Every Man a Speculator: A History of Wall Street in American Life

by Steven Fraser
ISBN: 0066620481

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A Review of: Every Man a Speculator: A History of Wall Street in American Life
by Christopher Ondaatje

Thomas Jefferson, the 3rd President of the United States, once described New York City as "a cloacina of all the depravities of human nature." Whether this was justified or not, there is little doubt that the City's reputation stemmed from its origins as a remote outpost of the Dutch Empire in the seventeenth century. It was the Dutch who invented the rudiments of modern finance (the very first exchange was set up by dealers to trade in stocks on a bridge over the Amstel River in Amsterdam). The Dutch colony in America created by Holland in its "avidity for trade and lucre" ignored the scriptural preoccupations of a more zealous protestantism and traded in "a wide range of commodities including lumber, slaves, fur and flour, and was a most unprovincial Dutch province." Wall Street itself was a Dutch construction, or at least the wall was. It was originally built to keep the cows in and the Indians out, but was rebuilt in sturdier fashion to discourage neighbouring British colonists from casting covetous eyes on this frail Dutch colony with its marvellous harbour and outlet to lucrative transatlantic commerce. The wall, probably erected by slaves and native Americans, was made of twelve-foot-high wooden posts running from the East River to the Hudson. The gun emplacements faced northwards as Peter Stuyvesant (colonial governor of the time) feared an attack by land from New England. The British came by sea instead and in 1664 overran Stuyvesant's bustling and commercially minded settlement. Hints of Dutch and later French designs on New York kept the wall in place, though poorly maintained, until the 1690s, when it was paved over with cobblestones and a street appeared in its stead.
>From its descriptions of the early origins, this scholarly history of Wall Street is different from all the other historical and economic dissertations, as it deals mainly with the capitalistic aspect of the Wall Street phenomenon and the multitude of ways in which the world's most powerful financial centre has influenced everyday life and culture in America over the past two centuries. Indeed, it significantly affected everyday life in Great Britain and, as I was to find out all too soon in the 1960s, Canada as well. This is a comprehensive study.
There have been other attempts to document Wall Street's important role in American economic history. The two classics are The Age of the Moguls by Stewart Holbrook, who wrote about the enterprising characters who built the United States, and The Robber Barons by Matthew Josephson, a book about the Great American Capitalists of 1861 to 1901 and this turbulent period in American financial history. These were my governing guides to understanding Wall Street and the American way of thinking.
Nothing much has changed. More recently there have been other critical books, notably Tom Wolfe's fictional masterpiece, The Bonfire of the Vanities, which exposed the excesses and arrogance of the 1980s. Steve Fraser's history, on the other hand, although still focused on the early financial titans-Cornelius Vanderbilt, Daniel Drew, James Fisk and Jay Gould-as well as on the more recent rogues-Diamond Jim Brady, Charles Jerkes, Joseph Kennedy, Samuel Insull and Michael Milken-is nevertheless aiming to make the unarguable point that "the history of Wall Street . . . is one of deep ambivalence and one of chronic cultural warfare."
Steve Fraser has cleverly divided his cultural thesis into four sections: Buccaneers and Confidence Men on the Financial Frontier; The Imperial Age; The Age of Ignominy; and The World Turned Upside Down. Throughout the first section Fraser guides us through the early years of America's nationhood, from the founding of the Republic in the late 18th century to the middle of the 19th century. Throughout this pioneering era there was continuous friction between government and finance capitalism-during the War of 1812 (fought until 1815 by the United States and Great Britain), and the American Civil War 1861-1865-following which an industrial revolution reforged the nation at an unimaginable pace. Wall Street figured centrally in that transformation and its financiers commanded the economic and political landscape.
"The Imperial Age" was almost totally dominated by the legendary J.P. Morgan, who was born in Hartford, Connecticut in 1837. His father, Junius Spencer Morgan, was a prosperous financier who taught his son how to manage the family assets. When the Civil War broke out Morgan joined his father's financial ventures, and from 1864 to 1871 he was an increasingly influential member of the firm Dabney Morgan & Co. In 1871 he became a partner in Drexel Morgan & Co., which in 1895 became J.P. Morgan & Co. It was soon recognised as one of the most powerful institutions in the world. Disdainful, secretive and imperious, he was utterly lacking in anything resembling the common touch. Unlike the buccaneering Vanderbilt, Drew, Fisk and Gould, all of whom rose from obscurity, Morgan's ancestry was steeped in the elite sophistication of Knickerbocker New York. By rescuing an economy where competitive capitalism had gone somewhat out of control, Morgan and his confederates created a virtual economic command centre whose influence spread from the railroads into every key industrial sector. "The social order he epitomised was extraordinary in the history of Wall Street," and this lent the whole political economy a coherence and direction it would otherwise have lacked. As Morgan's fortune grew, he continued to make investments and acquisitions. He funded Thomas Edison through the 1870s and 1880s. When the railroads ran into trouble after the Civil War he acquired them. By the middle of 1900 he owned some five thousand miles of rail. He founded and acquired huge steel-making operations, and in 1901 established the US Steel Company by merging several steel companies into the dominant steel producer in the country-thus owning the steel operations that supplied his rail companies. Morgan's realm included shipping interests, coal mines, insurance, and communications industries. He even backed a $62-million dollar government bond issue in 1895 and secured a $50-million dollar American issue for the British war loan. In the early 1900s he also provided the backing that assisted the US Treasury in stemming a stock market panic. He continued to be America's foremost financier throughout his life and his personal wealth was enormous. When he died in 1913 he had given substantial portions of his wealth to charities, churches, hospitals and schools. Much of his huge collection of art was given to the Metropolitan Museum of Art.
And then came the Roaring Twenties and the Jazz Age, all of which is included in Fraser's "Age of Ignominy", and all of which was followed by the 1929 stock market crash. Just as the Civil War had called into question the legitimacy of the nation state in the 1860s, so the Crash and the ensuing Depression posed a similar challenge to capitalism in the 1920s and 1930s. Both the Civil War and the Great Depression live on indelibly in the national memory as the two profound trials of modern America.

