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Over six terrifying, desperate days in October 1929, the fabulous fortune that Americans had built in stocks plunged with a fervor never seen before. At first, the drop seemed like a mistake, a mere glitch in the system. But as the decline gathered steam, so did the destruction. Over twenty-five billion dollars in individual wealth was lost, vanished gone. People watched their dreams fade before their very eyes. Investing in the stock market would never be the same.
Here, Wall Street Journal bureau chief Karen Blumenthal chronicles the six-day period that brought the country to its knees, from fascinating tales of key stock-market players, like Michael J. Meehan, an immigrant who started his career hustling cigars outside theaters and helped convince thousands to gamble their hard-earned money as never before, to riveting accounts of the power struggles between Wall Street and Washington, to poignant stories from those who lost their savings -- and more -- to the allure of stocks and the power of greed.
For young readers living in an era of stock-market fascination, this engrossing account explains stock-market fundamentals while bringing to life the darkest days of the mammoth crash of 1929.
About the Author
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Chapter One: October 24
Word spread quickly on this crisp fall morning: Stocks were in big trouble. The boys selling the morning newspapers shouted the news. Serious-voiced announcers on the radio commented on it. On the street, everyone was talking about it. Something was terribly wrong with the stock market, the greatest fountain of wealth in the history of America.
In the financial district of New York City and in other offices where brokers sold stocks, people began to gather well before stock trading formally began at 10 a.m. Men and women, nervous and pale, rushed to grab seats in the special customers' rooms at brokerage houses all around Wall Street. One observer said they looked like "dying men counting their own last pulse beats."
People also hurried to the corner of Broad and Wall Streets, just across the way from the New York Stock Exchange. Hundreds, then thousands, filled the streets and sidewalks. Men in overcoats and fedoras and women on break from their stenographers' jobs crowded in front of J. P. Morgan & Company, the powerful banking company at 23 Wall Street. They lined the stairs of the Subtreasury Building, right near the statue marking where George Washington was sworn in as the nation's first president. Usually, this kind of massive crowd gathered only for fires or to peer at the gore of some new crime. This day, though, there was nothing to see.
Fear and excitement had brought them, the kind of intense, heart-pounding emotion felt when something really bad is happening. If stocks were dropping, plans for the future were disappearing too. For some people gathered there, every cent they owned was riding on stocks, those odd pieces of paper that represented small stakes in American companies. For others, the stock market's climb had simply been an amazing thing to watch.
In the 1920s many astonishing events had captivated the nation. Charles Lindbergh had successfully flown across the Atlantic, becoming a worldwide hero. Babe Ruth had blasted home runs in record numbers. Bobby Jones had dominated golf. Gangsters had shot and killed hundreds in Chicago. But the dramatic rise of the stock market outlasted and outroared them all. It had been a "magic carpet ride" that now seemed to be ending in a most spectacular way. As people gathered, they waited for details with a mixture of thrill and dread.
Motion-picture cameramen arrived to film the scene for the newsreels that ran in theaters before feature films. Hundreds of additional police, some on foot and some on horseback, were sent to keep the crowd moving. But this group was orderly; in fact, it was eerily somber, almost dazed by the mysterious events going on across the street.
For more than a year, the stock market had been the surest and easiest way in the world to get rich. A ditty in The Saturday Evening Post captured the attitude:
"O hush thee, my babe, granny's bought some more shares,
Daddy's gone to play with the bulls and the bears,
Mother's buying on tips and she simply can't lose,
And baby shall have some expensive new shoes."
Companies had sold hundreds of thousands of shares to the public to raise money to build new plants or to expand their businesses. Once the companies sold them, those shares were traded between buyers and sellers in places like the New York Stock Exchange. People invested in these stocks hoping the companies would do well. Well-managed companies that make popular products usually see their sales and profits -- and stock prices -- grow. Sometimes, though, investors buy stocks for emotional reasons. They like the name, or the idea, or even an advertisement for a company. That kind of excitement can take on a life of its own, sending a stock soaring or crashing for no rational reason.
People who had bought a piece of General Electric, Montgomery Ward, or Westinghouse in March 1928 had witnessed a buying frenzy as those shares had at least doubled in value in eighteen short months. Which stocks were hot and who had been lucky had been trolley-car chitchat, party talk, and dinner-table conversation for months. Defying gravity and common sense, dozens of stocks had jumped from $20 or $30 to $200 or $300 a share. What was to keep them from going to $400 or higher?
Hardly anything seemed capable of slowing the climb. But on a brutally hot and humid day in early September 1929, prices had started slipping and sliding. Such "breaks" in the market weren't that unusual -- in fact, stocks had dropped sharply the previous December and again in March. The smart players saw those declines as an opportunity. In the past few years, every fall had been followed by a recovery. Each time, stock prices climbed even higher than before.
At first, the shift that started in September seemed healthy, a natural cooling off of an overheated market. But in October there had been some ugly days when stock sales were too heavy. The market seemed less sure. Still, the problems didn't appear to be too serious.
