Cover image for Eyewitness to Wall Street : 400 years of dreamers, schemers, busts, and booms
Title:
Eyewitness to Wall Street : 400 years of dreamers, schemers, busts, and booms
Author:
Colbert, David.
Personal Author:
Edition:
First edition.
Publication Information:
New York : Broadway Books, [2001]

©2001
Physical Description:
xvi, 391 pages ; 25 cm
Language:
English
ISBN:
9780767906609
Format :
Book

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Call Number
Material Type
Home Location
Status
Central Library HG4572 .C67 2001 Adult Non-Fiction Central Closed Stacks
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Summary

Summary

Drawing on diaries, private letters, memoirs, and reportage, David Colbert's acclaimed Eyewitness books offer extraordinary first-hand views of history's pivotal moments. Eyewitness to Wall Street's combination of remarkable perspectives and a subject of exceptional current interest results in the richest and most illuminating Eyewitness book yet.From our first IPO -- the European fund-raising that launched America's colonization -- through today's mass obsession with the Dow and Nasdaq, Eyewitness to Wall Street brims with accounts from people who saw it happen -- poets and speculators, patriots and criminals, politicians and reporters -- including Daniel Defoe, Mark Twain, Franklin D. Roosevelt, Warren Buffet, and Michael Lewis. It reveals how Wall Street traders saved the Continental Army from bankruptcy and helped finance the Union during the Civil War; how Americans were suckered by the bull market of early 1929 and struggled through the rebuilding of modern Wall Street. More than halfthe book is devoted to the contemporary era, defined by the "greed is good" 1980s, the bull market 1990s, and the dot-com millionaires and infla


Reviews 3

Booklist Review

Focusing on people and not numbers, Colbert traces U.S. history as it is linked to the financial markets. With material drawn from diaries, private letters, memoirs, and reports, he brings Wall Street to life, beginning with a 1670 memorandum from a Dutch trader describing the island of Manhattan and extending to the twenty-first century. Presenting a chronological series of firsthand accounts highlighting brilliant successes, con men, tycoons and robber barons, rivalries, corporate battles, and the mob mentality of the Street and investors, the author illustrates how Wall Street has been intimately connected to the growth of this country, enriching itself as it enriched and improved the nation. Among the most contemporary reports are the 1986 decline of Salomon Brothers; the 1983 to 1991 Pru-Bache scandal (the largest swindle in Wall Street's history); a superb piece on Alan Greenspan, dated 1996 but timely today; and various reports on Internet stocks and the world of day traders. --Mary Whaley


Publisher's Weekly Review

Using the same approach as he did in Eyewitness to America, Colbert presents a pastiche of newspaper accounts, book excerpts and other primary source materials that sketch the history of American finance from the founding of New Amsterdam in the 17th century through the bursting of the dot-com bubble in April 2000. By taking the long view of Wall Street, Colbert demonstrates that virtually every age has had its share of men who believed they could get rich quick by legal or other means. Long before Ivan Boesky, William Duer, Assistant Secretary of the Treasury under Alexander Hamilton, was the first insider trader to be exposed. While most of Colbert's firsthand accounts come from newspapers, industry insiders (e.g., Peter Lynch) and government officials (e.g., Henry Morgenthau), he adds dimension by mining a wealth of other primary sources, including letters, journal entries and books. In one piece, Charlie Chaplin humorously recollects using his celebrity to market Liberty Bonds during WWI, while the next features John Maynard Keynes's more sobering prediction that Germany's postwar economic downfall would lead to another world war. Serious history buffs may be annoyed that Colbert neglects to clearly identify his vast array of eyewitness accounts, and by the equal treatment given to such pivotal moments as the crash of 1929 and an almost negligible 1967 prank at the New York Stock Exchange, when Yippies Stew Albert, Abbie Hoffman and Jerry Rubin littered the floor of that bastion of capitalism with money. Still, this expansive and entertaining book will appeal to a broad readership. (On-sale date: May 15) (c) Copyright PWxyz, LLC. All rights reserved


