“Capital of Capital”
Having had the privilege to grow up in New York, I have had much exposure to banking and finance. Overhearing trade analysts on the subway, driving by “Occupy Wall Street” demonstrations, or walking by the latest headline of The New York Times or Wall St. Journal, whether we like it or not, the world of banking is central to the New York Experience. Despite this fact, I know relatively little about history of banking in New York. This is why the “Capital of Capital” exhibition at the Museum of the City of New York intrigued me. This is part of what led me to choose to study early commerce and trade through NYHS’s collection of scrimshaw.
Sponsored by Citigroup and done in partnership with the Museum of Finance, the exhibition was fascinating, and told the story of banking’s evolution in New York dating all the way back to Colonial America. As the British Empire forbade banking in the colonies, an effort to maintain their dependence on England, banking had a rather slow start.
In the wake of the Civil War, the world of banking radically changed with the birth of the investment bank. These institutions, in their most simplified form, do not take deposits and lend like a “regular” bank; they match investors with potential investment opportunities, in an attempt to create a profit. At this time, many fortunes were realized. The tremendous railroad expansion that characterized the later half of the 19th century was largely built on the back of the investment banks that raised capital for them. The timing could not have been better. Today, the primary purpose of the investment bank remains the same; however, many try to do even more, engaging in other ventures.
Following World War I, New York banks became some of the most respected institutions in the world. After World War II, they heightened their global reach, and with much of the world’s wealth in their vaults, New York became the undisputed banking capital of the globe.
Despite recessions and some instability in the decades following World War II, New York remained on the cutting edge of finance. Beginning in the early 1990s, banks began to consolidate at a feverish rate, becoming even larger institutions. Banks I remember from the past disappeared in a series of mergers and acquisitions. Banks like Wachovia, Chemical Banking, and Bank Boston, folded into even bigger names like JPMorgan Chase, Citigroup, and Bank of America. These institutions, as a result of the massive level or consolidation became, “too big to fail.”
With the financial meltdown of 2008, the effects of which continue, we saw the collapse of Lehman Brothers, Bear Stearns, and Merrill Lynch, some of the largest investment banks in the world. These institutions were swallowed by many of the remaining “stable” institutions. The exhibition at MCNY devoted much space to telling this story, which cannot be done justice in a single, or many, blog posts.
The history of banking in New York City is rich and fascinating. I recommend a visit to the “Capital of Capital” exhibition for anyone interested.