Wall Street Through the Years
New York City is one of the most renowned cities in the world. Few places are comparable to New York’s rich cultural and social history. Tourists can be seen all over New York as they flock to the to the most recognizable structures and places. Central Park is a favorite, along with Midtown Manhattan and the trendy Fifth Avenue. However, one location in New York that is not only synonymous with New York City, but with the country in general, is a small stretch of street in Lower Manhattan known as Wall Street. Few places are as recognizable, and as important to the economy of New York and the United States, as Wall Street. The activity that takes place on weekdays in the New York Stock Exchange is of utmost importance to investors and the general population who partake in the trading of stocks. The atmosphere of Wall Street can either be an indication of the good state of the economy or the turmoil of a bad economy. The New York Stock Exchange, off-limits to the public, is the center of activity at Wall Street. The activity inside of this prestige establishment informs the nation of the state of the economy, and has over time, delivered both good and bad news.
Before Wall Street came to be as distinguished as it is today, the area around it was nothing special. The name of “Wall Street” arose from the fact that in 1653, Peter Stuyvesant had a barricade built in that location to protect the Dutch settlers from local Indians that inhabited the area (Geisst, 10). Local merchants and traders would usually gather in this area and buy and sell shares and bonds. As the economy of the newly founded nation continued to develop, the New York Stock and Exchange Board was established in 1817; it was the “first organized stock exchange in the country” (Geisst, 20). However, the stock exchange restricted trading to members only, and many were not able to afford the $25 fee to become members. As a result, these people began trading outside of the stock exchange, on Wall Street, and became known as “curbstone brokers” (Geisst, 21). These brokers specialized in trading stocks that were not listed in the New York Stock and Exchange Board. Over time, two groups of traders were formed: bulls and bears. According to Geisst, “Bulls anticipated rising prices; bears were short sellers” (32). In time, these two phrases would become important in describing what type of market the economy was in, where a bull market represents a good, thriving economy, while a bear market signifies a troubled economy. The “Charging Bull” that is located near Bowling Green Park, very close to Wall Street, is a representation of the bull market that investors and brokers hope for and a symbol of the strength of the United States’ economy.
As the nation continued to grow and develop, Wall Street would experience periodical booms and busts, periods of high and low activity, respectively. These fluctuations are consistent with the business cycle, where productivity reaches a high point, known as the peak, before productivity begins to fall until it reaches a certain low point, known as the trough, after which productivity improves again and the cycle continues (Romer). During the 19th century, Wall Street experienced these various peaks and troughs, all the while maturing. The final two decades of the 19th century were Wall Street’s first “golden age” (Geisst, 109). The number of listings in the New York Stock Exchange increased greatly, and the exchange’s first million-share day came in 1885. As war broke out across the world in the early 1900s, many did not have good feelings about the economy that would follow World War I and inflation was predicted. However, the 1920s turned out to be so prosperous that the decade became known as the Roaring Twenties.
Prosperity began to take shape in 1922 and lasted until 1929. During this time, the “entire country was speculating in the market, buying all sorts of new consumer goods, and pretending to stay on the wagon in the process” (Geisst, 154). Although it appeared that everyone was making money, there was a large wealth gap between classes, as “five percent of the population controlled 90 percent of the wealth” (Geisst, 154). This discrepancy, and thus the uneasiness it brought, manifested itself to all of Wall Street when, in 1920, a terrorist planted a bomb outside of J.P. Morgan’s headquarters at 23 Wall Street, directly across the street from the New York Stock Exchange. The bomb was detonated and killed thirty people, while injuring many others. Nevertheless, Wall Street continued to grow during the decade and soon became a top tourist attraction in New York City, as people would travel great distances and cheer for well-known Wall Street workers as they arrived for work in the morning (Geisst, 187).
As America entered the final year of the decade, Wall Street was doing better than ever. According to Aldcroft, “for much of 1929 most Americans were convinced that the country had entered perpetual prosperity and there seemed little indication of the dire consequences which were soon to follow” (284). The large wealth gap between the classes, as well as the problem of buying on stocks on credit, would inevitably catch up with Wall Street, as it did in October 1929. Although the market was faltering, the stock market completely collapsed on October 29, 1929, a day known as “Black Tuesday” (CNN). On that particular day, the Dow Jones Industrial Average lost 23% of its total value, and by the end of November 1929, investors had lost $100 billion in assets. As a result, the nation began one of its darkest eras: the Great Depression.
