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Markets & Stocks
Kandel on Wall St. history
June 30, 2000: 5:54 a.m. ET

Successes and busts that shaped Wall Street, the capital market of the world
By CNN Financial Editor Myron Kandel
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NEW YORK (CNNfn) - We're now half a year into the 21st century, but it's still not too late to look back at some of the major achievements of the 20th. One of the nation's most distinguished academic experts on Wall Street did just that by polling 59 senior U.S. investment bankers on the most significant deals and events that shaped modern finance in the last century.

graphicSamuel L. Hayes III, who is Jacob Schiff Professor of Investment Banking-Emeritus at Harvard Business School, came up with a list of 39 actions that had a profound impact on the nation's financial and corporate scene and on how Wall Street conducts business. They ranged from the creation of United States Steel in the first two years of the century to the initial public offering by Goldman Sachs in 1999. Some of those are historic events, well known to any observer of the American economic scene; others are rather arcane, but nonetheless important to people who may have lived through them or who had to work under their ramifications. Some are especially meaningful to me because I covered them as they unfolded.

I wasn't around for the creation of U.S. Steel, but it was a landmark in the development of giant American businesses. J.P. Morgan, the first great business potentate to spring from Wall Street, engineered the purchase of Carnegie Steel from Andrew Carnegie for $500 million. He created what came to be known as Big Steel by combining it with his own Federal Steel and adding other companies, plus John D. Rockefeller's Mesabi Range ore fields in 1901, until the resulting trust controlled more than half the nation's steel business.

Coming after the stock market crash of 1929, the bankruptcy of the Swedish match king Ivar Kreuger in 1932, and the collapse of his U.S. investment banker Lee, Higginson & Co., helped lead to a widespread demand for securities regulation that resulted in the New Deal legislation that created the Securities and Exchange Commission.

The experts then skipped to a pair of disastrous new issues in 1937 -- $44 million for Pure Oil and $48 million for Bethlehem Steel, underwritten by the now-forgotten firm of Edward B. Smith & Co. The heavy losses the firm incurred forced it into merger later that year with Chas. D. Barney & Co., which created a new firm named Smith Barney & Co. (now part of the Citigroup empire).

Following World War II there came the World Bank's inaugural $100 million issue in 1950; the first Eurobond offering for a foreign issuer in U.S. dollars; the first postwar public offering of a debt issue by an American bank, $100 million by Bankers Trust in 1963; the Merrill Lynch-led offering of 5 million shares of the Communications Satellite Corp. at $20 per share, and the first postwar equity financing by a Japanese company in the U.S., by Honda Motor Car in 1965.

A blockbuster event in 1970 was Donaldson, Lufkin & Jenrette's  $24 million public offering in defiance of a New York Stock Exchange prohibition against public ownership of a member firm. The Big Board eventually backed down and a number of other brokerage firms began following DLJ by raising capital through initial public offerings.

May 1, 1975 became known on Wall Street as "Mayday," when fixed commissions were abolished, sending boutique brokerage firms catering to institutional investors into merger or oblivion. The move helped reduce commission costs for many individual investors and led to the development of discount brokers. A few years later, one of those discount brokers, Charles Schwab & Co. moved to go public but met with investor indifference and sold out to Bank of America. But Schwab and the company's managers, with a $132 million IPO managed by Morgan Stanley, took the company back in 1987, and rode the bull market to a point where its capitalization topped that of Merrill Lynch in 1998.

In 1980, a major Wall Street investment banker came to Silicon Valley, when Morgan Stanley joined with the San Francisco firm of Hambrecht & Quist to offer Apple Compute to the public. The experts noted that a dozen years later, the forthcoming Internet explosion was presaged by two eagerly awaited IPO's - that of America Online by Alex. Brown and Netscape by Morgan Stanley.

Before the dot-com fever came junk bonds. In 1984, now-defunct but then-high-flying Drexel Burnham Lambert wanted to raise $500 million in high-yielding junk bonds, but the demand was so huge that the figure was raised to $1 billion. It was the biggest corporate debt issue until then.

And the final major event of the century cited by the experts polled by Professor Hayes for Doremus, the business and financial advertising agency that is part of the Omnicom Group, was last year's public offering by Goldman, Sachs & Co., the last of Wall Street's investment banking giants to shift from a private partnership to public ownership.

These are a sampling of some of the deals that changed Wall Street. Some blazed new trails, some were big successes and some were busts or downright frauds. They all contributed to making the U.S. capital market the most powerful in the world and helped build the U.S. economy to the level of prosperity it now enjoys. Back to top

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.