How Wall Street Reshaped America’s Destiny

By Robert Zuccaro

Wall Street receives far more criticism than other institutions and not enough credit for its contributions to our well-being. Without Wall Street, the United States of America might not have led the Industrial Revolution or won two world wars.

Robert Zuccaro, the founder of Target QR Strategies, traces the history of the stock market, beginning in lower Manhattan in 1792 when a group of brokers crafted the Buttonwood Agreement. The pact led to the forerunner of the New York Stock Exchange.

The journey continues into the heyday of the railroad, telegraph, telephone, automobile, radio and movie industries, and concludes with the computer and internet era. This saga moves along quickly and is peppered with fascinating historic facts.

Wall Street even played a decisive role in the outcome of the Civil War by raising huge sums of money for the Union. The South, not having Wall Street in tow, was limited to printing paper currency, which led its economy to collapse.

Wall Street’s long history of bull markets, bear markets, financial crises missteps and even terrorist attacks are all covered in this exciting journey.

• Language: English
• Publisher: Lulu.com
• Release date: Nov 19, 2020
• ISBN: 9781716546181

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ZUCCARO

Copyright © 2020 Robert Zuccaro.

All rights reserved. No part of this book may be reproduced, stored, or transmitted by any

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Unauthorized reproduction of any part of this work is illegal and is punishable by law.

ISBN: 978-1-7165-4619-8 (sc)

ISBN: 978-1-7165-4618-1 (e)

Library of Congress Control Number: 2020917583

Because of the dynamic nature of the Internet, any web addresses or links contained in

this book may have changed since publication and may no longer be valid. The views

expressed in this work are solely those of the author and do not necessarily reflect the

views of the publisher, and the publisher hereby disclaims any responsibility for them.

Lulu Publishing Services rev. date: 09/28/2020

INTRODUCTION

Wall Street has changed the destiny of our country in so many ways. Those who participated in the Occupy Wall Street movement several years ago may not know or care about the role that Wall Street has played in helping to raise our standard of living and providing for our national security. The same can be said for many others. As a symbol of wealth, Wall Street receives far more criticism than other institutions, but not enough credit for its contributions to our well-being.

Wall Street derives its name from an earthen wall that was built in 1685 in lower Manhattan by the Dutch to protect its residents from attacks by the British and Indians. As time passed, the New York Stock Exchange would be built on Wall Street, and the Wall Street name, which is a symbol for US capital markets (stocks, bonds, and commodities), would become mostly associated with the stock market.

Clearly, Wall Street’s reputation suffered from the Enron, Arthur Anderson, and WorldCom scandals almost twenty years ago, and also from the Bernie Madoff Ponzi scheme. However, scandals are not limited to Wall Street. Credit Mobilier, parent company of the Union Pacific Railroad, ensnared both members of the Grant administration and members of Congress in a scheme involving gifts of company shares in exchange for generous federal land grants to build the transcontinental railway. Vice President Spiro Agnew in the Nixon years was receiving kickbacks in his Washington office from construction contractors in Maryland, where he had previously served as governor. Charged with three felony counts, he resigned in disgrace.

In 2016, the Department of Labor audited union finances and filed criminal embezzlement charges against union officials in 20 percent of audits. In one case, a UAW official charged his purchase of thirteen thousand dollars for cigars as a retirement plan expense. Imagine the public outcry if 20 percent of business investigations resulted in criminal charges.

On the positive side, Wall Street has been instrumental in raising capital for companies in every era of innovation, starting with the Canal Era in the 1820s. Wall Street raised $7 million by selling bonds to fund the construction of the Erie Canal, a considerable sum of money in those days when compared against the federal budget of $22 million. Work on the Erie Canal started in 1817 and was completed in 1825. In the next year, 13,110 barges and 40,000 passengers passed through the canal.

To say the least, the Erie Canal had a profound impact on the economics of transportation in upper New York State. It reduced shipping times between Buffalo and Albany by 60 percent and shipping costs by 90 percent. Furthermore, the canal opened up foreign markets for American goods after the Great Lakes-to-New York City waterway was built.

The Erie Canal remains one of the most consequential undertakings in American history. More than fifty thousand workers built the canal by hand over a stretch of 363 miles. The canal turned New York City into a boomtown overnight. Not only did New York become the center of commerce in the country, it also became the center of finance after its completion.

By the 1830s, there was a unified water network from New Orleans to New York City. More than a thousand miles of canals were built in Pennsylvania, but in the end, it was cheaper to ship products from the Midwest using the Erie Canal instead of through the Pennsylvania canal network, which bolstered New York’s dominance. By 1840, the national canal network had grown to more than three thousand water miles. Yet in time, a new mode of transportation would make most canals obsolete, forcing them to cease operation.

