Stocks – Text
Check unknown vocabulary before you read the text:
Merchant – a shopkeeper; seller
Competitor – a rival
Auctioneer – a person who conducts an auction
Security – a stock certificate
Settler – a person who starts living in a new country
Tumult – a state of noise and confusion
Decline – a fall
Bond – a certificate of debt
Vote – to express one’s preference or opinion
Fortune – a large sum of money
Merger – the union of two or more commercial interests
Plummet – to fall sharply
Occur – to happen
Con game – confidence game
Fall apart – to collapse
The Early History of Wall Street
In 1792, New York City's leading merchants met secretly at Corre's Hotel to discuss ways to bring order to the securities business and to get it from their competitors, the auctioneers. Two months later, these merchants signed a document named the Buttonwood Agreement, named after their traditional meeting place, a buttonwood tree. The agreement called for the signers to trade securities only among themselves, to set trading fees, and not to participate in other auctions of securities. These men founded what was to become the New York Stock Exchange. The Exchange would later be located at 11 Wall Street.
A century before, Dutch settlers built a wall to protect themselves from Indians, priates, and other dangers. The path became a bustling commercial road because it joined the banks of the East River with those of the Hudson River on the west. The path was named Wall Street.
The first stock exchange in America was actually founded in Philadelphia in 1790. The New York merchant group, realizing that their stock exchange was now in decline after the early tumult of revolutionary war bonds and stock in the Bank of the United States, sent an observer to Philadelphia in early 1817. Upon his return, the New York Stock and Exchange Board was formally organized.
The exchange rented a room at 40 Wall street and, every morning, the president read the stocks to be traded. The exchange was an exclusive organization, new members were required to be voted in, and a candidate could be black-balled by three negative votes. In 1817, a seat on the exchange cost $25, in 1827, it increased to $100, and in 1848, the price was $400.
The early 1900s saw the rise of huge fortunes made on Wall Street. In 1901, J.P. Morgan surprised Wall Street by creating a billion dollar merger resulting in the U.S. Steel Corporation. In 1907, a wave of panic hit Wall Street. Eight hundred million dollars in securities were unloaded within a few months. Stock prices plummeted and runs on banks became a daily occurence.
The first of the two largest Wall Street panics occurred in 1929. The Wall Street con game had convinced millions of Americans that the country was riding on an upward spiraling wave of financial glory. Both rich and poor put their money into stocks and bonds. The Wall Street myth spotlighted stories of shopkeepers and workers making fortunes in the stock market overnight.
Stock prices were pushed up beyond any relationship with the actual worth of the companies. In 1929, stock prices were 400% higher than they had been in 1924. On October 23, 1929, the market fell 31 points. Stock prices fell an additional 49 points on October 28 and on the 29th, the entire market fell apart. Some brokers and investors jumped out of their office windows. The fallout from the '29 crash devastated the country, leading to a long-time economic collapse and depression that was to continue until the start of the Second World War in 1941.