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Answer:
Dear
BuyandHolder,
Good
point. And, you're absolutely right. I'm sorry you
didn't give us your name so we could send you a prize
for one of the best questions ever!
Wall
Street originally was a dirt path, which took its
name from a wall made out of brush and mud that was
built along side the path by early settlers. This
is believed to have taken place shortly after New
York was founded as a Dutch trading post in 1609.
Shortly
thereafter the wall was improved -- notices were posted
on nearby trees that all citizens of the Dutch colony
were to report "with tools in hand" to help improve
the brush wall and construct a wooden fence. This
wall became a mini-stockade used to keep cows inside
and to protect against Indian attacks from the north
and from pirates lurking about on ships in the harbor.
However,
we know that the settlers got along with the Indians
quite well and that they certainly did business with
them inside the walls of the stockade -- that's where
the Indians sold the 22-square mile island to Peter
Minuit, head of the colony, for $24 and some beads.
The
path, now known as Wall Street, soon became the center
of business because it connected the docks on the
Hudson River with those on the East River. Early merchants
built their warehouses on the path, along with a city
hall and a church.
These
early merchants bought and sold commodities,
including furs, tobacco, wheat and molasses. We also
know they traded in foreign currencies. And,
of course, they speculated in land. However, at this
point there was no formal securities exchange. Stocks
and bonds did not officially become part of Wall Street
until after the Revolutionary War.
In
fact, bonds came first. Alexander Hamilton, the Secretary
of the Treasury, suggested that the new government
pay off the debt that the 13 colonies had accumulated
during the Revolutionary War by issuing bonds. The
first Congress met at Federal Hall (where Washington
was inaugurated) and authorized the sale of 6% government
war bonds to pay off the $80 million war debt.
The
first stock came about a few years later when Hamilton
established the First Bank of the United States. Shares
were sold to the public at $100 each. Other banks
and insurance company stocks were soon added to the
available list of securities. At this point, a number
of independent auctioneers ran public stock auctions
outdoors at the east end of Wall Street.
In
March 1792, twenty-four of New York's leading merchants
met secretly at Corre's Hotel to discuss ways to bring
order to the securities business and to wrest it from
their competitors, the auctioneers.
Two
months later, on May 17, 1792, these men signed a
document called the Buttonwood Agreement, named
after their traditional meeting place under a buttonwood
tree. The agreement stated that they would only trade
securities among themselves, that they would adhere
to set commissions and that they would not
participate in auctions. These twenty-four men were
the founders of today's New York Stock Exchange.
By
1793 there were too many brokers involved to meet
under a tree. So they took space in an elaborate structure
on the corner of Wall and Water streets, called the
Tontine Coffee House. The brokers met in a
room under the eaves; apparently it was hot on the
top floor because on sunny days they continued to
meet outside!
The
Buttonwood Agreement came too late for New York to
have the nation's first stock exchange. That honor
goes to Philadelphia, which opened an exchange in
1790.
The
New York Stock Exchange and Board was formally
organized on March 8, 1817. The first president was
Anthony Stockholm. The exchange rented a room
at 40 Wall Street for $200 a year, including janitorial
services. Every morning when the exchange opened,
the president read the names of the stocks to be traded.
After each stock was announced, the members shouted
out bids and offers from their assigned seats. This
was the origin of the phrase to own a seat
on the exchange.
From
the first, the exchange was an exclusive organization.
New members needed to be voted in and just three votes
against an applicant meant he (no women allowed) wasn't
accepted. In 1817, a seat cost $25. By 1827 the price
was $100 and in 1848, $400.
Men
wore top hats and swallowtail coats. Troublesome members
were quickly brought in line with a series of fines:
-
$5 for smoking a cigar
- $10
for standing on a seat
- 50
cents for knocking off a member's hat
Perhaps
Attorney General Eliot Spitzer was aware of these
early fines when he began his mission to improve the
way the financial community does business!
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