Wall Street ‘s History

Wall Street is the financial district of New York City. It is also the name of the street running from Broadway to South Street on the East River. Over time Wall Street came to signify a geographic location encompassing a commercial downtown Manhattan neighborhood as well as signifying the historical financial center of the United States. The term has become a metonym signifying New York-based financial interests. It is the first permanent home of the New York Stock Exchange, the world’s largest stock exchange by market capitalization of its listed companies. Anchored by Wall Street, New York City is one of the principal financial centres of the world.

Several major U.S. stock and other exchanges have headquarters on Wall Street and in the Financial District, including the NYSE, NASDAQ, AMEX, NYMEX, and NYBOT.

Wall Street is important in a nation such as the United States in which former president Calvin Coolidge once remarked “The business of America is business” and in which rising stock markets are called bulls and falling markets are called bears.

History

Early years

Lower Manhattan was the first area in the city to be settled by Europeans, in 1626, according to one account. Dutch settlers had houses, farms, and a few stores in this growing New World port. One Dutch farmer named Annotkje Janz had a farm in lower Manhattan and is buried in Trinity Church, and the last Dutch mayor Peter Stuyvesant ran New Amsterdam until 1664, when it was ceded to the Britain and had its name changed to New York.

There are varying accounts about how the Dutch-named “de Waal Straat” got its name. A generally accepted version is that the name of the street name was derived from an earthen wall on the northern boundary of the New Amsterdam settlement, perhaps to protect against English colonial encroachment or incursions by native Americans. A conflicting explanation is that Wall Street was named after Walloons — possibly a Dutch abbreviation for Walloon being Waal. Among the first settlers that embarked on the ship “Nieu Nederlandt” in 1624 were 30 Walloon families.

In the 1640s basic picket and plank fences denoted plots and residences in the colony. Later, on behalf of the Dutch West India Company, Peter Stuyvesant, using both African slaves and white colonists, collaborated with the city government in the construction of a stronger stockade. A strengthened 12-foot (4 m) wall against attack from various Native American tribes. In 1685 surveyors laid out Wall Street along the lines of the original stockade. The wall started at Pearl Street, which was the shoreline at that time, crossing the Indian path Broadway and ending at the other shoreline (today’s Trinity Place), where it took a turn south and ran along the shore until it ended at the old fort.

In the late 18th century, there was a buttonwood tree at the foot of Wall Street under which traders and speculators would gather to trade securities. The benefit was being in close proximity to each other. In 1792, traders formalized their association with the Buttonwood Agreement which was the origin of the New York Stock Exchange. In 1789, Wall Street was the scene of the United States’ first presidential inauguration when George Washington took the oath of office on the balcony of Federal Hall on April 30, 1789. This was also the location of the passing of the Bill Of Rights. In the cemetery of Trinity Church, Alexander Hamilton, who was the first Treasury secretary and “architect of the early United States financial system,” is buried.

Nineteenth century

In the first few decades, both residences and businesses occupied the area, but increasingly business predominated. “There are old stories of people’s houses being surrounded by the clamor of business and trade and the owners complaining that they can’t get anything done,” according to a historian named Burrows. The opening of the Erie Canal in the early 1800s meant a huge boom in business for New York City, since it was the only major eastern seaport which had direct access by inland waterways to ports on the Great Lakes. Wall Street became the “money capital of America”. In the 1840s and 1850s, most residents moved north to midtown because of the increased business use at the lower tip of the island. The Civil War had the effect of causing the northern economy to boom, bringing greater prosperity to cities like New York which “came into its own as the nation’s banking center” connecting “Old World capital and New World ambition”, according to one account. J. P. Morgan created giant trusts; John D. Rockefeller’s Standard Oil moved to New York. Between 1860 and 1920, the economy changed from “agricultural to industrial to financial” and New York maintained its leadership position despite these changes, according to historian Thomas Kessner. New York was second only to London as the world’s financial capital.

In 1889, the original stock report, Customers’ Afternoon Letter, became The Wall Street Journal. Named in reference to the actual street, it became an influential international daily business newspaper published in New York City.

Twentieth century

Historian John Brooks in his book Once in Golconda considered the turn of the century period to have been Wall Street’s heyday. The address of 23 Wall Street where the headquarters of J. P. Morgan & Company, known as The Corner, was “the precise center, geographical as well as metaphorical, of financial America and even of the financial world.”

