The Crash: The Shrinking of Fat City

Brokerages face bankruptcy, layoffs and maybe more regulation

The rumors mounted by the hour as Wall Street lunged and lurched through its wildest week. Many of the country's biggest brokerage firms and investment houses were said to be in trouble, even sinking: E.F. Hutton; Merrill Lynch; First Boston; Goldman, Sachs. Speculation swirled so briskly around Hutton that President Robert Rittereiser had to assure employees that the firm's financial resources were "strong and fully adequate." Though similar reassurances echoed up and down Wall Street, they left many doubts. As the stock-trading chaos continued, what would happen to the $50 billion American securities industry?

One Wall Street response was to turn...

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