Wall Street
Wall Street
THE RISE OF A FINANCIAL CENTER: FINANCE AND GEOGRAPHY
THE POLITICAL ECONOMY OF FINANCE CAPITAL
Wall Street refers to the geographical concentration of financial service providers that constitutes New York’s financial district. Its heart is the narrow thoroughfare of the same name in Lower Manhattan that is home to the New York Stock Exchange. The term carries a wide spectrum of meanings that intersect geography, finance, and political economy.
The origins of Wall Street can be traced to the brushwood barricade erected by Peter Stuyvesant along the northern boundary of the New Amsterdam community of Dutch settlers in Lower Manhattan in 1653. The “wall” was meant to protect the early settlers against attack from Lenape Indians, New England colonists, and the British (who dismantled it in 1699). The subsequent growth and lore of local merchants and financiers imbued this simple geographic setting with its modern significance—the story of the formation of a world financial center, the powerful headquarters of U.S. financial capital.
THE RISE OF A FINANCIAL CENTER: FINANCE AND GEOGRAPHY
Wall Street’s early history as a financial market began with gatherings of securities and commodities traders during the Revolutionary War. These curbstone and coffeehouse traders first developed financial techniques for loans and shares out of the needs of mercantile trade, a rudimentary copy of the 1600s Dutch exchanges. The consolidation of the New York exchange accelerated with U.S. government demands for new sources of capital to bail out securities issued to finance the Revolutionary War. The first Continental Congresses in New York issued $80 million in government bonds under Alexander Hamilton to redeem war debts at face value. Speculators seeking to profit on leaked news of the bailout plan set up operations at the east end of the street to broker insider trading of the government paper.
Wall Street’s development during the eighteenth century was shaped by trade in government debt and state licensed monopolies. During the nineteenth century, railroad shares and bonds fueled the market and its proliferation of trading instruments. Early institutional development was characterized by the monopolization of trading activity that excluded informal curb participants and curtailed the growth of rival exchanges. On May 17, 1792, twenty-four stockbrokers signed the “Buttonwood Agreement” (so named for the sycamore tree on Wall Street under which the signing is said to have taken place). The accord restricted membership and formalized rules for the loosely associated “Brokers for the Purchase and Sale of Public Stock” who conducted their exchange auctions out of the Tontine Coffee House. The financial turbulence of the War of 1812 prompted creation of the New York Stock and Exchange Board (NYSEB) in 1817. The board turned a handsome profit by financing the Erie Canal. It further restricted membership, enforced full commissions and secrecy, and moved member brokers into rented office space. The measures served to snuff out competition from rival curbstone exchanges, such as the 1835 Commercial Exchange Association.
The 1840s to the 1860s produced growth in securities issues associated with railroad stock (first listed in 1830). A major speculative boom driven by Civil War finance (1861–1865) spawned demand for new manufacture and mining and a swelling trade in government debt. This activity fueled persistent attempts to establish rival exchanges to the NYSEB, which culminated in the formation of the Open Regular Board in 1864. Unable to remove the Open Board from the trading arena, the NYSEB was forced to merge with it in 1869. This merger created the New York Stock Exchange as it is now known, with its 1,060 founding members. Subsequent challenges by rival exchanges, such as the Consolidated Stock and Petroleum Exchange (CSPE) founded in 1885, provoked aggressive response by the NYSE, which outlawed CSPE dealings and in 1900 ordered Western Union to stop supplying quotation services to all rival exchanges in New York City (Doede 1967, p. 14).
Financial turbulence in conjunction with the growing concentration of wealth on Wall Street prompted congressional reaction with the Pujo hearings in 1907. Wall Street was implicated in the monopolistic practices of the money trusts that facilitated industrial concentration under the control of a small number of corporations. During the 1920s, Wall Street flourished as a financial center, promoting the rise of large corporations with dispersed ownership and professional management along with a dramatic concentration of capital.