Wall Street has had changing relationships with government authorities. In 1913, for example, when authorities proposed a $4 tax on stock transfers, stock clerks protested. At other times, city and state officials have taken steps through tax incentives to encourage financial firms to continue to do business in the city.

In the late 19th and early 20th centuries, the corporate culture of New York was a primary center for the construction of skyscrapers, and was rivaled only by Chicago on the American continent. Skyscrapers were constructed in the downtown Manhattan area, although there were some residential sections, such as the Bowling Green section between Broadway & the Hudson river, and between Vesey & the Battery. The Bowling Green area was described as “Wall Street’s back yard” with poor people, high infant mortality rates, and the “worst housing conditions in the city.” As a result of the construction, looking at New York City from the east, one can see two distinct clumps of tall buildings — the financial district on the left, and the taller midtown district on the right. The geology of Manhattan was well-suited for tall buildings, since there was a solid mass of rock underneath Manhattan providing a firm foundation for tall buildings. Skyscrapers are expensive to build, but when there is a “short supply of land” in a “desirable location”, then building upwards makes sound financial sense. A post office was built in 1905. During the World War I years, occasionally there were fund-raising efforts for projects such as the National Guard.

On September 16, 1920, close to the corner of Wall and Broad Street, the bussiest corner of the financial district and across the offices of the Morgan Bank, a powerfull bomb exploded. It killed 38 and seriously injured 143 people. The perpetrators were never identified or apprehended. The explosion did, however, help fuel the Red Scare that was underway at the time. A report from the New York Times:

“The tomb-like silence that settles over Wall Street and lower Broadway with the coming of night and the suspension of business was entirely changed last night as hundreds of men worked under the glare of searchlights to repair the damage to skyscrapers that were lighted up from top to bottom. … The Assay Office, nearest the point of explosion, naturally suffered the most. The front was pierced in fifty places where the cast iron slugs, which were of the material used for window weights, were thrown against it. Each slug penetrated the stone an inch or two and chipped off pieces ranging from three inches to a foot in diameter. The ornamental iron grill work protecting each window was broken or shattered. … the Assay Office was a wreck. … It was as though some gigantic force had overturned the building and then placed it upright again, leaving the framework uninjured but scrambling everything inside. — 1920”

The area was subjected to numerous threats; one bomb threat in 1921 led to detectives sealing off the area to “prevent a repetition of the Wall Street bomb explosion.”

A crowd at Wall and Broad streets after the 1929 crash. The New York Stock Exchange is on the right. The majority of people are congregating in Wall Street on the left between the “House of Morgan” (23 Wall Street) and Federal Hall (26 Wall Street).

In October 1929, celebrated Yale economist reassured worried investors that their “money was safe” on Wall Street. A few days later, stock values plummeted. The stock market crash of 1929 ushered in the Great Depression in which a quarter of working people were unemployed, with soup kitchens, mass foreclosures of farms, and falling prices. During this era, development of the financial district stagnated, and Wall Street “paid a heavy price” and “became something of a backwater in American life.” During the New Deal years as well as the forties, there was much less focus on Wall Street and finance. The government clamped down on the practice of buying equities based only on credit, but these policies began to ease. From 1946-1947, stocks could not be purchased “on margin”, meaning that an investor had to pay 100% of a stock’s cost without taking on any loans. But this margin requirement was reduced four times before 1960, each time stimulating a mini-rally and boosting volume, and when the Federal Reserve reduced the margin requirements from 90% to 70%. These changes made it somewhat easier for investors to buy stocks on credit; this meant that an investor, for example, needed to only put up $700 instead of $900 to buy $1,000 worth of stock (the remaining $300 can be bought with a loan which has an interest rate of 4½% to 5%.) The growing national economy and prosperity led to a recovery during the sixties, with some down years during the early seventies in the aftermath of the Vietnam War. Trading volumes climbed; in 1967, according to Time Magazine, volume hit 7.5 million shares a day which caused a “traffic jam” of paper with “batteries of clerks” working overtime to “clear transactions and update customer accounts.” In 1973, the financial community posted a collective loss of $245 million and needed and help, and got it with the form of temporary help from the goverrnment. Reforms happened; the SEC eliminated fixed commissions which forced “brokers to compete freely with one another for investors’ business.” In 1975, the Securities & Exchange Commission threw out the NYSE’s “Rule 394” which had required that “most stock transactions take place on the Big Board’s floor”, in effect freeing up trading for electronic methods. In 1976, banks were allowed to buy and sell stocks, which provided more competition for stockbrokers. Reforms had the effect of lowering prices overall, making it easier for more people to participate in the stock market. Broker commissions for each stock sale lessened, but volume increased.

