Wall Street: a strong buy.

• Author: Rowen, Henry S.
• Position: Last Word - After September 11 - Brief Article

The horrible events in lower Manhattan have raised questions about the future of this world center of finance. The attacks forced many firms to move their operations to midtown and more distant places. Will they return after reconstruction; more broadly, will Manhattan continue to be the world's leading financial center?

Several arguments suggest that the damage might be long lasting. One is psychological--many people subjected to the horrors of that day, or observing them from afar, will not want to work there. Then there is the thought that terrorists might strike again. Another is that firms will discover that they can operate quite well in the places to which they have moved and need not return to lower Manhattan. Technology, it is held, enables them to do quite well in dispersed locations and, besides, lower Manhattan is not a low cost place to do business. All of this suggests that some other place might become the world's supreme center of finance.

Assuming that further terrorist threats are deterred or blocked, fears will recede with time. But there is a stronger argument why Wall Street will very likely continue to prosper. This assertion requires examining why it developed in the first place.

In colonial times, New York was one of three major cities on the seaboard, along with Boston and Philadelphia. New York had the great advantage of the Hudson River and then the Erie Canal, waterways that led to the continent's interior. Becoming the country's leading center of commerce naturally led to it becoming its leading center of finance. Boston, Chicago, St. Louis, and San Francisco became regional financial centers with different specialties but New York became the leader in the scope and volume of its activities. This led to it becoming a magnet for talent from around the world--as tragically shown by the many foreigners killed on September 11th. Only the City of London rivals it as a world center.

Wall Street became the leader because of the complexity and creativity of the activities that take place there. Highly professional and complicated operations require the most talented people and they need to work face to face. Commercial and investment banks, securities dealers, exchanges, lawyers, the suppliers of other supporting services need to rub up against each other. In doing so they work on complicated problems, communicate complex...