The fragile foundation of this accumulation of financial claims became apparent with the Black Thursday stock market crash of October 24, 1929, and the Black Tuesday sell-off panic that began on October 29. The collapse in equity prices came at the height of Wall Street’s reputation and prompted a wave of regulatory legislation, from the 1933 Bank Act to the creation of the Securities and Exchange Commission in 1934. In the world of finance, Wall Street’s characteristic business activity had produced a speculative financial frenzy that put short term capital gains before enterprise, setting the stage for a debt-deflation crisis that brought down more than nine thousand banks and triggered the onset of the Great Depression in the 1930s. From this historical episode, major debates ensued about the role of financial markets in the development process.
Viewed from the perspective of the efficient markets hypothesis, Wall Street is the archetype of a highly competitive, efficient capital market whose prices reflect all relevant information. It is impossible to beat the market, and capital is optimally allocated to productive firms. Viewed from the financial instability school of thought, however, Wall Street is predisposed to speculative excess, where the larger constellation of private credit-creating institutions serve the interests of financial accumulation, distorting the allocation of productive capital in debilitating waves of crisis and bankruptcy. Contemporary reference to the “Wall Street View,” coined by Hyman Minsky, derives from this interpretation of the Great Depression’s speculative overleveraging and collapse in world capital markets. Laissez-faire finance, absent regulation and supervision, produces destabilizing real economic performance.
Throughout the 1930s Wall Street exchanges shrunk from losses. Trading during the post–World War II golden age was lackluster until the end of the 1950s. In perspective, NYSE trading for all of 1950 was 525 million shares, which was equivalent to just two hours of an average day’s trading volume in 2005. Wall Street emerged by securing its geographic and financial monopoly over U.S. capital markets. The dense area of real estate demarked by Wall and Broad Streets came to include the New York and American stock exchanges, member firms, over-the-counter firms, government securities dealers, major banks and trust companies, the New York Federal Reserve Bank, and countless insurance, utility, mercantile, and commodity exchanges. The NYSE became the symbolic hub for U.S. financial capital. The amount of new capital Wall Street actually provisioned for “Main Street,” however, proved to be quite low—less than 1 percent of gross domestic product (GDP). It is not new capital but retrading existing capital that defines Wall Street’s key development role. Following the 1970s, speculative financial leveraging of accumulation returned to Wall Street, exploding trading volumes, where the banking system was engaged to secure profits on capital gains from asset price run-ups on financial claims. The resulting market volatility made more observers receptive to the financial instability hypothesis.
THE POLITICAL ECONOMY OF FINANCE CAPITAL
In the world of political economy, Wall Street signifies the epicenter of U.S. and global financial capital. In the tradition of imperialist extension, Wall Street is seen as having the power to create or undermine nations in accordance with U.S. national interest. Wall Street speculators, most notably J. P. Morgan, played a decisive role in Panama’s secession from Colombia and its birth as a nation in 1903 to ensure huge profits from the construction of the Panama Canal and U.S. controlling interest in the Canal Zone (Diaz Espinoza 2001). Morgan’s Wall Street partnership bought up the worthless stock of the failed French Canal Company in 1900 and dispatched Nelson Cromwell to convince the U.S. government to purchase the company’s rights and equipment at an exorbitant price. When Colombia’s refusal to ratify the Hay-Herran Treaty threatened Washington’s rights to build the canal, Wall Street financiers funded an uprising by Panamanian nationalists, causing President Theodore Roosevelt to deploy U.S. troops to the region.
Nineteenth-century political critique faulted Wall Street for advancing the monopoly powers of national capital and imperialist extension. Modern variants of this viewpoint examine in greater detail the evolving technology of financial institutions in promoting “accumulation by dispossession” (Harvey 2003, p. 147), where predatory asset redistributions are produced in the context of speculation-induced economic crises. Attention concentrates on the wave of financialization that occurred after 1973. Transactions involved stock promotions, Ponzi schemes, international debt-pushing and repayment servitude alongside speculative raiding conducted by hedge funds. The global reach of Wall Street’s agenda and contribution to financial instability is captured in the reference to the “Wall Street–Treasury–IMF complex.” This highlights the desire of large brokerage firms to have access to capital markets throughout the world through enforcement of complete capital account convertibility, while the International Monetary Fund (IMF) asserts its role as an international lender of last resort in the wake of impending crises.