The Reagan years were marked by a renewed push for capitalism, business, with national efforts to de-regulate industries such as telecommunications and aviation. The economy resumed upward growth after a period in the early eighties of languishing. A report in the New York Times described that the flushness of money and growth during these years had spawned a drug culture of sorts, with a rampant acceptance of cocaine use although the overall percent of actual users was most likely small. A reporter wrote:

“The Wall Street drug dealer looked like many other successful young female executives. Stylishly dressed and wearing designer sunglasses, she sat in her 1983 Chevrolet Camaro in a no-parking zone across the street from the Marine Midland Bank branch on lower Broadway. The customer in the passenger seat looked like a successful young businessman. But as the dealer slipped him a heat-sealed plastic envelope of cocaine and he passed her cash, the transaction was being watched through the sunroof of her car by Federal drug agents in a nearby building. And the customer – an undercover agent himself -was learning the ways, the wiles and the conventions of Wall Street’s drug subculture. — Peter Kerr in the New York Times, 1987.”

In 1987, the stock market plunged and, in the relatively brief recession following, lower Manhattan lost 100,000 jobs according to one estimate. Since telecommunications costs were coming down, banks and brokerage firms could move away from Wall Street to more affordable locations. The recession of 1990–1991 were marked by office vacancy rates downtown which were “persistently high” and with some buildings “standing empty.” The day of the drop, October 20th, was marked by “stony-faced traders whose sense of humor had abandoned them and in the exhaustion of stock exchange employees struggling to maintain orderly trading.” Ironically, it was the same year that Oliver Stone’s movie Wall Street appeared. In 1995, city authorities offered the Lower Manhattan Revitalization Plan which offered incentives to convert commercial properties to residential use.

Construction of the World Trade Center began in 1966 but had trouble attracting tenants when completed. Nonetheless, some substantial firms purchased space there. It’s impressive height helped make it a visual landmark for drivers and pedestrians. In some respects, the nexus of the financial district moved from the street of Wall Street to Trade Center complex. Real estate growth during the latter part of the 1990s was significant, with deals and new projects happening in the financial district and elsewhere in Manhattan; one firm invested more than $24 billion in various projects, many in the Wall Street area. In 1998, the NYSE and the city struck a $900 million deal which kept the NYSE from moving across the river to Jersey City; the deal was described as the “largest in city history to prevent a corporation from leaving town”. A competitor to the NYSE, NASDAQ, moved its headquarters from Washington to New York.

Lower Manhattan skyline from the Hudson River.

The Wall Street area from the air in 2009.

Wall Street area from Brooklyn; the South Street Seaport is at the lower middle slight right.

Twenty-first century

In the first year of the new century, the Big Board, as some termed the NYSE, was described as the world’s “largest and most prestigious stock market.” But when the World Trade Center was destroyed on September 11th, it left an architectural void as new developments since the 1970s had played off the complex aesthetically. The attacks “crippled” the communications network. One estimate was that 45% of Wall Street’s “best office space” had been lost. The physical destruction was immense:

“Debris littered some streets of the financial district. National Guard members in camouflage uniforms manned checkpoints. Abandoned coffee carts, glazed with dust from the collapse of the World Trade Center, lay on their sides across sidewalks. Most subway stations were closed, most lights were still off, most telephones did not work, and only a handful of people walked in the narrow canyons of Wall Street yesterday morning. — Leslie Eaton and Kirk Johnson of the New York Times, September 16, 2001.”

Still, the NYSE was determined to re-open on September 17, almost a week after the attack. The attack hastened a trend towards financial firms moving to midtown and contributed to the loss of business on Wall Street, due to temporary-to-permanent relocation to New Jersey and further decentralization with establishments transferred to cities like Chicago, Denver, and Boston.

