By Kristin Aguilera

The September 11 attacks on the World Trade Center struck the heart of the nation's financial capital more fiercely than any other event in history. Virtually every member of New York's financial community was touched by tragedy that day, as colleagues, friends, family members, and companies perished in what was once the symbol of America's business might.

But while the extent of the physical and psychological devastation left in the wake of the recent attacks was unprecedented, history reveals that Wall Street is no stranger to catastrophe. Historian Charles R. Geisst wrote in 100 Years of Wall Street, "The capital of capitalism always attracted attention from those intent on making a point."

Indeed, it has.

In addition to several economic and financial disasters since trading began under a buttonwood tree in 1792, Wall Street has also weathered many physical crises including fires, bombings, building collapses, and other more mysterious attacks, such as the release of tear gas into the New York Stock Exchange's ventilation system in 1933.

There is much to be learned by studying how the financial markets have reacted to disasters in the past, from attacks in the Financial District to other national and international crises.

While catastrophes have more often than not resulted in short-term market losses, due largely to investor uncertainty, the periods of market downturns have almost always been followed by short-term gains and occasionally even strong long-term bull markets. The Cuban Missile Crisis, President Kennedy's assassination, the 1993 World Trade Center bombing, and the Oklahoma City bombing are all examples of strong market recoveries.

Wall Street Fire

One of the earliest and most significant disasters to hit Wall Street occurred on December 16, 1835, when a fire ravaged the heart of the Financial District. The blaze broke out in a store on Merchant Street and spread through a 20-square-block area bounded by Wall Street, Broad Street, Coenties Slip and the East River, destroying more than 700 buildings in its path.

Of the lost facilities, the most significant was the Merchants' Exchange, a relatively new building constructed in 1827 to accommodate the city's numerous merchants. When the flames engulfed the building at 1:00 a.m., they spread rapidly through the rotunda, where they destroyed all merchandise and caused the dome to collapse. The building also housed the New York Stock & Exchange Board (now the New York Stock Exchange) on the second floor, but their records were salvaged from the burning building by a faithful watchman, J.R. Mount, who received a $100 reward for his efforts. This allowed the Board to resume trading immediately in temporary quarters while a new permanent office was constructed.

In the aftermath of the destruction, 23 of New York's 26 fire insurance companies declared bankruptcy, and the extreme loss of local business left the city's economy in shambles.

Two weeks after the fire, New York City leaders convened to map out a recovery plan. They would receive no federal funding for disaster relief, but were permitted by the state to sell reconstruction bonds. Within five months, a larger and sturdier Merchants' Exchange was under construction. It took only a year for the entire area to be completely rebuilt and transformed into a state-of-the-art business district.

The abundance of new buildings attracted bankers and financiers from other areas of the city and country, and before long Wall Street began to earn its reputation as a global financial center.

Morgan Bank Bombing

Nearly a century later, Wall Street was again hit by catastrophe, but this time it was no accident. Just before noon on Wednesday, September 16, 1920, a horse-drawn wagon covered with a canvas tarpaulin pulled to a stop on the north side of Wall Street across from the House of Morgan. The driver abandoned the wagon and blended in with the lunchtime crowd before the dynamite-packed wagon exploded. Debris ricocheted through the canyons of the Financial District and shattered windows as far as half a mile away. The bombing was likely an attempt to steal the $900 million worth of gold ingots being transferred that day. If that was the intent, however, the heist was unsuccessful, as no gold was stolen.

The attack killed 38 people and injured more than 300. Junius Morgan, grandson of company founder J. Pierpont Morgan, suffered only minor injuries to his hand. J.P. "Jack" Morgan, Jr., then president of the bank, was traveling in Scotland at the time of the attack. When he returned, he found his building pock-marked from the explosion. These marks can still be seen on the facade of the Morgan building today.

Both the House of Morgan and the New York Stock Exchange, located across the street, closed that day but reopened for business the following day. When trading resumed, stock prices moved upward. At the time of the attack, more than 3 million people worked in the factories, warehouses, department stores, specialty shops, and skyscrapers on Wall Street, where one-third of New York City's workforce was employed in white collar jobs. Bolshevik groups and anarchists were accused of the bombing of the Morgan Bank, but no one was ever brought to trial.

Fraunces Tavern Bombing

Fifty years after the Morgan bombing, an attack on New York's financial community came not as Wall Streeters worked, but as they dined. Fraunces Tavern, which housed the Departments of Foreign Affairs, the Treasury, and War when New York was the nation's capital in the 18th century, evolved into a restaurant in the 19th century and added a museum in the early 20th century. Financiers had been lunching at Fraunces Tavern for 150 years when terror struck this Wall Street landmark in January 1975.

Four were killed and more than 50 were injured when a bomb detonated in the Fraunces Tavern restaurant. Both the tavern and the building's only other occupant, the Anglers' Club of New York, were damaged but restored within a year. FALN, the Puerto Rican nationalist group, claimed responsibility. Eventually, the police tied the attack to 13 other bombings.

Fraunces Tavern recently underwent a $1 million renovation and reopened in Summer 2001 to once again cater to the Wall Street community.

World Trade Center Bombing

When a nitrourea bomb weighing more than 1,000 pounds detonated in the parking garage of the World Trade Center on February 26, 1993, it was the first foreign terrorist attack on American soil. The bomb, concealed in a yellow Ryder Econoline van below the buildings, blasted an L-shaped crater measuring 130 feet wide by 150 feet long. The explosion killed six, injured 1,042, caused more than 50,000 to evacuate, and left terrified school children trapped in a smoke-filled elevator for hours.

Until September 11, 2001, the 1993 World Trade Center bombing was the largest incident ever handled in the 128-year history of the New York Fire Department. It was the equivalent of a 16-alarm fire, and it took 11 hours for firefighters to evacuate the towers.

While many Americans felt more vulnerable after the attack than ever before, the stock market was virtually unaffected. In fact, the Dow was up at market close that day, dropped only about 0.5% the next day, and ended up positive for the week. A month later and six months later, it was still on the rise, as the bull market of the 1990s charged on.

Investors may be surprised, two or three years from now, to see how resilient the market has turned out to be after the horrific events of September 11, 2001. Though it is impossible to plot the exact course the market will take in the months and years to come, a long-term market downturn due to the attacks would be entirely without historical precedent.

Resources

Alterio, Julie Moran. "America Forges Ahead." The Journal News. September 23, 2001.

Alterio, Julie Moran. "Financial Capital Has Attracted Terrorists Before." The Journal News. September 23, 2001.

Buck, James E., ed. The New York Stock Exchange: The First 200 Years. Greenwich Publishing Group, Inc.: Essex, Connecticut. 1992.

Geisst, Charles R. 100 Years of Wall Street. McGraw-Hill: New York. 2000.

Geisst, Charles R. Wall Street: A History. Oxford University Press: New York. 1997.

Zweig, Jason. "What Can We Learn From History?" Money. September 21, 2001.