Finance is the art of passing currency from hand to hand until it finally disappears.

—Robert W. Sarnoff

Downtown [the Stock Exchange], there are two emotions: fear and greed. The rest is bullshit.

—A New York stockbroker


Even the most casual student of American history can tell you that the most significant happening in the United States in 1929 was the stock market crash, bringing to an end the great bull market of the 1920s. And yet, when the year came to an end, the New York Times did not select this event as the biggest news story of 1929, choosing instead Admiral Richard Byrd's journey to the South Pole.

At first blush, the Time's choice seems totally incomprehensible. But upon a review of events preceding and following the crash, it appears more logical. For when it happened, the Wall Street fiasco did not seem as earthshaking as it does today; it would be some time before history would escalate its importance.

For more than a century, America had suffered periodic economic downturns that struck the nation approximately every twenty years. The years 1829, 1837, 1857, 1873, and 1893 were ones that saw the beginning 100 of major recessions, and another hit twenty-one years later, in 1913. Fortunately, the beginning of World War I brought about a need for goods, which quickly revived the flagging economy. If one gives credence to the old cliche "History repeats itself," then the 1929 stock market crash and subsequent Depression were right on schedule.

Many have been left with the impression that the stock market crash of October 1929 both brought the market to its nadir and triggered the Depression. Although these were history-making days on Wall Street, the market did not bottom out until November, followed by a year-end rally that would see stock prices recover substantially; by the following spring, more than half the losses from the crash had been recovered. When 1929 came to an end, most economists predicted that 1930 would be a good year. And while the roots of the Depression were taking hold, it was nine months after the market crash before it was broadly acknowledged that the Great Depression was under way.

The year 1928 had seen security values increase by over $11 billion, but it had not been a year without trauma in financial markets. There had been sharp: sell-offs in both June and December, the New York Times commenting on the June downturn as follows: "Wall Street's bull market collapsed with a detonation heard round the world." So investors had become used to periodic price breaks and took them in stride, confident that the overall trend of the market was in only one direction—up although one might have to take a few lumps along the way.

In January 1929, the market broke smartly from the starting gate, with security values up a heady 7 percent for the month. In his State of the Union address, President Coolidge painted a rosy picture: "No Congress ever assembled has met with a more pleasing prospect than that which appears at the present time. In the domestic field- there is tranquility and contentment . . . and the highest ' record years of prosperity."

February and March, however, produced a few discordant notes:

• The Senate passed a resolution asking the Federal Reserve to work up some guidelines for possible legislation to inhibit speculation.

• The House Banking and Currency Committee began preparations for an investigation of the stock market.

• The Federal Reserve Board on February 2 sent a confidential memorandum to its member banks across the land, requesting that they refuse to lend money for the purpose of stock market speculation. Five days later, the board warned of "the excessive amount of the country's credit absorbed in speculative loans."

The Federal Reserve Bank lent money to its member banks, who in turn lent it to stockbrokers, who lent it to their customers. Stocks could be purchased on margin, with the investor coming up with only a portion of the purchase price. When the Federal Reserve's member banks  tightened their purse strings, interest rates on call money soared, to 10,' to 15, and, finally, on March 26, to 20 percent. The market responded by going into a tailspin. But it appeared to have a mind of its own, stubborn in the extreme, for every time bad news sent it southward, some rationale was proposed, or some financial leader voiced confidence, and the market got back on its upward track. This time it was Charles Mitchell who stepped into the breach. As chairman of the National City Bank, he was, in the heady days of the bull market, a hero on Wall Street, although he would later be jailed for tax evasion. Mitchell announced that his bank would lend money to brokers at more, favorable rates, totally undercutting the efforts of the Federal Reserve Bank to return the credit markets to some degree of sanity. Call money ` rates retreated, the stock market jumped forward again, and it was business as usual, with borrowed money used to fuel the furnaces of speculation.

There was another market break in May, but once again the market righted itself. Downs were regarded as "corrections" or "buying opportunities," and another came in July, but a record earnings report from U.S. Steel sent the market on its merry way upward again. In August, three luxury liners to Europe offered brokerage offices on board so that vacationing Americans would not miss a beat in their stock market dabbling while on the high seas. A seat on the New York Stock Exchange sold for a record $615,000, and GM executive John J. Raskob's article in the Ladies' Home Journal, entitled "Everybody Ought to Be Rich," advised that $15 put into the market monthly should produce a nest egg of $80,000 in just twenty years! A Time article published in the spring had said, "Most of the investors are new, small, ignorant. They speculate to double their capital rather than invest to get a steady increase. They are motivated by faith." And investors literally flocked to Wall Street in the summer of 1929 to see where the action was and, in some cases, to do some on-the-spot trading. NBC interviewed a visiting schoolteacher, who said that he had come to New York to speculate in the market and that he would be departing, when he had made $50,000.

