The Capital Of Capitalism

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On a cold Saturday in December, 1865, the 350 members of the New York Stock Exchange gave a party to celebrate moving into a new building on Broad Street, near the corner of Wall—the first home of their own. “One of the finest temples of Mammon extant,” the New York Times observed. Visitors poured through the spacious lower hall and up the wide stairs to enjoy refreshments in the high-ceilinged, black-walnut-panelled Board Room, whose acoustics had already been tested at a brief stock auction that morning. Among the decorations to be admired were two gilt-framed portraits that had been hung in places of honor—of John Ward and of Jacob Little, important figures in the Exchange’s recent past.

Ward had come from a family long prominent in the political and financial affairs of the country. Although he took part in some speculative stock operations, he was a respectable organization man, three times elected president of the Exchange in the eighteen-thirties. His contemporary Jacob Little, on the other hand, worked his way up from a Wall Street basement to become the first famous, daring speculator the Exchange had known—admired, imitated, feared. “His nod unsettled the market,” complained an acquaintance. Little made and lost several fortunes. Each man reflected an aspect of life on the Exchange that was to be projected into its future.

The move to a new building was also a move into a new era for the Exchange, the first step in becoming the “capital of capitalism,” as it was often called later. It was to pace America’s extraordinary industrial development for the next hundred years.

When securities trading first began in New York during and after the Revolutionary War, it was an unimportant business. Government bonds- called stock were auctioned off now and then by the same men who conducted sales in cotton, sugar, and spices down in the riverfront area at the foot of Wall Street. The securities were various types of federal and state obligations issued to pay for the war and keep the country going under the Articles of Confederation. They had all depreciated to a fraction of their original value.

As soon as Alexander Hamilton proposed that the new federal government formed under the Constitution take over these old obligations, sharp businessmen, including some members of Congress, sent agents out around the country to buy up batches of them before their disgusted owners got news of the refunding. By the middle of 1790 the securities began to show up in Wall Street in some quantity. “Stock jobbing drowns every other subject. The coffee house is in an eternal buzz with the gamblers,” James Madison wrote disapprovingly.

A few auctioneers came to consider themselves stock specialists. In March, 1792, several of them opened an office at 22 Wall Street, calling it the Stock Exchange Office. John Pintard, later a founder of the New-York Historical Society, was one of this early group. His stockbroker’s career was cut short when he went bankrupt a few weeks later and had to leave the state. But he returned for a long, venerable life in insurance and banking, serving for years as secretary of the New York Chamber of Commerce, which his uncle, Lewis Pintard, had helped launch in 1768.

Fearful that the Stock Exchange Office would cut into their trade, a rival group drew up plans for a private voluntary association that would monopolize the whole business. In May, 1792, they signed a pledge to give each other preference in stock deals. They also agreed to maintain a minimum commission rate so as to control competition among themselves.

Legend has it that this agreement was signed by the brokers under a buttonwood tree that stood somewhere between 60 and 78 Wall Street. In the fanfare of publicity celebrating its 175th anniversary in 1967, the New York Stock Exchange fixed the legend firmly in history by insisting that this pact be called the Buttonwood Agreement, thus borrowing, perhaps unconsciously, a little of the prestige of the Bretton Woods agreement that restructured international finance after World War II.

 

Regardless of where the agreement was signed, a great deal of early stock trading, like all buying and selling of that era, was done on the street under whatever trees were handy. In rainy weather the merchants swarmed into local coffee houses. The stockbrokers set up headquarters first in the Merchants’ Coffee House, at Wall and Water streets, and then across the street at the new Tontine Coffee House.

They all had other jobs, for there weren’t enough securities around to make much trading volume. Some days less than a hundred shares changed hands. Few enterprises were large enough to require capital from the public at large; most were family concerns or were financed by small groups of wealthy local men. Banks and insurance companies, however, founded with increasing frequency after the turn of the century, were gradually added to the list. In the i82o’s canal stocks, originally issued to merchants and farmers along the waterways, began to work their way into Wall Street to give a boost to the business. Still, Philadelphia, which had been the banking center of the young United States, long overshadowed New York as a financial city.