brokers on Wall Street in the late nineteenth to early twentieth centuries. His Henry Clews and Company was a prestigious brokerage house. Clews was also one of the first financial journalists, pioneering the stock market letter and writing financial columns for the newspapers. His memoir is an entertaining and shrewd portrayal of the characters and events of Wall Street from the 1850’s to the early 1900’s.
  • Dolkart, Henry. Guide to New York City Landmarks. 2d ed. Washington, D.C.: Preservation Press, 1998. Offers architectural and historical details for many New York City buildings and locations.
  • Sharp, Robert M. The Lore and Legends of Wall Street. Homewood, Ill.: Dow Jones-Irwin, 1989. A popular retelling of many picturesque events in American financial history.
  • Thomas, Dana L. The Plungers and the Peacocks. 2d ed. New York: William Morrow, 1989. Retells Wall Street history in anecdotal style. A popular book.
  • Warshow, Robert I. The Story of Wall Street. New York: Greenberg, 1929. An older but knowledgeable and well-illustrated stock market history published just before the onset of the Great Depression.
  • Wolfe, Gerard R. New York: A Guide to the Metropolis. New York: McGraw-Hill, 1994. An excellent source for architectural and historical information.