So New York became the money city—and a moneyed city. Big profits came from manufacturing: Manhattan was full of factories, even on Park Avenue (but only until about 1910, when the factories were exiled by new city zoning rules). New York still had more than a million manufacturing jobs at the end of World War II, from dress makers in the garment district to steel fabricators in Queens. It had stores to sell the products consumers wanted—the nineteenth-century dry goods emporiums became the big department stores of the twentieth. And it had the financiers who all but invented the modern economy that paid for expansion after expansion—Cornelius Vanderbilt, J.P. Morgan, Andrew Carnegie, John D. Rockefeller.
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But why? Why was New York accepted as the capital of capitalism—and of retailing, advertising, publishing, culture and, perhaps most of all, of expensive real estate? Why didn’t Boston or Philadelphia or Chicago become the nation’s economic powerhouse?
One reason is that New York’s all-consuming energy draws aggressive stockbrokers, gutsy entrepreneurs and canny real estate developers willing to double up their bets. That has given New York rags-to-riches characters like Harry B. Helmsley, who went from a $12-a-week office boy to consummate real estate deal maker and part-owner of the Empire State Building. Donald J. Trump’s father built apartment complexes in Queens and Brooklyn. Trump himself moved to Manhattan and resurrected a hotel on East 42nd Street in the 1970s, when the city’s own fortunes were sinking. Soon he was putting his name on buildings all over town, and bragging about perfecting the art of the deal.
People like Helmsley and Trump prospered as the city was changing around them. Manufacturing jobs were disappearing because factories were relocating to places where doing business was cheaper—the South, for example, where unions were far less powerful if they existed at all, or overseas. New York went from a city with 1.1 million manufacturing and industrial jobs after World War II to a service-oriented city with fewer than 200,000 “blue collar” jobs now. And that made the city more vulnerable than ever to the ups and downs of Wall Street.
New York makes its money on other streets besides Wall Street, of course, like West 47th Street, still the Main Street of America’s diamond district. In the popular imagination, the big advertising agencies are on Madison Avenue (although few of them are actually located there anymore). They dreamed up characters and slogans that stuck in people’s minds: the Excedrin headache, for example, and “I want my MTV.”
New York is also home to television networks that broadcast primetime hits and book publishers that fill the best-seller lists, and to trend-making fashion designers and retailers. In New York’s stores are the clothes worn by the models who glide along the catwalks at the fashion shows in Bryant Park—clothes made by apparel-industry workers in the garment district nearby, in a neighborhood choked with men pushing racks filled with dresses and suits through the streets.
A few blocks away are stores that are choked with shoppers—Macy’s claims that its Herald Square store is the world’s largest, with 2.15 million square feet, or about as much space as 35 football fields. There are shop-till-you-drop New Yorkers who remember visiting the tree at Rockefeller Center as a prelude to Christmas shopping at Saks. They remember Union Square as the ho me of S. Klein, the discount department store mentioned on sitcoms from “I Love Lucy” to “All in the Family.” They also know the big B’s of stores (Henri Bendel, Bergdorf Goodman and, a few blocks away, Bloomingdale’s), and they also know Burberry’s, Baccarat and Bulgari. These are world-class shoppers like the late playwright Wendy Wasserstein, who once said she never mentioned shopping when she was asked about her hobbies or interests. But shopping must have been in her DNA: “There is no department store, specialty shop or even supermarket,” she said, “that doesn’t whisper to me, ‘We’re open. Please come in.’”
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WALL STREET
Stock Prices Slump $14 Million In Nationwide Stampede to Unload
October 29, 1929
THE SECOND HURRICANE OF LIQUIDATION within four days hit the stock market yesterday. It came suddenly, and violently, after holders of stocks had been lulled into a sense of security by the rallies of Friday and Saturday. It was a countrywide collapse of open-market security values in which the declines established and the actual losses taken in dollars and cents were probably the most disastrous and far-reaching in the history of the Stock Exchange.