The destruction of Manhattan’s World Trade Towers on September 11, 2001, made evident that Wall Street’s financial nexus had assumed symbolic dimensions as the center of U.S. financial power and was vulnerable to attack. A previous episode had occurred on September 6, 1920, when a bomb was exploded outside the NYSE building, killing thirty-three people. The post 9/11 geography of money produced a diaspora of the financial industry out of its concentrated center in Lower Manhattan. The disaster dislocated fifty thousand financial service employees to new office space in Midtown Manhattan and nineteen thousand across the river to New Jersey. Over thirteen million square feet of class A office space were completely destroyed, and insurance industry claims from property and life topped $40 billion.
Wall Street’s financial dominance continues despite encroaching competition by rival exchanges trading with new electronic technologies. In 2006 the NYSE acquired Archipelago Holdings, a rival exchange based entirely on electronically traded funds. The resultant public corporation, NYSE Group, took on the all-electronic NASDAQ to consolidate its control in the Internet trading world, where member “seats” and “trading floor” no longer signify geographic reference when accounting for revenue streams. The NYSE Group’s subsequent merger with Euronext produced the first transatlantic bourse.
SEE ALSO Casino Capitalism; Corporations; Economic Crises; Efficient Market Hypothesis; Federal Reserve System, U.S.; Financial Instability Hypothesis; Financial Markets; Great Depression; Hedging; Investment; Market Fundamentals; Random Walk; Regulation; September 11, 2001; Speculation; Stocks; Transaction Taxes
BIBLIOGRAPHY
Darity, William A., Jr. 1992. Financial Instability Hypothesis. In The New Palgrave Dictionary of Money and Finance, eds. M. M. Peter Newman and John Eatwell, vol. 2, 75–76. London: Macmillan.
Diaz Espinoza, Ovidio. 2001. How Wall Street Created a Nation: J. P. Morgan, Teddy Roosevelt, and the Panama Canal. New York: Four Walls Eight Windows.
Doede, Robert W. 1967. The Monopoly Power of the New York Stock Exchange. PhD diss., University of Chicago.
Geisst, Charles R. 2004. Wall Street: A History; From Its Beginnings to the Fall of Enron. Oxford and New York: Oxford University Press.
Harvey, David. 2003. The New Imperialism. Oxford and New York: Oxford University Press.
Henwood, Doug. 1997. Wall Street: How It Works and for Whom. London and New York: Verso.
Kindleberger, Charles Poor. 1974. The Formation of Financial Centers: A Study in Comparative Economic History. Princeton Studies in International Finance, no. 36. Princeton, NJ: International Financial Section, Princeton University.
Pohl, Nicole. 2004. Where Is Wall Street? Financial Geography after 09/11. Industrial Geographer 2 (1): 72–93.
Wachtel, Howard M. 2003. Street of Dreams—Boulevard of Broken Hearts: Wall Street’s First Century. London and Sterling, VA: Pluto.
Joseph Ricciardi
Wall Street
WALL STREET
Wall Street, in the broadest sense, refers to the financial epicenter of all business and banking in the United States. Not only is Wall Street synonymous with U.S. financial interests, but also is an international symbol of financial power. Wall Street is an umbrella term encompassing the New York Stock Exchange (NYSE), the American Stock Exchange (Amex), the over-the-counter market called the National Association of Securities Dealers (NASD) and its automated quotation system (NASDAQ). It also includes bond markets, commodity futures markets, and various markets throughout the United States such as those in Chicago, Philadelphia, and Kansas City. In its physical sense, Wall Street, a street on the south tip of Manhattan Island in New York City, forms a triangular block with Broad and New streets, location of the nation's exchanges plus many commercial banks and business offices.
The name Wall Street derived from an early road located alongside a wall or stockade built across lower Manhattan in 1653 to protect a small Dutch colony. Local merchants and traders gathered on street corners and coffeehouses around Wall Street to buy and sell shares and loans (bonds), collectively known as securities. Although crude, this early trading set precedents which underlie American market practice for the next two hundred years.
