Abstract: Wall Street's "War with Washington": A Clausewitzian Analysis of How the NYSE Fought the New Deal (and Didn't Lose)

Janice Traflet


While immensely important, the Securities Act of 1934 (creating the Securities and Exchange Commission) did not represent the end of the New Deal's efforts to reform Wall Street, nor did it represent the end of the NYSE's fight to thwart such external "interference." In fact, as this paper highlights, the Exchange's so-called "War with Washington" escalated to its most intense phase during the recession years of 1937 and 1938. Ironically, despite committing serious tactical mistakes, the NYSE emerged in 1939 from the ordeal battered but with its core self-regulatory structure perhaps surprisingly intact. Applying a Clausewitzian analysis of the combatants' tactics, this paper uses the war metaphor to shed light on the evolution and outcome of Wall Street's bitter battle with Washington during the later Depression years.