Lifestyle

History of finance: Wall Street corners market

By Richard Pyle
Associated Press Writer
Published: November 16, 2008

NEW YORK — The enduring symbols of Wall Street's fabled, turbulent history are inescapable on this walk through the epicenter of American capitalism.

Over there, at 23 Wall, is the former headquarters of J.P. Morgan's banking dynasty, its granite facade still scarred by pockmarks from a terrorist bomb that killed 33 people in 1920. A block away, a skyscraper at 48 Wall occupies the site of the city's first bank, founded by Alexander Hamilton in 1784. Names like Rockefeller, Roosevelt and Goldman Sachs are invoked at almost every turn.

The past, as outlined during a recent three-hour "Great Wall Street Crashes Walking Tour," takes on greater meaning in the current economic crisis — an ongoing story of boom and bust, bull markets and bailouts, recessions and recoveries.

October historically being the cruelest month on Wall Street, emphasis is on the October 1929 stock market crash that triggered the Great Depression and a decade of Dickensian deprivation for many Americans, that ended only with World War II.

"If we've learned anything from history, it is that history repeats itself," says Richard Warshauer, a real estate executive who founded the tour 20 years ago after the crash of 1987. His partner, James Kaplan, puts a more optimistic twist on that lesson: "Wall Street always comes back — every time there's been a crash, there's been a rebound. In order to have a rise, you have to have a fall."

On a recent rainy Saturday, Warshauer and Kaplan led some 30 people on the tour, which is offered annually, beginning at the Museum of American Finance, itself an engrossing presentation of history from the Dutch settlers of New Amsterdam to the modern Wall Street of glass and steel towers.

Warshauer and Kaplan noted that the United States had barely become a nation before facing its first economic crisis — the panic of 1792. Fortunately, Hamilton, wisely chosen by President George Washington to manage the nation's money matters as Secretary of the Treasury, rode to the rescue.

By having the federal government assume the new states' Revolutionary War debts and pay those off at 100 cents on the dollar, Hamilton established America's credit and credibility abroad, and himself as "the patron saint of American finance," Warshauer said.

Philadelphia remained the nation's financial capital until the 1820s when the new Erie Canal began carrying products from the Midwest to the port of New York. From then on, Wall Street became the center of commerce, he said.

From the museum — which, appropriately, occupies the former banking hall of Hamilton's Bank of New York — the tour moves to various points of historical interest.

That includes the New York Stock Exchange, with its huge American flag over the facade; the statue of George Washington fronting the rebuilt Federal Hall where he took the first presidential oath in 1799; and the bomb-pocked House of Morgan. Now converted to condos, it is only four stories tall because "Morgan said he didn't need to build a skyscraper," Warshauer said.

Other tour stops touch on the first Jewish immigrants to America in 1654 and the literal rags-to-riches tale of Marcus Goldman, a fabrics peddler who began dabbling in personal finance to help other small entrepreneurs, and with son-in-law Samuel Sachs and other relatives created what would become the investment banking powerhouse Goldman Sachs.

Neither Warshauer nor Kaplan claims that their tour of Wall Street's turbulent past foretells the future.

"Is this downturn going to be like the crash of 1929, or like the 1987 crash — where the market came back in 1 1/2 years and went up four times?" Warshauer says.