That the storm has now blown itself out, that there will be organized support to put an end to a reaction which has ripped billions of dollars from market values, appeared certain last night from statements by leading bankers.
It was calculated last night that the total shrinkage in American securities on all exchanges yesterday had aggregated some $14 million, with a decline of about $10 million in New York Stock Exchange securities. It was not so much the little trader or speculator who was struck by yesterday’s cyclone; it was the rich men of the country, the institutions which have purchased common stocks, the investment trusts and investors of all kinds.
Shares of the best-known American industrial and railroad corporations smashed through their old lows of Thursday, and most of them to the lowest level for many years, as wave after wave of liquidation swept the market during its day of utter confusion and rout. General Electric lost 47½, United States Industrial Alcohol, 39½; Standard Gas, 40½; Westinghouse Electric, 34¼; Western Union, 39½, and Worthington Pump, 29.
One of the difficulties that beset the market was the popular misconception that the banking pool, organized by J. P. Morgan & Co., the First National Bank, the National City Bank, the Guaranty Trust Company, the Equitable Trust Company and the Chase National Bank would throw funds into the market to save it. What the bankers had set out to do, with their consortium, was merely to supply bids where no bids existed and to plug up the “air hole” which the market had developed on Thursday. They had no idea of putting the market up, or saving anyone’s profits. Rather the general plan was to provide a degree of stabilization on which further liquidation could take place, if it proved necessary.
The Market Plunge: Board Sale of Stock Funds Helped To Spur Drop
By KURT EICHENWALD | October 20, 1987
YESTERDAY’S HISTORIC PLUNGE IN THE STOCK market was fed in large part by huge sales of shares in stock-oriented mutual funds. Several of the largest mutual fund management companies said the number of phone calls from investors was about double the normal volume.
Trading activity by the investors was extremely heavy as shareholders switched out of stock funds and into other funds, primarily money market funds that invest in short-term fixed-income securities. Funds oriented toward medium- and long-term bonds and gold also attracted investors frightened by the falling market.
But activity was so hectic that it was difficult to gauge the numbers of investors who were calling and how many were switching their investments.
“At this point, we don’t know what’s happening,” Tracey K. Gordon, a spokesman for Fidelity Investments, said during yesterday’s early trading. “Things are happening too fast.”
‘A GENUINE PANIC’
Thomas V. Williams, senior vice president and managing director of mutual funds at Kemper Financial Services, said: “We’ve just seen a genuine panic. In equity funds, up till about a week ago, we were running positive cash flow. That has now turned to negative cash flow, with the vast majority of that in exchanges.”
Most investors were switching funds within a family of funds rather than redeeming their shares and seeking a refund of their money. Such a move to a money market fund is usually available at no cost, and gives investors the option of moving back into the stock market with as much ease as they left.
Managers of mutual funds said that the number of investors switching funds compared with the number asking that their shares be sold was at least 10 to 1.
But the managers said they had prepared for the volume of yesterday’s telephone calls afte
r last week’s market drop.
New York’s Resilience Put to the Test
By PATRICK MCGEEHAN | September 21, 2008
AFTER THE RECESSION OF 2002, MAYOR Michael R. Bloomberg said that New York City’s economy had diversified enough through the fostering of tourism, manufacturing and other businesses that the city had “reduced our dependency on the fortunes and failures of Wall Street.”
Now, with the financial sector in turmoil after the failure of two of its biggest investment banks, the forced sale of another and the loss of thousands of its best-paying jobs, the mayor and his city face a true test of that claim. When the current mess is over, many economists and analysts predict, Wall Street will emerge a smaller and less lucrative place than it was before.
By some measures, the city entered this crisis more reliant than ever on Wall Street, with its big profits and bonuses, raising difficult new questions about how quickly the city will recover.