During the Great Depression, Wall Street was in disarray. People lost their entire life savings and many did not know what to do. Help came from President Franklin Delano Roosevelt, who implemented his New Deal plan to help restore the nation’s economy. The New Deal helped provide people with jobs to make money and established various agencies to help improve the nation’s economy. Among the agencies created by the New Deal was the Securities and Exchange Commission (SEC). The SEC changed the way Wall Street operated and attempted to ensure that another crash would not occur. However, the SEC annoyed Wall Street greatly. According to Geisst, “Investment bankers now found themselves accountable to a government agency for the first time. Any company that misrepresented itself on a filing statement with the SEC was liable, as were its investment bankers” (234).
According to the business cycle, when a nation’s economy reaches a trough, the economy will eventually improve once more. The same held true during the 1930s and 1940s, when America’s economy was revived with the help of World War II, which sparked businesses and provided people with jobs. Wall Street began to grow again and eventually reached a large boom in the early 1950s. This postwar boom was the largest in American history and was based upon “strong economic fundamentals, technological advances, and a stock market that reflected solid optimism rather than rank speculation” (Geisst, 273). However, Wall Street could not help declining again in the late 1960s. During this decade, over 150 firms failed in the New York Stock Exchange (Geisst, 296). The troubled times for Wall Street continued through the 1970s. In 1975, New York City was on the verge of bankruptcy. During this year, New York watched as “the prices of its outstanding bonds and notes began to fall” (Geisst, 314). However, the major banks in the city helped prevent it from going bankrupt.
As Wall Street entered the 1980s, the economy began to improve once again. Investment bankers had some of their best years between 1982 and 1987 (Geisst, 348). Although the market was doing well, indications that a collapse was approaching appeared. Citicorp announced its largest loss in corporate history, and in 1987, Wall Street was struck with the fear that worldwide interest rates would increase. Once again in the month of October, Wall Street began to collapse. On October 19, 1987, a day known as Black Monday, Wall Street experienced chaos as the market indices lost about 21% of their value (Geisst, 349). The next day, a doomsday prophet stood outside the New York Stock Exchange, saying, “People, I plead with you, start reading your Bible” (Mahar, 66). Nevertheless, as Wall Street has proven repeatedly, things do get better. The 1990s saw the largest bull market in Wall Street history. In March of 1999, the Dow Jones Industrial Average broke the 10,000 mark, and Wall Street investors could not be happier (Mahar 300).
The economy today is simply another turn of the business cycle. Wall Street is struggling, but if the past is any indicator, the market will rebound. As Mahar states, “there is good reason to expect that past cycles might forecast, at least in broad strokes, the shape of the future” (16). The economy is not doing as well as investors hoped it would, but there is hope in the future, for the cycle has repeated itself many times over the course of history. Wall Street continues to be the center of the nation’s economy, as well as one of the major financial areas of the world. In due time, a bull market will once again take over Wall Street and business will improve.
Over time, Wall Street has demonstrated that is both the site of market activity and a place of interest for people from all corners of the world. From its primitive days of curbside trading to its elite status in the world today, Wall Street has withstood the test of time. From its darkest days, Wall Street was reborn stronger than before. The business cycle is unavoidable, and the peaks and troughs that it brings cannot be stopped. Only hope and faith in the economic system will help Wall Street overcome the hardships it experiences during the troughs. However, its position at the forefront of economic activity in the United States, as well as its importance to New York City will undoubtedly remain.
WORKS CITED
Aldcroft, Derek H. From Versailles to Wall Street 1919-1929. Berkeley: University of California Press, 1977. Print.
CNN. “October 29, 1929: ‘Black Tuesday.’” CNN.com. 10 March 2003. Web. 26 November 2009. <http://www.cnn.com/2003/US/03/10/sprj.80.1929.crash/>.
Geisst, Charles R. Wall Street: A History. New York: Oxford University Press, 1997. Print.
Mahar, Maggie. Bull! A History of the Boom, 1982-1999. New York: Harper Collins Publishers, 2003. Print.
Romer, Christina D. “Business Cycles.” The Concise Encyclopedia of Economics. 2008. Library of Economics and Liberty. Web. 26 November 2009. <http://www.econlib.org/library/Enc/BusinessCycles.html>.
