History of Wall Street

Wall Street is often thought of as both the symbol and geographic center of American capitalism. Symbolically, Wall Street refers to all the banks, hedge funds, and securities traders that drive the stock market and the whole American financial system. Geographically, Wall Street is the center of Manhattan’s Financial District. It runs east/west for eight blocks from Broadway to South Street.

The New York Stock Exchange (NYSE) is located on 11 Wall Street. Nearby, but still considered part of Wall Street, are six other businesses. The New York Federal Reserve Bank is at 33 Liberty Street. The Nasdaq is on 1 Liberty Street, Goldman Sachs is at 200 West Street, and JPMorgan Chase is at 277 Park Avenue. The NYMEX is at 300 Vessey Street. Even the Wall Street Journal is not on Wall Street itself—it’s at 1211 Avenue of the Americas.

Way back when it all started, Wall Street ran along a physical wall built when New York was still a Dutch Colony. Then-Governor Peter Stuyvesant ordered a wooden wall that protected the lower peninsula from the British and Native Americans. It later became a street bazaar where traders met under a now-famous buttonwood tree. In 1792 these traders formalized the rules of the game and created the NYSE.

Wall Street includes the stock market, bond market, commodities market, futures market, and the foreign exchange market. The original purpose of the securities market was to raise funds for companies to grow, be profitable, and create jobs. Securities trading has become so profitable in and of itself that trades have been established for just about anything you can think of, and a lot of things you could never imagine.

What changed Wall Street? For one thing, the abolition of the Glass-Steagall Act in 1999. This allowed any bank to use depositors’ savings to invest in complicated securities called derivatives. They based their value on different types of loans, including credit card debt, corporate bonds, and mortgages.  Deregulation was one reason for the 2008 financial crisis. The derivatives based on mortgages were called mortgage-backed securities. They were guaranteed by another financial innovation called credit default swaps. All of these were traded successfully on the secondary market until housing prices started to fall in 2006. The underlying mortgages started to default, and no one knew how to price the mortgage-backed securities. There were so many defaults that the companies, like AIG, who guaranteed the debt ran out of cash.

Occupy Wall Street was another reaction to the financial crisis. Its “leaderless resistance movement” began on Sept. 17, 2011, with a non-violent occupation of Liberty Square in New York’s Financial District. It spread to over 1,500 cities around the world.

thebalance.com