by Paul Smart
Wall Street is more than a symbol of financial power, or one of the key topics of debate in this year’s election cycle. It’s a place, a legacy, and center to a rollicking segment of modern history.
Some say the actual street in the Dutch settlement of lower Manhattan was named for an earthen rampart meant to hold off the Native Americans. Others say it was a reference to Walloons, a cohort of Belgian families who arrived with the Dutch on the ship Nieu Nederlandt in 1624. Suffice to say all the state and nation’s other Wall Streets simply derived from the name of that first one, where a wall was eventually built and maintained for fifty years. Merchants and traders operated there in ad hoc locations. It was also the site of a slave market that operated from 1711 to 1762. Yes, in New York.
As for the history of stock exchanges in general, while it was the merchants of Venice who first took the initiative to move money lending away from the temples and Holy Roman Empire in the 13th and 14th centuries, and the Flemish in Antwerp who first set up bourses where IOUs and bonds could be traded, it was the Dutch who figured out how to finance international procurement expeditions to the East Indies by selling shares in such enterprises. They then started selling such “stocks” at coffee shops, where offerings and achievements were listed in newsletters, and eventually moved to an actual “exchange” building.
This type of activity moved across the North Sea to London in the 17th century, where the first real stock exchange was set up–once again after decades in coffee shops–in 1773. This came after many years of massive scandals, from the Tulip crash of 1640 to the British-born South Seas debacle of 1720, after which the selling of shares was forbidden by the crown for nearly a century.
Banks at the time were extremely untrustworthy. They tended to have an average lifespan of at most five years. Various places, (such as Texas) actually banned banks entirely (and for that matter, paper money) for certain periods of time. Therefore, it is hardly surprising the business people in that era looked for other ways of accessing the capital they needed for their ventures
Savvy business folk started selling shares in outgoing ships from New York Harbor, much as the Dutch had done earlier, as a way to finance those expeditions, and bring a pretty return to investors–as long as the ship made it back . Within 20 years of the London Stock Exchange’s founding, a newly independent United States of America had its true first stock exchange in Philadelphia, and then a second, even bigger one meeting on Wall Street in lower Manhattan.
At first, that latter exchange was little more than a group of two dozen traders who’d meet under a “buttonwood Tree,” otherwise known as a Sycamore. On May 17, 1792, a formal agreement was signed that formalized some trading rules; within a year a coffee shop, the Tontine, had been designated as a first home for “the exchange,” where the British penchant for yelling out trades for transparency’s sake became the norm… along with frequent fistfights and the occasional duel.
“The Tontine Coffee House was filled with underwriters, brokers, merchants, traders, and politicians; selling, purchasing, trafficking, or insuring; some reading, others eagerly inquiring the news,” read British visitor John Lambert’s account of the place in 1807. “The steps and balcony of the coffee-house were crowded with people bidding, or listening to the several auctioneers, who had elevated themselves upon a hogshead of sugar, a puncheon of rum, or a bale of cotton; and with Stentorian voices were exclaiming, ‘Once, twice. Once, twice… and everything was in motion; all was life, bustle and activity.”
Over the years trading laws kept shifting, the market grew richer from various fees paid to it, and “Wall Street’s” international reputation and hold on vast amounts of capital reached levels where it became the place our own and other governments had to turn when economies failed. The actual exchange moved around, eventually settling in its home of the last 151 years on Broad Street, just off Wall itself.
End of story? Not quite. The Federal Reserve System was set up in 1913 with the intention of saving the nation from depending on Wall Street bailouts (mostly from J.P. Morgan and friends) during the frequent busts and panics of the era . In 1920, a horse-drawn cart carrying 100 pounds of dynamite and 500 pounds of iron weights blew up on the street and killed and wounded hundred of people. No one was ever caught, although everyone blamed anti-capitalist anarchists. October, 1929 saw the “crash” that began what would become the Great Depression. In 1934, the exchange was registered as a national securities exchange with the new U.S. Securities and Exchange Commission, designed to keep such economic disasters from happening again.
In 1971 the NYSE became a non-profit. That same year the NASDAQ (National Association of Securities Dealers Automated Quotations) came into being as the first electronic “market,” with its official home on Times Square but its effects virtual, especially since joining forces with the London Stock Exchange.
These days, the NYSE is still big boy on the block, representing more wealth than NASDAQ and the major exchanges in London, Paris, Amsterdam, Tokyo, Shanghai and several other sites combined.
After the crash of 1987, trading “curbs” were set; following the 2008 crash, everything went totally electronic.
Of course, there was also Occupy Wall Street, which like the exchange was never really ON the street itself, except for some of the lobby meetings of organizers. Remember Zuccotti Park? But that’s another story.