"Wall Street was not merely accountable for the country's dilemma; it was its perpetrator, the principal villain in a saga of guilt, revenge, and redemption. . . White shoe Wall Street suddenly seemed no better than a gang of common criminals, skimmers, double-dealers, and confidence men, stripped of every last vestige of moral authority and heroism to which they had once laid claim."

And then came Franklin Delano Roosevelt, a Brahmin well familiar with Wall Street. He realised, as few before him, that a handful of men ran most of the country's industry, and that abuses had reached epidemic proportions in the Roaring Twenties. Everyone now suffered the consequences. "Unrestrained financial exploitations which created fictitious values never justified by earnings have been one of the great causes of our present tragic conditions," he said. Wall Street's enmity for the President was raw and unconcealed, but Roosevelt introduced increasingly strong securities and banking regulations. Social Security and Unemployment Insurance were also introduced in the 1930s; and Richard Whitney, the autocratic president of the New York Stock Exchange, was sent to prison for embezzlement. There is no doubt that Roosevelt's New Deal put a stop to capitalism's excesses. After Roosevelt died in the 1940s, Truman, who presided during the start of the Cold War, was the last President to adopt an adversarial position to Wall Street.
But Wall Street roared back again. In Steve Fraser's fourth and final section, "The World Turned Upside Down", it mirrored its own political and cultural emotions.

"It seemed to cut adrift. Somehow it boomed through the second half of the decade, unfazed by urban riots and insurrections, the Tett offensive, the thundering herds of anti-war demonstrators, the assassinations of Robert Kennedy and Martin Luther King, the debacle in Chicago at the Democratic Party convention; it shrugged off the ominous portent that the dollar's pre-eminence in international trade and investment would no longer be taken for granted."

Charles Merrill founded what eventually became Merrill Lynch Pierce Fenner, and Smith, and was the first to evangelise the stock market to the "thundering herd". This was in the early 1940s. From the 50s on stock prices went up and Wall Street played a major role in providing new capital for the nation. This was followed by the great conglomerate movement of the early 1960s (Ling Temco Vought, Litton Industries, Texetron and Gulf and Western), misconduct again, and the subsequent rise of the institutional investor (also in the late 1960s). More and more money was being handled by fewer and fewer people.
It was my specialised brokerage firm's early decision to serve these demanding institutional investors and collective funds, rather than the individual retail investor or Charles Merrill's "thundering herd", that gave us the niche we wanted first in Canada and then in Europe. Similar firms like Donaldson, Lufkin and Jenrette had similar immediate success in the United States. Lyndon Johnson, when he signed a bill amending the Securities and Exchange Act in 1964, poked fun at Soviet denunciation of American capitalism.
Eventually the bull market of the Reagan years saw Wall Street again driving the public frenzy, and even Bill Clinton overturned outdated New Deal legislation-most importantly the Glass Steagall Banking Act-which had lasted seventy years and kept banks from becoming brokers. This created a whole new period of abuse, culminating in the zany dot.com era which gripped the public's imagination. America had become a "shareholder nation", with no less than half of householders owning stocks either directly or indirectly.
Wall Street is an expansive social history. Fraser has drawn on histories, novels, cartoons, songs and hearsay to portray Wall Street and its roller-coaster ride in public opinion and acceptance. It is a real story, and an entertaining encyclopedic history. Nothing is left out except, perhaps, a fuller explanation of the "paper economy" which was introduced in the late nineteenth century and still exists today. The very creation of "greenbacks" in 1862 is an American phenomenon, and the story of the dollar is in itself tantamount to the invention of America. There are 7 trillion dollars in the world today-most of which exist electronically. There are 14 billion paper dollars-a third of which are held outside the United States. Thus there are more dollar bills in existence than any other branded object including coke cans. No history of Wall Street is complete without a full discussion of the dollar's part in it. Much more than a simple medium of exchange, the US dollar from its inception was an icon of revolutionary unity embued with great symbolic significance. It was a primer in American purpose, an instrument for the future of the New World, pitting Federalists against Republicans, farmers against goldbugs, and the money power against the people. It was this struggle that forged the identity of the dollar and settled forever the shape of American civilisation. Today's Federal Reserve notes are backed only by faith in the US Government.
The story of America's history is told in its currency; changes in American currency usually came about during times of crisis such as the American Revolution and the Civil War. It may well happen again. Faith in paper notes is an enduring theme in the history of the American dollar, and Wall Street is the machine that uses this unique commodity. It is the instrument of measure and achievement. Money is a belief that has to be shared and, just like Wall Street, it only works if people have confidence in it and are willing to use the system.

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