Introduction
New York, Banking City
Ever since Alexander Hamilton and his associates
founded the Bank of New-York in 1784, New York
City’s banks and bankers have been star actors
in the city’s and the nation’s affairs. In every
important chapter of the city’s growth—its early
19th-century rise to commercial primacy over
its rival, Philadelphia; its promoting of canals,
railroads, the Southern plantation economy,
and the American industrial revolution; and the
20th-century building of the nation’s corporate
headquarters that exported American economic
power around the world—New York banks have
been front and center. Conversely, almost every
major controversy and crisis involving American
banking—from the Panic of 1792 to Occupy Wall
Street in 2011—has had New York City as a princi-
pal setting or target. This book offers a narrative
of the intertwined histories of New York City and
its banks, from Hamilton’s day to our own.
Over the centuries, for good or ill, New York
City has become synonymous with its banks.
Though New York has multiple identities—the city
of immigrants, the nation’s cultural and enter-
tainment center—it has arguably been a capital of
finance for the longest, with Wall Street its reign-
ing symbol. Beginning in the late 18th century,
the Lower Manhattan thoroughfare attracted the
city’s banks, brokerages, insurance companies,
exchanges, and government financial institutions.
Ever since, it has represented the contradictory
traits that Americans and others have associated
with banks, New York City, and urban life in gen-
eral. Thus, by the mid-19th century, Wall Street
and New York City came to stand for great wealth
and sophistication in the American imagination,
but also arrogance and callousness; conspicuous
display of influence, but also concealed power;
economic opportunity for the lucky, resourceful,
and privileged, but also obstacles to opportunity
for most others. No other institution in the city’s
history has been more important simultaneously
to New York’s development and to its national
and global influence and stature. Certainly, the
city and its banks have continually shaped and
reshaped each other in innumerable ways. Our
aim is to explore that relationship—and the ways
New Yorkers and many others have understood
it—over the course of nearly 230 years.
The book is organized chronologically to fol-
low the trajectory of the city’s banking history
from the 18th to the early 21st centuries. Between
1784 and the early 1830s, postrevolutionary
New York City quickly became one of the new
nation’s important financial centers. By the end
of that period, New Yorkers had established the
three major types of banks that remain central
in American economic history, and to our narra-
tive: commercial banks, which accepted deposits
and made interest-bearing loans, initially to
merchants and other members of the urban elite;
savings banks, which accumulated the deposits
of working people and invested them in interest-
earning securities, in order to teach depositors
the values of thrift and economic foresight and
provide them a means to get ahead; and the firms
of investment bankers who bought and sold
stocks and bonds issued by corporations and
governments. (In the post-Civil War era, these
businesses would become full-fledged investment
banks, organized to issue stocks and bonds for
companies and governments, to raise the capital
needed to originate and market those securities,
and in many cases to manage the consolidation
of companies into larger, industry-dominating
corporations.) From these beginnings, New York
banks rose to facilitate and fuel the nation’s agri-
cultural economy, to fund its spreading network
of canals and railroads, and to help sponsor the
commercial, financial, and infrastructural growth
of the city itself. New York’s banks were never
alone in this process; hundreds and then thou-
sands of other banks spread across the country
were also involved. But after the mid-1830s, no
other place on the continent concentrated bank-
ing capital, ingenuity, and innovation the way
New York City did.
Wall Street was where New York bankers
channeled English and European loans and
investments to underwrite the expansion of the
19th-century American economy. After World
War I, and even more decisively after World War
II, the same thoroughfare would be central to the
nation’s new identity as creditor to the world, and
to New York’s position as “capital of capital.” In
the following decades, the banks continued to
play a vital, if often contested role in the daily
life and public affairs of the city itself—amid the
ongoing repercussions of the 2008 financial melt-
down, continuing dramas over malfeasance and
regulation, and the rise of competing “money cen-
ters” (London, Hong Kong, Singapore, and other
cities) around the world.
Several major themes recur throughout this
history and thus in the chapters that follow. New
York has consistently been an incubator and
promoter of changing financial strategies and
instruments, reflecting its role as the nation’s
banking center and further enhancing that role
over time. From the savings bank in 1819, to the
personal loan department in the 1930s, to nego-
tiable CDs and mortgage-backed securities of
the late 20th century, New York’s bankers have
repeatedly embraced or spurred innovations,
usually enhancing their influence and status by
doing so. These changing strategies have altered
the relationships between banks and governments,
business, and the general public. They have also
repeatedly shifted the balance of power between
banks and their clients, often in unpredictable
ways. The late 19th-century “titans of finance”
such as J. P. Morgan and Jacob Schiff, invest-
ment bankers who took the lead in consolidating
industrial corporations, gave way by the 1950s
to bankers who scrambled to catch up with the
assertive expansion of U.S.-based multinational
industrial corporations selling their goods around
the world. By the 1980s, the focus had shifted to
new, aggressive, risk-taking investment and com-
mercial bankers, impatient with regulations and
limits, who often dictated the terms of buyouts to
corporate boards and executives or traded securi-
ties for their own profit.
New York’s banks—and “Wall Street” in par-
ticular—have remained at the center of political
debate over the morality and fairness of the
nation’s financial economy, and, with their accu-
mulation of capital and ability to provide or deny
loans and investments, have been the focal points
of heated controversies. New Yorkers, like other
Americans, have repeatedly had to grapple with
a central tension inherent in banking. Banks
match people possessing extra capital (investors
and depositors) with people who need credit,
thereby fueling economic growth. But banks are
then tasked with the large responsibility of man-
aging and reducing the risk inherent in lending
and borrowing. As repeated panics and crashes
have shown, this risk management is itself a very
risky business, and banks have not always kept
risks from overflowing and damaging the entire
economy. This fact has polarized New Yorkers
and others for over two centuries. Against those
who have posited the city’s banks as the agents of
growth, prosperity, and stability, others have asked
whether the banks represent an illicit concentra-
tion of wealth and power threatening to extinguish
democracy itself. Recurring financial crises
radiating out from Wall Street into prolonged
nationwide recessions have especially focused
popular outrage on banks, blamed for precipitat-
ing—or failing to prevent—such catastrophes.
Cycles of prosperity followed by unpredict-
able downturns generated questions about the
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