Moguls, Scoundrels & Heroes
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

If you have ever spent any time with Wall Streeters, two things quickly become clear. First, everyone knows everyone else’s business: The market moves gossip as efficiently as money. Second, the Street is filled with ghosts, and those working there are mindful of its history.
Even though working on “Wall Street” no longer bears any strict relationship to geography and the “Street” is now a central engine of the worldwide capital markets, there are still enough people around who remember what it was like “before” (the dot-com boom, the stock market rallies of the late 1980s, insider trading, the mutual fund scandals, and Eliot Spitzer) to make it seem a relatively small place with a strong sense of its past. Both these truths are demonstrated in “What Goes Up” (Little, Brown, 480 pages, $27.95), Eric J. Weiner’s anecdotal history of the world’s most powerful financial center.
“What Goes Up” is divided into a series of chapters, each dealing with a central event or period in the development of Wall Street from the 1920s to today. Mr. Weiner opens the book with a discussion of Merrill Lynch and one of its founders, the legendary Charles Merrill. “Good Time Charlie” revolutionized what we now know as the brokerage business, and the reflections here, from colleagues such as Donald Regan, give some sense of his innovative impact on the securities markets. Merrill’s conviction that individual investors should be permitted to buy stocks rewarded Merrill Lynch richly.
Mr. Weiner’s chapters cover such subjects as “Black Monday in October 1987, when the stock market fell 500 points in one day, the rise of Sandy Weill, the founding of the NASDAQ stock market, and more technical issues such as value investing (and its most famous proponent, Warren Buffett). He goes on to feature a number of people involved in the Ivan Boesky insider-trading scandal and the takeover of RJR Nabisco. He also has chapters on the collapse of the high-flying hedge fund Long-Term Capital Management, the Internet bubble, and the Enron scandal, and shorter sections on the aftermath of September 11 and the growth of financial-news network CNBC.
Mr. Weiner, a financial journalist, constructs the chapters as conversations among the players. This approach has its flaws. It is not immediately clear that his chapters are not, in fact, real conversations. We do not see Mr. Weiner’s questions, and without independent verification of what Mr. Weiner’s characters are saying, we cannot be sure we are getting all the details. With this caveat, however, Mr. Weiner ably covers the high and low points of modern Wall Street.
The success of his approach is best illustrated in the section on automation of the securities markets. In the late 1960s, the financial industry began its move toward complete automation, driven in large part by the growth of mutual funds. Mutual funds enabled investment in stocks by people even of modest means. As a result, the volume of trading exploded, which overwhelmed the Street’s antiquated systems.
Hard as it is to believe, prior to that time, the great movements of stocks and bonds, the mergers and acquisitions, and the settling of trades, all occurred manually. The New York Stock Exchange even closed down on the occasional Wednesday just to process all the paperwork. Cadres of people – almost all men, most just out of high school – were trained specifically to make the markets function smoothly. Without these “back office” people, Wall Street would quickly have ground to a halt.
When the change came, it was disastrous for firms that could not keep up. Many closed their doors, and a generation of people who thought their jobs secure was out of work. This “creative destruction” changed the way Wall Street operated. The Street had always had its share of white-shoe Ivy League firms – Morgan Stanley most particularly, and later, Goldman Sachs – but it was also a rough-and-tumble place where someone could pull themselves up by their own bootstraps. The switch to an automated market eliminated a lot of opportunities for advancement, and led to a more rarefied environment where the technologically savvy and the well-educated and-connected gained the upper hand. While he refers to this, Mr. Weiner’s book would have profited by including the voices of some of the lesser players in the industry.
Automation also paved the way for the growth of the huge firms that now characterize the Street. The old partnerships almost completely disappeared in the 1960s and early 1970s, and a wave of American firms merged with or were acquired by their foreign counterparts. At the same time, the public became aware of the financial industry in ways not seen since the first phase of investor participation in the markets in the 1920s.This public interest has not abated, even after the bubble burst in the late 1990s. Mutual funds and individual securities are now followed as closely as sports teams, and the constant press coverage would make some of the old lions of Wall Street cringe.
Yet this emphasis perhaps gives too much credence to the power of Wall Street. Mr. Weiner quotes former Treasury Secretary Robert Rubin, who describes the bailout of Long-Term Capital Management by the major investment banks with the help of the Federal Reserve by saying that the real risk of the hedge fund’s collapse was that “the entire financial system could freeze up, with a spillover into the real economy.” With that telling phrase, the book is brought back into focus: Yes, Wall Street has its share of moguls, scoundrels, and heroes, and it has created great wealth for many people. Ultimately, however, it is dependent on the “real economy,” on people who make and build things.
Wall Street unleashed economic forces that have now spread across the world, and it is already, almost imperceptibly perhaps, losing the stature it once had. But “What Goes Up” provides an easy introduction to some of the major events that have shaped the modern financial world.
Mr. Russello last wrote for these pages on urban policy.