After September 11th, the financial services industry went through a downturn with a sizable drop in year-end bonuses of $6.5 billion, according to one estimate from a state comptroller’s office. Many brokers are paid mostly through commission, and get a token annual salary which is dwarfed by the year-end bonus.

To guard against a vehicular bombing in the area, authorities built concrete barriers, and found ways over time to make them more aesthetically appealing by spending $5000 to $8000 apiece on bollards:

“ To prevent a vehicle-delivered bomb from entering the area, Rogers Marvel designed a new kind of bollard, a faceted piece of sculpture whose broad, slanting surfaces offer people a place to sit in contrast to the typical bollard, which is supremely unsittable. The bollard, which is called the Nogo, looks a bit like one of Frank Gehry’s unorthodox culture palaces, but it is hardly insensitive to its surroundings. Its bronze surfaces actually echo the grand doorways of Wall Street’s temples of commerce. Pedestrians easily slip through groups of them as they make their way onto Wall Street from the area around historic Trinity Church. Cars, however, cannot pass. — Blair Kamin in the Chicago Tribune, 2006”

Wall Street itself and the Financial District as a whole are crowded with highrises. Further, the loss of the World Trade Center has spurred development on a scale that hadn’t been seen in decades. In 2006, Goldman Sachs began building a tower near the former Trade Center site. Tax incentives provided by federal, state and local governments encouraged development. A new World Trade Center complex, centered on Daniel Liebeskind’s Memory Foundations plan, is in the early stages of development and one building has already been replaced. The centerpiece to this plan is the 1,776-foot (541 m) tall 1 World Trade Center (formerly known as the Freedom Tower). New residential buildings are sprouting up, and buildings that were previously office space are being converted to residential units, also benefiting from tax incentives. Better access to the Financial District is planned in the form of a new commuter rail station and a new downtown transportation center centered on Fulton Street. In 2007, the “giggling guru” Maharishi Mahesh Yogi with his Maharishi Global Financial Capital of New York opened headquarters at 70 Broad Street near the NYSE, in an effort to seek investors.

The Guardian reporter Andrew Clark described the years of 2006 to 2010 as “tumultous” in which the heartland of America is “mired in gloom” with high unemployment around 9.6%, with average house prices falling from $230,000 in 2006 to $183,000, and foreboding increases in the national debt to $13.4 trillion, but that despite the setbacks, the American economy was once more “bouncing back.” What had happened during these heady years? Clark wrote:

“But the picture is too nuanced simply to dump all the responsibility on financiers. Most Wall Street banks didn’t actually go around the US hawking dodgy mortgages; they bought and packaged loans from on-the-ground firms such as Countrywide Financial and New Century Financial, both of which hit a financial wall in the crisis. Foolishly and recklessly, the banks didn’t look at these loans adequately, relying on flawed credit-rating agencies such as Standard & Poor’s and Moody’s, which blithely certified toxic mortgage-backed securities as solid… A few of those on Wall Street, including maverick hedge fund manager John Paulson and the top brass at Goldman Sachs, spotted what was going on and ruthlessly gambled on a crash. They made a fortune but turned into the crisis’s pantomime villains. Most, though, got burned – the banks are still gradually running down portfolios of non-core loans worth $800bn. — The Guardian reporter Andrew Clark, 2010.”

The first months of 2008 was a particularly troublesome period which caused Federal Reserve chairman Benjamin Bernanke to “work holidays and weekends” and which did an “extraordinary series of moves.” It bolstered U.S. banks and allowed Wall Street firms to borrow “directly from the Fed.” These efforts were highly controversial at the time, but from the perspective of 2010, it appeared the Federal exertions had been the right decisions. By 2010, Wall Street firms, in Clark’s view, were “getting back to their old selves as engine rooms of wealth, prosperity and excess.” A report by Michael Stoler in The New York Sun described a “phoenix-like resurrection” of the area, with residential, commercial, retail and hotels booming in the “third largest business district in the country.” At the same time, the investment community was worried about proposed legal reforms, including the Wall Street Reform and Consumer Protection Act which dealt with matters such as credit card rates and lending requirements. The NYSE closed two of its trading floors in a move towards transforming itself into an electronic exchange.

January 23, 2011 | Categories: Uncategorized | Tags: history, street, wall | 2 Comments