Exclusive: The Most Memorable Day on Wall Street in 50 Years

I recently met up with Art Cashin, director of floor operations at UBS and a regular on CNBC for years, on the floor of the New York Stock Exchange.

Cashin has worked on the NYSE for nearly 50 years. I asked an obvious question: What's been the most memorable day during that time? Here's what he had to say (transcript follows):

Morgan Housel: In 50 years, what is your most memorable day here at the New York Stock Exchange?

Arthur Cashin: Well that's a great question. Having, as I said, been through everything from the Cuban Missile Crisis, the Kennedy assassination, I would think that not the day of the crash in '87, but the day after the crash in '87 because the day after the crash was when the system almost fell apart. It's not widely known; the day of the crash was somewhat surreal, like an independent movie made somewhere. Things kind of went slow motion on you. You were saying, I know the price, I know the market and I'm still not sure that I fully understand this, but you kept rechecking yourself.

The day after, however, a lot of the banks had solicited the accounts of specialists and dealers on the exchange. When the headlines printed that the market had gone down 22% in one day, the presidents and chairmen of the banks picked up and said, Oh my God, do we have any exposure or liability here? And as sometimes happens in a crisis, they said, Well this looks too large, and even though you might have been clever enough to understand the business that you were in, they at a much higher level didn't understand the detail. All around Wall Street the banks began calling in the dealers and market makers and saying, Your line of credit has been cut off. The dealers would say, Wait a minute. I went through the crash yesterday. I bought when I had to buy, but I sold for a loss right after it to keep me liquid. Why are you...? Well, we just don't know if everybody's going to pay.

So slowly the market began to wither. It had been down 508 points in the crash. You opened up close to 200 points and then they rolled over and they went down another 150 points. You could hear an audible gasp on that floor when those of us who said, Oh my goodness; is this going to happen again?

John Phelan, who was the Chairman at the time, was approached by several of the dealers who said, Our lines of credit are being shut down. He tried to call Mr. Greenspan, who had just been appointed to the New York Fed, and unfortunately he was traveling. He was in a plane somewhere. Phelan tried again and again and finally got a hold of the president of the New York Fed, Gerry Corrigan. Corrigan understood the situation and began calling around and saying to the bank, Reopen those lines of credit. And the bank chairman would say, Well, I have to worry about my stockholders and Corrigan, while I wasn't present for it, I'm sure said, I'm the president of the New York Fed. I will guarantee that you and your shareholders don't lose any money. We've got to keep the markets running. Reopen that account.

And slowly they did and the market turned back up and we closed up on the day. But it is the day that I remember best of all because it was the day that the wheels almost really did come off the locomotive.