Few inventions in history have ever exerted such a swift and significant impact on the economy as did the railroad. Unlike canals, which were limited in connecting communities on rivers, lakes, and the ocean, railroads were not restricted in their reach. Just as the Erie Canal had reduced transportation times and costs, railroads were able to provide the same benefits on a similar scale.

The Mohawk & Hudson Railroad was formed to compete against the Erie Canal. It was first railroad stock listed on the New York Exchange in 1830. By 1850, thirty-eight railroad stocks were listed on the exchange, and the railroad industry would go on to dominate both the economy and stock market for the rest of the century.

In 1844, the telegraph was introduced and was quickly adopted by the New York and Philadelphia stock exchanges. Prior to its introduction, securities prices were communicated between the two exchanges by workers stationed on hills between the two cities using semaphore, an alphabet and numbers signaling system using flags and telescopes. This was both time consuming and inefficient, as foul weather often hindered communications. Before the telegraph, it would take roughly thirty minutes to transmit prices using semaphore, but the telegraph made it almost instantaneous.

Many telegraph companies sprung up around the country to participate in the booming telegraph business. By 1851, the Bureau of Census counted seventy-five telegraph companies and twenty-one thousand miles of telegraph wire in operation. Years later, Western Union, with the help of Wall Street financing, consolidated the entire industry, creating the first monopoly in the United States. At its height, Western Union controlled more than a hundred thousand miles of telegraph wire in the country. In 1871, the company introduced another breakthrough service: money delivery by telegraph. Any breakthrough technology is always followed by rapid growth. The telegraph was no different in this regard. The volume of messages carried by telegraph grew from the first message sent in 1844 to more than 66 million by the turn of the century.

In 1866, the laying of the transatlantic telegraph cable by the American Telegraph Company suddenly made the world a smaller place. American Telegraph needed to raise $300 million to build the cable from North America to Europe, and once again, Wall Street was there to assist by selling company stock to raise funds for construction. Prior to the building of the transatlantic cable, written communications were carried by ship between the two continents, which would take weeks. The cable allowed a message to be relayed in minutes. Upon completion of the cable, the US stock markets became international in scope.

The Civil War started in 1861 when the South Carolina militia fired on Union soldiers at Fort Sumter in Charleston. Afterward, Wall Street moved into high gear and raised huge sums of money from investors to finance the North’s military campaign against the South. The South lacked the financing capability of Wall Street, so it had to resort to printing paper currency. By the end of the war, in 1865, hyperinflation of 9,000 percent a year had set into the South, resulting in an economic collapse that contributed to the end of the war.

When the war broke out, only 1 percent of the Northern population owned securities. In order to raise the enormous sums needed to finance the war, a mass marketing program was created for the first time, as ads were placed in newspapers to sell war bonds. By the end of the war, 5 percent of Northerners owned securities. Without the help of Wall Street, the North might not have won the war, and our country might look very different today.

Wall Street was forced to change the way it did business because of the Civil War. As the number of securities proliferated, trading increased on the exchange at a frenetic pace, so Wall Street moved from two trading sessions a day to continuous trading throughout the day. Until then, one auction was held in the morning and another in the afternoon, six days a week. Before continuous trading, brokers would routinely break for lunch by going home or to a tavern. Now, there was little time to do this, which gave birth to fast food and the lunch counter.

As time went by, Wall Street would prove to be instrumental in raising capital for the telephone, natural gas, and electrical power industries in the 1880s; the automobile and airplane industries in the early 1900s; the radio and movie industries in the 1920s, and the computer industry and internet companies starting in the 1980s.

Wall Street not only helped to raise funds for the federal government in both World Wars; it also helped the war effort by lending two industrial titans to spearhead mobilization for war. In 1917, during World War I, Woodrow Wilson appointed Charles M. Schwab, former president of US Steel, to head the Emergency Fleet Corporation.

The United States was at an early disadvantage in the war, having no merchant ships to ferry troops and supplies across the ocean to Europe, so it had to rely on transporting them by passenger ships. After Schwab was appointed to run the Emergency Fleet Corporation, he borrowed mass production methods used by Henry Ford to produce a fleet of 3,116 merchant ships in just one year.

During World War II, President Franklin D. Roosevelt, despite his strong anti-business leanings, appointed William Knudsen, president of GM, as chairman of the War Production Board (WPB). Knudsen led the greatest industrial transformation in history by shifting some two hundred GM plants and the plants of six other automakers away from car production to the manufacture of airplanes, ships, tanks, artillery, and military vehicles in a matter of months. In 1940, the US