Library Journal Review

Colbert (Eyewitness to America) presents a history of Wall Street using "firsthand" accounts, ranging from the early 1600s in Dutch New Amsterdam to the year 2000. Unfortunately, 400 years is a lot of ground to cover in this Reader's Digest format. While the past century receives a fairly comprehensive examination, the first 300 years are given comparatively short shrift. Obviously, not a lot of eyewitness accounts exist for early American financial history, so why not rethink the book and scale it back to something less ambitious? Several of the pieces are first-rate (notably George Templeton Strong on "The Panic of 1857" and B.F. Borsody's reportage in the New York Times of "The Bombing of J.P. Morgan" on Sept. 16, 1920), but a few seem out of place (e.g., Ward McAllister's "The Idle Rich"). In addition, some time periods cry out for more detail. For instance, why not something on Civil War profiteering? Still, this is fairly enjoyable reading, and as the author reminds us, "The focus here is on people, not numbers. These eyewitnesses share a knack for revealing the human side of business." In that respect, he admirably captures the history of America's richest street. Recommended for all larger public libraries. Richard Drezen, Washington Post/New York City Bureau (c) Copyright 2010. Library Journals LLC, a wholly owned subsidiary of Media Source, Inc. No redistribution permitted.


Excerpts

Excerpts

part one Financing the New World "The prodigious increase of the Netherlanders in their domestic and foreign trade, riches, and multitude of shipping is the envy of the present, and may be the wonder of all future generations." Josiah Child, 1688 Timeline 1519 -- Spain conquers Mexico, rich in gold and silver--Spanish reals will be most trusted currency in early U.S. 1519 -- Bohemia mints thaler (origin of "dollar") 1531 -- First European stock exchange opens in Belgium 1602 -- Hot IPO is Dutch East India Co., first modern public company. Double-digit yields until dissolution in 1799 1606 -- Virginia Company of London granted charter 1611 -- Dutch develop stock exchanges 1625 -- New Amsterdam settled 1637 -- Height of Tulipmania in Holland; single flower bulbs trade for large fortunes 1653 -- 12-foot-high wall built across lower Manhattan 1666 -- Trader corners wampum by burying it, price quadruples 1675 -- Fishing company becomes first corporation in America 1685 -- Path behind city wall becomes Wall Street 1690 -- Massachusetts issues first paper money in colonies 1694 -- Bank of England established 1698 -- Trinity Church opens March 13 1720 -- Mississippi and South Sea bubbles pop--crises in French and British economies 1721 -- First American insurance company is established in Philadelphia 1729 -- Ben Franklin prints money for Pennsylvania the scene in the 1600s New Amsterdam Arnoldus Montanus Montanus, a Dutch trader, saw the town in 1670. On the Manhattans island stands New Amsterdam, five miles from the Ocean. Ships run up to the harbor there from the sea with one tide. The city hath an earthen fort. Within the fort, and on the outermost bastion towards the river, stand a windmill, and a very high staff, on which a flag is hoisted whenever any vessels are seen in Godyn's bay. The church rises with a double roof between which a square tower looms aloft. On one side is the prison, on the other side of the church the governor's house. Without the walls are the houses mostly by Amsterdamers. On the river side stand the gallows and whipping post. A handsome, public tavern adorns the farthest point. Between this fort and this tavern is a row of suitable dwelling houses: among which stand out the warehouses of the West India Company. From the First IPO to the South Sea Bubble, 1621-1720 Josef de la Vega & Daniel Defoe From the start, European settlement of New York was a publicly traded commercial venture. The colony of New Netherlands and its capital of New Amsterdam were established by the Dutch West India Company in 1621. "West," as the company was known, was one of the blue-chip stocks of the Amsterdam Exchange, the most sophisticated in Europe. ("East," the Dutch East India Company, was formed to trade in Asia.) In contrast, Massachusetts and Pennsylvania were religious sanctuaries; Virginia was owned by a private consortium that soon failed and became sponsored by the Crown. The Dutch colonists were granted more freedom than their British neighbors, many of whom lived as little better than employees. The Dutch colonists were also given an opportunity that has become deeply imbedded in American culture: indebting themselves to buy stock. New Amsterdam was the perfect spot for traders and merchants. The huge harbor, though well protected, is just a quick sail from the open sea--closer than Philadelphia to the ocean, safer than Boston. Just as important, the Dutch emphasis on fair trade allowed commerce from various European colonies and Caribbean islands to pass through New Amsterdam. Although the town was practical and unpretentious--it would trail Philadelphia and Boston in sophistication for a couple of centuries--other nations took notice of the Dutch success. When war between Britain and the Netherlands broke out in 1652, Peter Stuyvesant, the governor of New Netherlands, ordered the capital's men to build a half-mile-long wall of sharpened logs, reaching twelve feet high, across what was then the