<b>On Wall Street, Present Is Prologue</b>
By THE NEW YORK TIMES
July 28, 2002
Wall Street continues in feverish, nervous malaise. Its pulse keeps going up to 120 under hourly rumors of defalcation in this or that great corporation, railroad, or others. Faith in financial agents is gone. Every treasurer and cashier is "suspect," and no wonder after the recent epidemic of fraud.
George Templeton Strong, Oct. 27, 1873
THE language is stuffy — defalcation is just a fancy word for embezzlement, which itself is a genteel way to say "stealing." But otherwise, this entry from Mr. Strong's New York diary sounds like it could have been written yesterday.
And while the current parade of corporate scandals, the insider-trading allegations and the overall stock-market smash-up has shocked many New Yorkers, there are a few for whom this is all old hat.
"For historians, it's unbelievably boring and repetitious," said Mike Wallace, a professor of history at the City University of New York and co-author of the Pulitzer-Prize winning "Gotham: A History of New York City to 1898."
Financial fiascos have been a feature of New York life for centuries; in 1854, Mr. Wallace said, "the railroads were the dot-com boom, and there was wild speculation." Leading, of course, to insider trading, fraud and, ultimately, financial catastrophe.
The good news, for New York, is that the city has survived countless such episodes. The bad news is that the consequences have often been severe and long-lasting.
The panic of 1857 left tens of thousands of jobless people on the streets. After the panic of 1873, hundreds of New Yorkers starved to death. The panic of 1893 resulted in economic depression. After the crash of 1929, "New York suffered badly," said Charles R. Geisst, a professor at Manhattan College and a historian of Wall Street. "There were more Hoovervilles here than anywhere else."
The grinding stock market declines of 1973 and 1974 helped land the city in fiscal hot water; the crash of 1987, some economists aver, helps explain why New York went into recession well before the rest of the country and emerged far later.
If anything, finance has taken on a greater role in the city in recent years. "It's not entirely true that New York is a one-horse town, but we've lost manufacturing and lost the port," Mr. Wallace said. "Washington is a one-horse town, and so is Hollywood, but they don't have these huge swings."
But Wall Street is built on boom and bust. During the boom years, New York profits more than anywhere else. During the bust years, the city suffers more.
It's not only because stockbrokers are out of work; so are all the lawyers and advisers and accountants and clerks and building cleaners and, these days, computer experts who flock around the financial business. Restaurant owners, bauble sellers, opera singers and cigar vendors lose valuable clients; so do housekeepers, golf pros and manicurists. Heck, so do newspapers.
New York's image also suffers when the stock market swoons, exposing financial shenanigans. "As early as the 1830's, people in Ohio were enraged," Mr. Wallace said. "They were railing about the people living in Sybaritic luxury in New York while we virtuous farmers live in penury."
After the stock market melted down in the 1970's, the rest of the nation generally approved of Gerald Ford's "Drop Dead" attitude about New York. The spectacle of a Wall Street bigwig being hauled off in handcuffs did not do much to burnish New York's image in 1987.
So you have to wonder how the rest of the country will feel about New York now that more Americans than ever have staked their financial futures on the stock market. True, Enron isn't based in New York. But the banks that profited from it and the brokerage firms that flogged it (and all those other now-worthless stocks) are.
It may turn out to be too bad that the Rigas family were accused of using ill-gotten gains from looting Adelphia Communications to buy a place on the Upper East Side. Couldn't the Rigases have gone back to Coudersport, Pa., to get arrested?
So while there's no guarantee that times will get tougher, the outlook isn't exactly rosy. "I think New York's in for it this time," Mr. Geisst said. Or, as George Templeton Strong put it more than a century ago, "There is a prospect of a hard, blue winter."