Last year, financial sector workers collected more than a third—35.9 percent—of all the income earned in the city, even though they held just one of every eight jobs in New York, according to the federal Bureau of Labor Statistics. That share is double the industry’s portion of the city’s wages and salaries from 30 years ago, and it has continued to grow even as the number of financial jobs in the city has declined, to about 470,000.
Last week, the state Labor Department projected that about 40,000 of those jobs would be eliminated in the next year—in addition to the more than 10,000 that are already gone—sharply reducing the amount of money being pumped into the local economy and the amount of taxes the city and state will collect. (City officials are more hopeful, predicting the job loss to be about half of the state projection.)
“For the Manhattan and New York City economy, it’s like pulling a big plug out,” said Rosemary Scanlon, an associate professor at the New York University Schack Institute for Real Estate.
She said it could take two or more years for the metropolitan area to recover from the various blows it has sustained in the last few weeks. That would be a relative blink compared to what transpired after the stock market crash of 1929.
Big Board Deal May Mean The End of Floor Trading
By JENNY ANDERSON | April 21, 2005
THE NEW YORK STOCK EXCHANGE, WHOSE shouting traders and frenzied activity have become a global symbol of capitalism, announced yesterday that it would acquire a leading electronic trading system in a deal that allows the exchange to become a public company but casts doubts on its 213-year-old system of auction trading.
The exchange will merge operations with Archipelago, one of the biggest electronic trading operators, to form the NYSE Group. The deal will give the holders of the exchange’s 1,366 seats $400 million in cash and 70 percent of the shares of the combined publicly traded company.
More important, it will enable the New York Stock Exchange to expand its ability to handle trades electronically, staving off challenges from its traditional rival Nasdaq and global competitors like Euronext and Deutsche Börse.
The merger is the most significant acknowledgement yet that the Big Board’s traditional market, driven by human traders, may not be able to survive in an era increasingly dominated by instantaneous trades.
On the storied trading floor of the New York Stock Exchange, hundreds of men and women in blue and green jackets spend their days monitoring screens, handling multiple calls and yelling at each other in an effort to get the best prices for buyers and sellers of stock.
Defenders of the system say their judgment is critical; critics say the system is overrun with conflicts and rife with a history of misdeeds. After a three-year investigation, seven firms on the floor paid more than $240 million in fines for trading violations. Last week, 15 traders were indicted on related charges.
Many members of the exchange have resisted moving to greater automation, fearing for their jobs and their wealth, which for many is tied up in the price of a seat. Seat prices have fluctuated as sentiment about the exchange’s future has wavered. In August 1999, a seat sold for $2.7 million, falling in January 2005 to $975,000. The most recent sale was back up to $1.6 million.
The Bronze Bull Is For Sale, but There Are a Few Conditions
By DAVID W. DUNLAP | December 21, 2004
THE SNORTING, PAVEMENT-PAWING, 11-FOOT-tall, 7,000-pound, bronze “Charging Bull” is being offered for sale by its sculptor and owner, Arturo Di Modica. The buyer must keep it in place and donate it to New York City.
The minimum bid is $5 million.
“It’s become one of the most visited, most photographed and perhaps most loved and recognized statues in the city of New York,” said Adrian Benepe, the city parks commissioner. “I would say it’s right up there with the Statue of Liberty.”
Mr. Benepe said the city did not have the money to acquire it but would welcome it as a donation. The donor would be recognized on a plaque designed by Mr. Di Modica, a 63-year-old artist who divides his time between Sicily and a studio in Lower Manhattan. Mr. Di Modica would use most of the proceeds to finance other sculptures he is planning for New York. He would also recoup more than $300,000 that he spent on “The Charging Bull” and donate some money to charity.
“The Charging Bull” made its startling debut outside the New York Stock Exchange on Dec. 15, 1989. Mr. Di Modica installed it overnight, without permits, as a tribute to America’s rebound from the 1987 stock market crash. It was quickly hauled away. Six days later, it was relocated in Bowling Green by Henry J. Stern, who was then the parks commissioner.