northern edge of the city. Stuyvesant was right to guess the British were coming; but in 1664 they came by sea, not land. After British frigates were spotted off Long Island, the governor rushed a letter to the nearby towns. "This capital is the object aimed at," he wrote, "which if lost, all is lost, there being no other place capable of offering any resistance." He "earnestly required and requested" the towns to send him every third man to defend New Amsterdam. But colonists did not comply. "We ourselves are living here on the Flatland without any protection," wrote one town council, "and must leave wives and children seated here in fear and trembling, which our hearts would fail to do." The outcome, though inevitable, held a few surprises. First, it was peaceful. Second, and perhaps more important, it was indulgent. The British intelligently agreed to mild surrender terms that allowed the colony to continue doing business. In the "Articles of Capitulation" the British agreed that "Any people may freely come from the Netherlands and plant in this country, and that Dutch vessels may freely come hither, and any of the Dutch may freely return home, or send any sort of merchandise home in vessels of their own country." As well, "All differences of contracts and bargains made before this day by any in this country, shall be determined according to the manner of the Dutch." Even the elected officials were allowed to remain in office. In short: business as usual. The British did demand one immediate change. The city, like the colony, was renamed New York, in honor of the duke who had financed the successful invasion. The log wall became an anachronism as the city grew beyond its old northern border. It was torn down in 1698. By then, however, it had given a name to the street that ran along it. By bringing Dutch commerce into their fold, British business culture leaped forward. British economists had long envied the strong currency, secure banks, reasonable interest rates, and fluid markets of the Netherlands, one of the most advanced economies in the world. Now their American colonies would benefit from Dutch business acumen. A cornerstone of the Dutch economy was the Amsterdam Stock Exchange. "Confusion of confusions" was the phrase used in 1688 by eyewitness Josef de la Vega, a Portuguese Jew who had moved to the Netherlands to escape the Inquisition. "This enigmatic business is at once the fairest and most deceitful in Europe, the noblest and the most infamous in the world, the finest and the most vulgar on earth. It is a quintessence of academic learning and a paragon of fraudulence; it is a touchstone for the intelligent and a tombstone for the audacious, a treasury of usefulness and a source of disaster. It has necessarily been converted into a game, and merchants in it have become speculators." Although to the uninitiated like de la Vega it was an awesome spectacle, to the modern eye it seems remarkably familiar: The Exchange is an enclosed building surrounded by columns. (Some people lean against these columns of the Exchange, others hide behind them.) The way in which the transactions are concluded is as ridiculous as the game itself. Handshakes or hand-slaps are the signs of agreement. But how painful! A member of the Exchange opens his hand and another takes it, and thus sells a number of shares at a fixed price, which is confirmed by a second handshake. With a new handshake a further item is offered, and then there follows a bid. The hands redden from the blows (I believe from the shame that even the most respected people do business in such an indecent manner as with blows.) The handshakes are followed by shouting, the shouting by insults, the insults by impudence and more insults, shouting, pushes, and handshakes until the business is finished. Reading de la Vega, one also notices the psychology of speculation has changed very little: The speculator fights his own good sense, struggles against his own will, counteracts his own hope, acts against his own comfort, and is at odds with his own decisions. There are many occasions in which every speculator seems to have two bodies so that astonished observers see a human being fighting himself. If, for example, there arrives a piece of news which would induce the speculator to buy, while the atmosphere prevailing at the stock exchange forces him to sell, his reasoning fights his own good reasons. At one moment his reasoning drives him to buy, because of the information that has just arrived. At the other it induces him to sell because of the trend at the Exchange. People who get involved in this swindle resemble the English Quakers who believe to contain in their bodies an inner light that advises them. In his description of the seventeenth-century Amsterdam Exchange, de la Vega included some advice that rings true for those investing today: Never give anyone the advice to buy or sell shares, because, where perspicacity is weakened, the most benevolent piece of advice can turn out badly. Take every gain without showing remorse about missed profits, because an eel may escape sooner than you think. Whoever wishes to win in this game must have patience and money, since the values are so little constant and the rumors so little founded on truth. A twenty per cent drop in the stock prices is not large enough to be considered a serious blow; as the price may drop twenty per cent