Then, in the last hour of trading on Wednesday, October 23, stock prices seemed to melt. Out of nowhere, everyone seemed to want to sell at the same time. Some stocks dropped a shocking $5 or $15 a share in frantic trading because no one would step up to buy them. More than 2.6 million shares changed hands in the chaotic final hour of trading, as many as might trade in a regular day. When the gong that ended trading rang at 3 p.m., the market was weak and trembling.
On the morning of October 24, the virus seemed to have spread. People were selling shares at any price they could get, and prices were plunging with a violence never seen before. "In a society built largely on confidence, with real wealth expressed more or less inaccurately by pieces of paper, the entire fabric of economic stability threatened to come toppling down," the New York World reported somberly.
All over Wall Street, there were rumors. Half a dozen brokers working inside the Stock Exchange had collapsed and were taken to hospitals, it was whispered. Eleven well-known speculators had already killed themselves. Men, broken and broke, were jumping from buildings! The crowd craned their necks to look up at windows. Ambulances rushed to respond.
One person spotted a man atop a high building looking down at them, and assumed the man was about to jump. The crowd bunched together to watch. But the man turned out to be making some repairs, and when he went back inside, the throng was disappointed. A London newspaper reported that so many distraught stock owners jumped from windows that bodies were littering the streets of Manhattan. Not so. In truth, there were no suicides on Wall Street that day, though many people may have felt as if their world were ending.
There was, though, an ominous feeling, a deep-in-the-gut sensation that something powerful and painful was unfolding. From across the street at the Stock Exchange came a weird and relentless roar that could be heard clearly by the crowd. Steady and high-pitched, it was the combined voices of more than a thousand men inside trying to hold on to the last shreds of the greatest financial boom ever. "It was the voice of the Street," said The New York Times, "now hopeful, now tragic, making audible the history of a momentous day in the market."
Copyright © 2002 by Karen Blumenthal
Table of Contents
White Knights to the Rescue
President Hoover Responds
The King of the Bulls
A Bloody Monday
Sources, Picture Credits, and Acknowledgments
The years after the First World War were a golden age for many Americans. The 1920s didn't just sing with the rhythms of jazz, or swing with the dancing of the Charleston; they roared with the confidence and optimism of a prosperous era.
For most of the decade, jobs were plentiful and paychecks grew steadily. Mass production and innovation helped make many items widely available and affordable. Automobiles became cheaper, faster, and more comfortable. Fledgling airlines began to carry a few passengers from city to city. Electric refrigerators and washing machines freed women from some household chores. Department stores and grocery chains expanded, offering a greater selection and lower prices than neighborhood markets.
As movies talked for the first time, radio brought instant news and entertainment into living rooms, spreading the word about the many things money could buy. A new industry, advertising, advised Americans that they needed toothpaste, mouthwash, and ready-made clothing.
Young women, energized from winning the long fight for the right to vote, traded their heavy, long dresses for short, slim styles. They cut their hair short like the boys', and dared to wear makeup. Many women began to handle their own money.
With all the attention on buying and consumer goods, businessmen became widely admired public figures. The powerful men who ran the nation's largest banks, car companies, and electric utilities became national celebrities.
Money became the sign of success -- though very few people were truly wealthy. Most working Americans made just a few thousand dollars a year and worked six days a week. But those who could save some money for a down payment and spare a few dollars more from each paycheck could buy one of Henry Ford's cars or a house in the suburbs on the partial-payment plan.
Amid all the affluence, the average man saw one way that he, too, could become rich. On Wall Street, a narrow little road in New York City, magical things were said to happen to money. Men told coworkers about it, women told their sisters, neighbors told neighbors. Those who could scrape together a few hundred dollars -- or even better, a few thousand dollars -- could buy stocks, pieces of paper that represented a small ownership in a company. For much of the 1920s, stocks soared in value. People clever enough to buy them could end up with more money than they ever imagined. Someone who had the foresight to buy $10,000 of General Motors stock in 1920 would have seen the investment grow to more than $1.5 million by 1929.
Unfortunately, few people had that kind of cash or insight -- or luck. Many investors never made money in the market, or at least not very much. And there weren't all that many stock investors to start with. Out of 121 million people, probably just 1.5 million to 3 million of them owned stocks -- just one or two out of every 100 Americans.
Still, as stock prices climbed higher and higher in 1928 and 1929, Americans were captivated by the idea of making money in such a fast and fantastic way. Newspapers listed daily stock prices. Radio broadcasts gave the day's stock-market highlights.
The fascination with wealth drew many more people than had ever before gambled their savings in such a risky and unpredictable place as the stock market. Their zeal was supported and encouraged by some of the nation's most respected leaders. As stock prices seemed to climb to the sky and beyond, these prominent men began to chase after wealth themselves. Executives who had spent their lives building solid reputations cut secret deals in pursuit of their own stock-market riches. Greed took hold.
Few seemed to care. The market was enchanted, part of an affluent and exciting time that seemed likely to continue forever. Politicians, professors, and businessmen proclaimed that this was a new era, where the old ups and downs no longer applied. Americans flourishing in the 1920s shared a feeling, said historian David M. Kennedy, "that they dwelt in a land and time of special promise."
Then came October 1929.
Copyright © 2002 by Karen Blumenthal