The Day the Bubble Burst
A Social History of the Wall Street Crash of 1929
Gordon Thomas
and Max Morgan-Witts
TO GEORGE WALLER
in admiration and gratitude
CONTENTS
AUTHORS NOTE
The Wall Street Crash of 1929 was the most climactic financial disaster in history. It still affects all our lives today.
Periodically, when the market declines, the question is asked whether history will repeat itself. For a decade or more those warning of a likely repetition have been ably led by Professor Kenneth Galbraith, whose own book on the economic background to the Crash has become a standard work of reference.
That other doyen of American economics, Professor Milton Friedman, sees monetarism as our financial salvation.
Both agree the 1929 Crash was a financial turning point. Prior to that, the business of money was held to be the prerogative of businessmen. The Crash showed how widely that prerogative had been dispersed. The Crash affected everyone; it was the precursor to the Depression; as such it was not only a financial collapse but a human, family tragedy. In a way it was worse than war. One of those hurt explained: In war, Dad goes off, a hero. But soon after the Crash, Dad was always at home. Nagging doubts were raised: wasnt he smart enough to get a job? Was he really trying to get work? Doubts about Dad as a person grew and remain to this day.
How such a situation came to be we have tried to explore and include. Our intention is to present, for the first time, a full social history of the Crash and its global impact; while the boom was essentially American, the ramifications of the Crash were worldwide.
It is our contention that the story of the Crash is best told through the lives of people; among them the people who sowed the financial whirlwind that would scatter not only them but untold others in penury. They were the victims of a financial pandemic the like of which the world has never before, or since, seen.
Previous works have tended to restrict themselves to the New York market and its immediate environsan admirable enough decision, but one that inevitably reduced the horizon. Our journeying into the hinterlands far beyond Wall Street produced a wealth of information buried in arcane documentation, private reports, and the accounts of eyewitnesses hitherto unrecorded.
While ours, too, is a financial story, it is also a social study of a unique period in history, peopled with characters rich in every sense of the word.
There is Jesse Livermore, archmanipulator and nemesis of the Great Bull Market, locked in financial combat with great bulls like John J. Raskob, Billy Durant, and Charles Mitchell. Against the background of their wheeler-dealing, enough to keep most men fully occupied, Raskob is preparing his own monument, the Empire State Building; Durant is running a single-handed campaign to overthrow the policies of the Federal Reserve Board; Mitchell, chairman of Americas biggest commercial bank, is, like the Artful Dodger, creating a scheme to avoid paying income tax on his millions.
There is A. P. Giannini, founder of the Bank of America, hurtling around California in a Rolls-Royce dressed up as a fire truck, planning his latest moves in another great conflictthis one with the most powerful private bank in the world, the House of Morgan. There is Joe Kennedy, founder of a dynasty, self-made millionaire, determined to revenge himself on Jack Morganwhose virtually last public appearance is with a midget in his lap.
There is Henry Ford, avowed enemy of Wall Street, unwittingly providing the fodder for Hitlers anti-Semitism. There is Clarence Hatry in London, whose ambition some believe contributed to the Crash. There is Mike Meehan, who put Wall Street on the Atlantic.
Talking to the sons and daughters of these men, studying their contemporary writingstheir diaries and office papersthe unsuspected connections between them, the tangled web of high finance, became clear. Often publicly distanced from each other, they are, in the end, drawn together into Wall Street by the mesmeric effect of the market.
Their decision-making touched not only almost everybody in America but also countless millions around the world.
Charles Mitchells decision to float a new bond affected the lives of Brazilian peasants; a loan from Jack Morgan helped to prop up Mussolini; Nazism grew in part because of the decision of American financiers to support the ailing Weimar Republicfor profit.
We have tried to look at the effects on all strata: On the one hand there is Winston Churchill, who lost money, and a member of J. P. Morgan and Company whose wife dismisses the Crash as no more than the rattle of teacups; on the other, there is a young flapper and a vivacious bootleggerboth in a sense in the marketwho, like so many others, are scarred forever by men they never met and decisions over which they had no control.
Few man-made events, short of the World Wars, created so much pain and bitterness, and the fear it could occur again.
Perhaps the only real protection against that happening is to have an understanding not only of why it happened but of what it was like to be there when it happened.
It began so promisingly, the events leading up to the day the bubble burst.
GT/MMW
April 1979
Ashford,
Ireland
October, this is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.
PUDDNHEAD WILSON (Mark Twain)
The most disastrous decline in the biggest and broadest stock market of history rocked the financial district yesterday.
THE NEW YORK TIMES, October 25, 1929
The fundamental business of the country, that is the production and distribution of commodities, is on a sound and prosperous basis.
PRESIDENT HERBERT HOOVER, October 25, 1929
I appeal to movie exhibitors to show pictures that will reinstate courage and hope in the hearts of the people.
JIMMY WALKER, mayor of New York, October 29, 1929
Stock prices virtually collapsed yesterday, swept downward with gigantic losses in the most disastrous trading day in the stock markets history.
THE NEW YORK TIMES, October 30, 1929
There is nothing in the business situation to warrant the destruction of values that has taken place in the past week, and my son and I have for some days past been purchasing sound common stocks.
JOHN D. ROCKEFELLER, SR., October 30, 1929
Sure hes buying. Who else has any money left?
EDDIE CANTOR, October 31, 1929
On Fifth Avenue, police found a parrot screaming More margin! More margin!
WIRE SERVICE REPORT, undated, unverified
The situation has been reached in New York hotels where the clerk asks incoming guests, You wanna room for sleeping or for jumping? And you have to stand in line to get a window to jump out of.
WILL ROGERS, November 20, 1929
CHAPTER ONE
THE RAMPAGING BULL
One whang of his hand-tooled gavel against the fluted gong would stop everything.
It would end the action at Post Two, one of the stockade-shaped trading counters that had been under siege by brokers since early afternoon as U. S. Steel continued its giddy climb; it would quieten the harassed clerks inside Post Nine, where Standard Oil of New Jersey, after a slow start, had suddenly outpaced the trading in Sears Roebuck, another of the posts lively stocks; it would still the flashing numbers on the black annunciator boards which called traders to their posts for urgent messages from their offices.
