By the mid seventeenth century, the Dutch colony of Nieuw Amsterdam had become so successful that the English colonies to the north were beginning to look upon it as a possible conquest. Fearing a possible attack, the colony’s governor Peter Stuyvesant ordered the construction of a defensive wall made of sixteen foot logs, sharpened at the top and thrust four feet into the ground. Unfortunately, despite his preparations, Stuyvesant failed to take into account the power of the English navy, which sailed from the south in 1664 and threatened the colony with its superior firepower. Fort Amsterdam was vastly outgunned. Fearing ruin in a futile struggle, the merchants of the colony petitioned the governor to surrender to the English. Reluctantly, the governor complied, and the English took control of Nieuw Amsterdam. It was shortly renamed New York after James of York who received the colony as a birthday gift.

Unneeded and ignored, the defensive wall erected to thwart the English fell into disrepair and was torn down in 1698. Nonetheless, the space behind the wall – originally reserved for the passage of troops – became known as Wall Street, and soon became an important commercial center. By the late 1700s New York was rapidly growing economic force, rivaling Philadelphia and Boston, and Wall Street was the hub of the commercial transactions. Though Wall Street brokers originally dealt mostly with tangible goods (and would be considered wholesalers in modern parlance) their business increasingly turned from molasses, beaver pelts and tobacco to securities such as government bonds and shares of joint stock companies.

From the very beginning Wall Street was an insider’s game. The first brokers who met at 68 Wall Street to form the association eventually known as the New York Stock Exchange restricted trading to a very select group of 24 members. The public could not attend the auctions directly but had to seek out a specialist who dealt in the particular issue. It was the specialist who would conduct the trade. Needless to say, with a small group of members with similar interests trading on behalf of a much larger, less informed public, there was substantial room to pad commissions and engage in price manipulation. Even outside the select circle of members there were always those who looked at the public not as a body of citizens to be served, but as a profit source to be manipulated and fleeced where possible. Using “pump and dump” schemes, bear raiding, and other devices, the insiders kept naive investors buying at tops and selling at bottoms. Here are some of the major practitioners of these schemes.

Daniel Drew -
One of the first great Wall Street manipulators was Daniel Drew. According to legend, in his early days as a cattle drover, Drew deprived his cattle of food shortly before reaching his final destination of New York City. Then, the night before his arrival, he allegedly fed them all the salt they could eat. At dawn the next day, the animals eagerly consumed gallons of water from nearby streams. When his herd arrived in New York they were artificially fattened and heavy with water, and Drew is claimed to have made a small fortune on his ‘watered stock’. However, As J.S. Gordon points out in The Great Game, it is highly unlikely that Drew could have survived long as a drover using such a transparently crooked device. In any event, few contemporaries doubted Drew’s capacity for concocting such a scheme, and the mere fact that the legend has survived so long is a testament to Drew’s deserved reputation as a manipulator.

A typical ploy used by Drew ran as follows:

One day Drew walked into a prestigious men’s club in a state of apparent agitation. He claimed to be looking for someone, and was clearly dismayed when the person could not be found. Obviously worried, he wiped the sweat from his brow several times. In the process he let drop a small scrap of paper, which he appeared not to notice. After he left, the brokers in the club discovered the bit of paper which had the following instruction written on it: “Buy all the Oshkosh stock you can get at any price you can get below par”. Though the Oshkosh rail company was known to be experiencing difficulties and its stock was expected to decline, the other brokers reasoned that Drew had some bit of privileged information and so began to buy the stock. Then, with this sudden demand in the shares of the ailing company, Drew was able to unload his shares at a tidy profit.