3c hapter - Index of

200 Locavesting
The exchanges were important institutions in their communities,
both socially and commercially. To purchase shares listed on
a regional exchange, investors would have to buy from one of its
member- brokers, who were often prominent citizens in the community.
Each exchange refl ected the unique character and industry
of its region. On the Seattle exchange, for example, investors
could fi nd hometown favorites such as Olympia Brewing, Alaska
Pacifi c Salmon, and Carnation (acquired by Nestlé in 1985). In
Richmond, Virginia, listings tended toward tobacco, local utilities,
and southern banks. The Cincinnati Stock Exchange, created in
1885, nurtured young Midwestern companies including a soap
maker called Procter & Gamble, a tire maker called Goodyear,
and a grocer named Kroger. Its brokers didn’t do too badly either.
According to one account, the Cincinnati exchange provided
“large, deep couches for its members, who spend a large part of
their time on the fl oor playing pinochle.” 2
The history of the early exchanges has been largely forgotten,
and few detailed accounts remain. But they were engines of
regional growth, facilitating the fl ow of capital into area business
ventures and stoking their local economies. From 1790 through
1930, the number of exchanges rose in tandem with U.S. industrial
production, according to researchers at Franklin & Marshall
College, who conducted one of the most comprehensive studies
of the role of regional exchanges. To better assess the impact the
exchanges had on local economies, the researchers compared
data before and after the founding of each exchange to measure
its effect on manufacturing employment (the dominant employer
category at the time) in the area. In almost all cases, the increase
in the population engaged in manufacturing was greater in the
regions with stock exchanges than for the nation as a whole, leading
the authors to conclude that regional stock exchanges are
strongly associated with regional economic growth. On average,
the regions with newly established exchanges saw a 175 percent
increase in manufacturing engagement, compared to 76 percent for
the nation as a whole. 3
The landmark securities regulations of the 1930s, which
imposed new registration and reporting requirements on publicly