Since then, passers-by have rubbed to a bright gleam its nose, horns and a part of its anatomy that, as Mr. Benepe put it gingerly, “separates the bull from the steer.”
Stock Exchange’s Former Chief Wins Court Battle to Keep Pay
By JENNY ANDERSON | July 2, 2008
FOR NEARLY FIVE YEARS, RICHARD A. GRASSO was vilified for the riches he reaped while running the New York Stock Exchange.
But on Tuesday, an appeals court ruled that Mr. Grasso could keep the $139.5 million he was paid.
Mr. Grasso, who symbolized for many the exuberance and excess of the now-faded bull market, won the final round in his long legal battle over the compensation he amassed during his eight years as head of the Big Board, when the New York State Court of Appeals threw out the remaining claims against him.
The 3-to-1 ruling brings to an end one of the ugliest fights in modern Wall Street history and hands a remarkable victory to Mr. Grasso against his antagonist, former attorney general—and now former governor—Eliot Spitzer, who pressed the case against Mr. Grasso.
A tireless cheerleader for the exchange, Mr. Grasso was lionized for his work in reopening it in the aftermath of 9/11.
But two years later he was forced out amid a furor over his pay, even though he maintained that the stock exchange’s directors, who included many Wall Street executives, approved his compensation. Mr. Grasso, who spent 35 years at the exchange, working his way up from a clerk to the chairman’s office, always insisted the fight was not about the money, but about his personal honor. He never showed any inclination to settle the case, despite pressure from Mr. Spitzer.
In Tuesday’s decision, the Appellate Division of New York State Supreme Court overturned a lower court’s ruling that Mr. Grasso hand over more than $100 million of his compensation.
The decision means the case was not decided on whether Mr. Grasso’s pay had been unreasonable but rather was thrown out because the exchange had merged with Archipelago Holdings in 2006, becoming a public company. The appeals court concluded that the attorney general had no standing to sue Mr. Grasso since the exchange had been converted from a nonprofit entity to a for-profit corporation, negating the attorney general’s ability to sue on behalf of the public rather than for private shareholders.
J. P. Morgan’s Life One of Triumphs
April 1, 1913
J. PIERPONT MORGAN HAD BEEN THE LEADING figure in American finance for almost as many
years as the present generation could remember and had often been described as the biggest single factor in the banking business of the entire world. Combination, concentration, and development were his alms, and the story of his life is indissolubly intertwined with the periods of expansion in this country in the world of railroads, industrial organization and banking power.
The pinnacle of his power was reached in the panic of 1907, when he was more than 70 years old, and to some extent had withdrawn from participation in active affairs. By general consent he was put at the head of the forces that were gathered together to save the country from financial disaster.
Unlike many of the men of great wealth in this country, Mr. Morgan, who was born in Hartford on April 17, 1837, did not have the incentive of poverty to spur him on. He was not born poor. On the contrary, he was heir to a fortune estimated at from $5 million to $10 million. It was one of the notable fortunes of the country in the 50s, and when John Pierpont Morgan went into business here in the early 60s there was open to him a career entirely honorable and very comfortable that would have carried him to an inconsequential old age and an unhistoric grave.
He did not choose this career, but rather chose to work as few men have worked in the last half century. At the opening of the new century Mr. Morgan was easily the largest financial figure on this side of the water, if not in the world.
His United States Steel enterprise was perhaps as notable an example of J. P. Morgan’s persistent optimism as anything in his whole life. It was capitalized on the expectation that the conditions of the most prosperous year in the history of the country up to that time would continue indefinitely. When the depression of 1903 came along, and the Steel stocks dropped off until the common, dividendless, was down to 8¾, a banker went to Mr. Morgan to ask him what he thought about it.
The New York Times Book of New York Page 30