overnight, it may also rise fifty per cent in the same period. . . . It is foolish to think you can withdraw from the Exchange after you have tasted success. Britain's early steps toward market scholarship began about 1705, when a Scotsman named John Law put forth "several Proposals to Remedy the Difficulties the Nation is under from the great Scarcity of Money." His prescription was simplistic: "The use of banks has been the best method yet practis'd for the increase of money. So far as they lend they add to the money, which brings a profit to the country, by imploying more people, and extending trade." But Britain wasn't ready for easy credit, so Law moved to France, where his views were accepted. He was granted a charter for the private Banque Generale in 1716, and allowed to print money. In 1717 he formed the Compagnie d'Occident ("Company of the West"--best known as the Mississippi Company), which enjoyed a monopoly on trade in Louisiana and Canada. Law hoped it would mimic the success of the Dutch West India Company. The company grew through mergers and acquisitions--including a merger with Law's bank, which had since been made the national bank. But the company produced too little profit. The speculative bubble that had followed its creation burst in 1720. Law wisely left France. By then the stock fever had spread to England. The highest flier was the South Sea Company, which owned the rights to British trade with South America and the South Sea Islands. Founded in 1711, it had followed Law's lead in 1720 by assuming responsibility for the national debt, swapping its stock for government bonds. In January of that year the price of a share was £128H; in August it was £1,000. A staggering variety of new companies hoping to ride the wave of speculation offered stock to the inexperienced British public. Their businesses ranged from "improving the art of making soap" and "trading in hair" to "a grand American fishery" and even "a company for carrying on an undertaking of great advantage, but nobody to know what it is." You know how the story ends. An anonymous Massachusetts pamphleteer was unsympathetic: When I heard the first news of the South-Sea stock rising to such a considerable height, that a person who had one hundred pounds in that stock could sell it at a thousand or eleven hundred, I could only think the people concerned in this new contrivance were a company of mad-men. At least they look'd like a company of gamesters, eagerly gaming daily, lest their chance should be at an end. And when I heard of men of low degree being advanced to their coaches, what could I think but the world is turning upside down. But all on a sudden the scale is turned; the next news is that abundance are broke by the fall of stocks. It's fallen from eleven hundred to under three hundred, and none cares to buy. Families have been ruined, brought to poverty, and turned beggars. The trade of the city of London, one of the finest in the world, hath been very much shortened. Few ships have been built, or fitted to sea, during the reign of the South-Sea Company. But why do I talk of South-Sea stock only? Is not Mississippi stock as bad, or worse? Are not Holland, and Spain, and others, contriving to be at the same sport? Truly, as far as I can learn, the greatest part of Europe is infatuated with the same spirit! One Londoner of the time, Daniel Defoe, author of Robinson Crusoe, suffered from a gambling bug. Despite knowing the odds were against making a profit in the stock market, he couldn't resist trying. Occasionally he vented his frustration in verse: Some in clandestine companies combine Erect new stocks to trade beyond the line With air and empty names beguile the town And raise new credits first, then cry 'em down Divide the nothing into shares And set the crowd together by the ears. At other times he stuck to prose, such as this general attack on the game as it was played during the South Sea era: If you talk to [brokers] of their occupation, there is not a man but will own 'tis a compleat system of knavery; that 'tis a trade founded in fraud, born of deceit, and nourished by trick, cheat, wheedle, forgeries, falsehoods, and all sorts of delusions; coining false news, this way good, that way bad; whispering imaginary terrors, frights, hopes, expectations, and then preying upon the weakness of those whose imaginations they have wrought upon, whom they have either elevated or depressed. The [stock] jobbers, hardened in crime, are at last come to exceed all bounds, and will some time or other, make it absolutely necessary to the Government to demolish them. I know they laugh at the suggestion, and have the pride to think it impracticable to restrain them. " 'Tis impossible," said one. "There is no way in the world to suppress us unless the Government should first pay all the public debts. [If they do,] they will be apt to hang themselves." Though John Law's schemes ended in scandal and financial disaster, they were the foundation of the plan adopted by the U.S. Congress after the Revolution. Excerpted from Eyewitness to Wall Street: 400 Years of Dreamers, Schemers, Busts and Booms by David Colbert All rights reserved by the original copyright owners. Excerpts are provided for display purposes only and may not be reproduced, reprinted or distributed without the written permission of the publisher.

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