Wall Street

Among the most famous thoroughfares in the world, Wall Street is located in the southeast side of Manhattan in New York City. It is a narrow and relatively short street, running for 0.4 mile along nine blocks from a 19th-century church on Broadway down to South Street near the shore of the East River. Despite these geographic confines, Wall Street is lined with skyscrapers and historic buildings that signal the enormous influence and significance it has acquired over time in both American and international commerce. As a result of this historical evolution, Wall Street is not just a place, but it is also a symbol of everything connected to the operations of high finance in a global economic order.

What serves as the moniker of New York's financial district originated in 1653 as a path alongside which Peter Stuyvesant, the governor of what was then the Dutch colony of New Amsterdam, built a defensive wall made of sharpened logs. Designed to protect the budding colony from attacks by British settlers in New England, the wall proved useless, as the British attacked New Amsterdam by sea in 1664, bringing about its surrender and renaming it to New York. When the wall was subsequently torn down in 1698, the lane beside it was employed to carry traffic and christened as Wall Street.

Even though it developed into a dynamic commercial and trading precinct under British rule, Wall Street did not become a hub of financial activity—in which savers and investors supplying capital are brought together with the firms and governments demanding it—until the early days of the new American republic. The federal government was then the chief demander of capital, having decided to assume the debts incurred by the Revolutionary War. It initially issued $80 million in bonds and these, along with state bonds, constituted the most actively traded securities of the day. Banks and insurance companies [Page 1698]soon joined the trading mart where transactions were negotiated in coffeehouses and outside along the curbs of the street.

Wall Street and the Stock Exchange and Bankers Trust buildings in 1912, before the founding of the Federal Reserve.

One of the banks traded, the Bank of New York founded by Alexander Hamilton, became the object of Wall Street's first scandal. William Duer, a friend of Hamilton, sought to manipulate the price of Bank of New York stock, but ended up being ensnared by his own intricate machinations. In the wake of the scandal, a group of brokers met under a buttonwood tree, at what is now 68 Wall Street, to come up with an arrangement aimed at burnishing the image of the financial community. The result was the Buttonwood Agreement of 1792. In it, the brokers agreed to deal only with each other in the buying and selling of public securities at a fixed commission rate. This agreement constituted the foundation of the New York Stock Exchange (NYSE), the defining institution of Wall Street.

19th Century

The early 1800s witnessed the failure of two attempts to establish a central bank that could act as a “lender of last resort” to counteract a financial crisis on Wall Street. The first such attempt was the Bank of the United States, which operated for 20 years before its charter was revoked by Congress in 1811. Another effort was made five years later with the second Bank of the United States, but it also fell to political opposition fueled by a Jeffersonian suspicion of financial capitalism and federal concentration of power.

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