On August 20, the Wall Street Journal, which remained steadfastly bullish throughout the crash, commented that the recent rally "establishes the major upward trend," and that "the outlook for the fall is the brightest in years." On September 2, Evangeline Adams, an astrologer who had a large following, predicted that "the Dow Jones should climb to heaven." Whether it reached heaven or not must be left to higher powers, but the next day it reached what proved to be the high watermark of the great bull market, 381.17 on the Dow.

Just three days into September, economist Roger Babson stated that "Sooner or later a crash is coming," and the Dow plunged, to be righted by some, consoling words from Professor Irving Fisher of Yale University, another well-regarded source of financial prophecy, who would remain optimistic until virtually every hope had been removed. On September 11, although it was not public knowledge, Chase Bank chairman Alfred Wiggin began selling his bank's stock short, a bit of foresight that would net $4 million. Later in the month, a scandal shook London's financial markets when one Clarence Hatry was jailed for a swindle of hefty proportions, leaving a goodly number of the city's financial institutions considerably poorer. Many Englishmen liquidated their positions in the American stock market to obtain needed funds, and a good deal more money came back to the British Isles from America when higher interest rates became available than could be obtained in New York.

October did not begin auspiciously for Wall Street. In a statement on October 1, the American Bankers Association voiced its concern over the large amounts of loans to small borrowers. The market broke on October 5, only to rebound as if by reflex. Yale's Professor Fisher predicted on October 15 that he expected to see "the stock market a. good deal higher than it is today within a few months." The next day, a committee of the Investment Bankers Association said that speculation "has reached the danger point and many stocks are selling above their values," a statement that sent security prices down once more, but values rebounded over the next three trading days. On October 22, President Hoover received a report from J. P. Morgan executive Thomas Lamont, declaring that "there is nothing in the present situation to suggest that the normal economic forces, working to correct excesses and to restore the proper balance, are still not operative and adequate."

Two days later, on October 24, often referred to as Black Thursday, there occurred what the New York Times described as the most disastrous decline in the biggest and broadest market of history." By noon, security values had eroded by $6 billion, and the board of governors met to consider whether or not to close down the exchange. They decided not to, and a group of leading financiers decided to prop up the market, pooling $240 million for that purpose. Their broker, Richard Whitney, vice president of the New York Stock Exchange, later to be jailed for misappropriating the funds of some of his customers, marched dramatically on to the floor of the exchange and began to buy selected blue• chip stocks, to the cheers of onlookers. Thomas Lamont told the press that there had been a "little distress selling," and that some funds had been marshaled "to fill the air pockets." The market recovered somewhat, but bankers called their broker customers for more collateral for their loans, and brokers in turn dunned their on margin customers for additional collateral for theirs. If it was not directly forthcoming, brokers sold them out. A guard at the New York Stock Exchange described the scene on the floor of that august institution: "They roared like a lot of lions and tigers. They hollered and screamed, they clawed at one another's collars. It was like a bunch of crazy men. Every once in a while, when Radio or Steel or Auburn would take another tumble, you'd see some poor devil collapse on the floor." That night, astrologer Adams consoled her customers by predicting that the market would recover. She then called her broker and instructed him to sell all of her securities.

Despite, statements of confidence by President Hoover and the leaders of Bethlehem Steel, Standard Oil, and General Motors, the stock market took another record-breaking plunge on Monday, October 28, setting the stage for October 29, when the loss in the value of stocks on the New York Stock Exchange alone would be twice the value of all the currency in circulation in the United States at the time. Men working at the exchange wept openly, and Trinity Church was jammed with worshipers. The director of the exchange's medical staff was well prepared for many of the cases he treated that day, having dealt with shell-shocked victims during World War I. Some comments the next day follow:

• "Stock prices virtually collapsed yesterday, swept downwind with gigantic losses in the most disastrous trading day in stock market history." (New York Times)

• "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 been ° purchasing sound common stocks." (John D. Rockefeller, Sr.)

• "Sure he's buying. Who else has any money?" (Comedian Eddie Cantor)

• "WALL STREET LAYS AN EGG" (Variety headline)

During the next two trading days, stocks steadied somewhat. U.S. Steel declared an extra dividend, and the president announced plans to cut taxes. But then the market moved still lower, reaching its bottom in mid-November. The London Times reported that "hysteria has now disappeared from Wall Street," and Bernard Baruch wired his British friend Winston Churchill: "FINANCIAL STORM DEFINITELY PASSED." For the last six weeks of the year, the stock market was on the rise: U.S. Steel went from a low of 150 to 171, GE from 168 to 243, and AT&T from 193 to 243. Christmas shopping sales topped those of 1928, and the Department of Labor predicted "a splendid employment year" coming up in 1930. The New York Times, following the last trading day on the New York Stock Exchange, wrote, "A general price rise ends stock trading with Wall Street moderately bullish for 1930."

•"October, this is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, December, June, August and February." (Mark Twain, Pudd'nhead Wilson)