In 1792, meeting under the famous buttonwood tree at 68 Wall Street, traders agreed to a formal organization or exchange for buying and selling shares and loans. In 1817 many of the same dealers agreed to organize into the New York Stock and Exchange Board. Early securities listed on the Exchange were U.S. government bonds and a few stocks of banks and insurance companies. Stocks and bonds not traded on the new Exchange were traded by curbstone brokers congregated outside the Exchange. These curbstone brokers were the predecessors of the American Stock Exchange and over-the-counter market. Industrial issues and railroad stocks and bonds appeared on the Exchange in the 1830s and 1840s. By the 1840s foreign capital became a major factor influencing American business expansion. Foreign bankers maintained offices on Wall Street as did domestic commercial banks, business corporations, insurance companies, and commodity exchanges for coffee, agricultural products, and metals.
Wall Street traders operated entirely free of regulation leading to unscrupulous practices by robber barons such as Jay Gould, Cornelius "Commodore" Vanderbilt, Andrew Carnegie, John D. Rockefeller, and J.P. Morgan. Consolidation of U.S. industry into immense trusts between 1880 and 1910 provided Wall Street's largest listed firms. Following the stock market crash of 1929, the Securities Exchange Act of 1934 established the Securities and Exchange Commission to protect people investing money in securities and to enforce federal laws governing trading practices. The modern era of Wall Street finance began in the 1950's. Individual investors began entering the market and all purpose securities firms serving all types of clients changed the face of Wall Street.
See also: Investment, New York Stock Exchange, Securities and Exchange Commission
Wall Street
Wall Street ★★★ 1987 (R)
Stone's energetic, high-minded big business treatise in which naive, neophyte stockbroker Bud Fox (Charlie Sheen) is seduced into insider trading by sleek entrepreneur Gordon Gekko (Douglas), much to his blue-collar father's (Martin Sheen) chagrin. A fast-moving drama of ‘80s-style materialism with a mesmerizing, award-winning performance by Douglas as greed personified. Expert direction by Stone, who co-wrote the not-very-subtle script. His father, to whom this film is dedicated, was a broker. Look for Stone in a cameo. 126m/C VHS, DVD, Blu-ray Disc . Paul Guilfoyle, Michael Douglas, Charlie Sheen, Martin Sheen, Daryl Hannah, Sean Young, James Spader, Hal Holbrook, Terence Stamp, Richard Dysart, John C. McGinley, Saul Rubinek, James Karen, Josh Mostel, Millie Perkins, Cecilia Peck, Grant Shaud, Franklin Cover, Oliver Stone; D: Oliver Stone; W: Stanley Weiser, Oliver Stone; C: Robert Richardson; M: Stewart Copeland. Oscars ‘87: Actor (Douglas); Golden Globes ‘88: Actor—Drama (Douglas); Natl. Bd. of Review ‘87: Actor (Douglas); Golden Raspberries ‘87: Worst Support. Actress (Hannah).
Wall Street
Wall Street
Wall Street, the financial center of the United States, takes its name from an actual street in lower Manhattan in New York City. The financial district around Wall Street is home to the New York Stock Exchange , American Stock Exchange, and several commodities exchanges. Many banks, insurance companies, investment firms, and regulatory agencies also have offices in the area of Wall Street.
Wall Street's history as a financial center dates back to the time when the area was a Dutch colony. The “wall” in the street's name refers to the protective earthen wall that ran alongside it. Local merchants and traders gathered along the street to buy and sell interests (stocks and bonds) in companies.
In 1792 traders established a formal organization at 68 Wall Street to conduct business. In 1817 the New York Stock and Exchange Board was created. As the country's businesses grew and prospered, Wall Street became the center of investment activity and economic hope. It attracted investors from all over the world.
Market performance on Wall Street has come to symbolize the health of the nation's economy. Although there are now market districts worldwide, Wall Street remains the dominant symbol of high finance, big investments, and financial dreams.
Wall Street
Wall Street Crash the collapse of prices on the New York Stock Exchange in October 1929, a major factor in the early stages of the Depression; many investors became bankrupt, and there were a number of suicides from high-rise Wall Street buildings.