The Early History of Wall Street
Stock exchanges were created in Western Europe before the American Revolution. The
first known exchange was in 1531 in Belgium. Soon after, an exchange was built in
Amsterdam, when in 1602, under the Amstel Bridge, shares in the Dutch east India
Company were bought and sold. Ironically, money was also raised at the Amsterdam
Exchange to raise money for the pilgrim’s trip to America. Paris and Germany also
created exchanges in the 1600s. The London Stock Exchange began as an outdoor market
on Exchange Alley, then moved inside to Jonathon’s Coffee House, which was later
renamed The Stock Exchange in 1773. New York however, did not start its exchange
until 1792.
In 1792, the population of New York (not including Brooklyn and Queens) was around
34,000 people. Manhattan was still being rebuilt after the Great Fire of 1776.
There was once, before New York City was a city, a wall on Manhattan Island. It was
built in 1644 by the Dutch to protect against British attacks. Overtime the wall
disappeared but the road alongside the structure still remained and was named Wall
Street. By 1792, Wall Street was not yet paved, it was a cobblestone street. Along the
street were import warehouses for furs, coffee and tea, and other goods from around the
world. To the south were the tanneries and slaughter houses of the meat district.
Before 1792, anyone who wanted to invest in the trading companies of New York had to
advertise in one of the local newspapers or trade by word-of-mouth with fellow financial
associates. The first organized stock exchange was in Castle Garden (located in Battery
Park). It was under a buttonwood tree that John Sutton, Benjamin Jay, and 22 other
financial leaders signed an agreement of rules, regulations and fees. This organization
then began to trade at 22 Wall Street. Everyday, beginning at 12 noon, securities were
auctioned and sold to the highest bidders. The seller paid the exchange a commission on
each stock or bond sold. The organization took the name The Stock Exchange Office and
became a very exclusive organization. Only the elite of New York could become
members. No women were allowed in the building!
In 1817, The Stock Exchange Office changed its name to the New York Stock and
Exchange Board. In 1850 the exchange was located at Wall and Hanover Streets. In
1863, the name was again changed, this time to the New York stock Exchange. A new
building, on the corner of Wall and Broad Streets was built, the same location as today.
Soon, other organizations began to create smaller exchanges. They became known as the
Curbside Brokers as they conducted their business outside on street corners downtown.
The Curbside Brokers began dealing in stocks of smaller companies that did not meet the
requirements of the Big Board of the New York Stock Exchange. The Curbside Brokers
continued to sell on street corners until 1919, when they moved to a building at 86 Trinity
Place at the west end of Wall Street. In 1928, they renamed themselves the New York
Curb Exchange. They kept this name until 1953 when they changed it to the American
Stock Exchange.
The first company to be officially traded was the Bank of New York, which had been
established in 1784. By 1800, there were only 295 corporations listed, only 20 of which
were traded publicly. By 1835, 121 companies were publicly traded, most of them being
railroads. The first rapid change in trading came with the Panic of 1836, when the nation
fell into a depression. The market soon reversed itself and by 1869, there were 145
companies listed on the New York Stock Exchange, including insurance, steel, farm
equipment and tobacco companies.
By 1900, the larges company traded was U.S. Steel. Other major companies of note were
AT&T, Westinghouse, Eastman Kodak, Procter and Gamble, Pillsbury, Sears, Kellogg,
and Nabisco Crackers, the maker of the new item the Oreo cookie in 1902. The Stock
Market began to “boom” despite wages being low. [The average national wage was only
10 cents per hour, women and children working in factories were paid about 25 cents for
a 12-hour day]. This, however, did not stop fortunes being made on a daily basis. Many
traders made millions, even a “runner” who delivered paperwork and stock certificates
between brokerage houses made $8 a day.
Of note was an incident that took place on September 16, 1920. Around noon that day, a
horse-drawn carriage stopped in front of the JP Morgan building on Wall Street and a
powerful bomb inside the carriage exploded, killing 35 people and injuring hundreds. No
arrests were ever made and if you go to the building today, there is still evidence on the
outside walls of the explosion.
There have been many stories about the stock market “crash” of 1929. Stories of people
jumping out of windows emerged, even though no cases were actually reported. Several
people did shoot themselves and one man committed suicide by leaving on his gas stove.
Another had a heart attack at his broker’s office while watches the prices drop rapidly.
What did take place though, was a global recession after the people ran to the banks to
withdraw their savings.
On October 28th and 29th in 1929, the Dow average dropped 69 points to 230. Many lost
their entire investments as they had bought on margin, using a liberal 10:1 ratio to take
out big loans to buy stocks. Most Americans, as popularly believed, did not invest in the
stock market. They fell into hard times from the high rate of unemployment that followed
from the market’s “crash.” What is to be noted is that the drop in 1929 was not the worst
seen by Wall Street. This came on August 12, 1932, when the Dow hit an all-time low of
63 points (compared to 230 in 1929).
In response to the “Great Crash” Congress passed the Securities and Exchange Act in
1934. The SEC (Securities and Exchange Commission) was created to regulate stock
market trading and oversee the requirements for companies issuing stock to the public to
ensure that enough relevant information was given to potential investors. Today, the SEC
still oversees the daily actions of the market’s exchanges and how securities offered for
trading are represented to the public.
Information: http://www.atozinvestments.com/history-of-wall-street.html
Stock Exchange photograph taken by Gordon Hurst