Wall Street Crash

One way of making money during the 1920s was to buy stocks and shares. Prices of these stocks and shares constantly went up and so investors kept them for a short-term period and then sold them at a good profit. As with consumer goods, such as motor cars and washing machines, it was possible to buy stocks and shares on credit. This was called buying on the margin and enabled speculators to sell off shares at a profit before paying what they owed. In this way it was possible to make a considerable amount of money without a great deal of investment.

In an article entitled Everybody Ought to be Rich John Jaskob claimed that by investing $15 a month in stocks and shares it would be possible to make $80,000 over the next 20 years. Another investor, Will Payne, stated in 1929 that it had become so easy to make money on the Wall Street Stock Exchange, that it had ceased to become a gamble. He went on to say that a gambler wins only because someone loses, when you invest in stocks and shares, everybody wins.

On 3rd September 1929 the stock market reached an all-time high. In the weeks that followed prices began to decline. Then on 24th October, over 12,894,650 shares were sold. Prices fell dramatically as sellers tried to find people willing their shares. That evening, five of the country's bankers, led by Charles Edward Mitchell, chairman of the National City Bank, issued a statement saying that due to the heavy selling of shares, many were now under-priced. This statement failed to halt the reduction in demand for shares. On 29th October, over 16 million shares were sold. The market had lost 47 per cent of its value in twenty-six days.

Fred Bell was a wealthy businessman but was forced to sell apples after the Wall Street Crash.
Fred Bell was a wealthy businessman but was
forced to sell apples after the Wall Street Crash.

Although less than one per cent of the American people actually possessed stocks and shares, the Wall Street Crash was to have a tremendous impact on the whole population. The fall in share prices made it difficult for entrepreneurs to raise the money needed to run their companies. Within a short time, 100,000 American companies were forced to close and consequently many workers became unemployed. As there was no national system of unemployment benefit, the purchasing power of the American people fell dramatically. This in turn led to even more unemployment.

It was later discovered that some Wall Street bankers had been partly responsible for the crash. It was pointed out that from September 1929, Albert H. Wiggin had begun selling short his personal shares in Chase National Bank at the same time he was committing his bank's money to buying. He shorted over 42,000 shares, earning him over $4 million. His earning were tax-free since he used a Canadian shell company to buy the stocks.

As William E. Leuchtenburg, the author of Franklin D. Roosevelt and the New Deal (1963) pointed out: "At a time when millions lived close to starvation, and some even had to scavenge for food, bankers like Wiggin and corporation executives like George Washington Hill of American Tobacco drew astronomical salaries and bonuses. Yet many of these men, including Wiggin, manipulated their investments so that they paid no income tax at all. In Chicago, where teachers, unpaid for months, fainted in classrooms for want of food, wealthy citizens of national reputation brazenly refused to pay taxes or submitted falsified statements."

Senator Burton Wheeler of Montana argued: "The best way to restore confidence in the bankis would be to take these crooked presidents out of the banks and treat them the same way as we treated Al Capone when he failed to pay his income-tax." Senator Carter Glass of Virginia claimed: "One banker in my state attempted to marry a white woman and they lynched him."

The panic increased when Ivar Kreuger shot himself in March 1932. It has been estimated that since the Wall Street Crash he had lost between $50 million and $100 million ($750 million and $1.5 billion in today's currency). The following month it was revealed that he had been a swindler who had forged $100,000,000 in bonds.

Soon afterwards the leading utility magnate, Samuel Insull, fled the United States to France. Insull was the chairman of the boards of sixty-five companies that folded, wiping out the life savings of 600,000 shareholders. When the United States asked French authorities that he be extradited, Insull moved on to Greece, where there was not yet an extradition treaty with the United States. He later moved to Turkey where he was arrested in 1934 and extradited back to the United States. He was defended by famous Chicago lawyer Floyd Thompson and found not guilty on all counts.

Primary Sources

(1) Frederick Lewis Allen, Only Yesterday (1931)

Throughout 1927 speculation had been increasing. The amount of money loaned to brokers to carry margin accounts for traders had risen during the year from $2,818,561,000 to $3,558,355,000 - a huge increase. During the week of December 3, 1927, more shares of stock had changed hands than in any previous week in the whole history of the New York Stock Exchange. One did not have to listen long to an after-dinner conversation, whether in New York or San Francisco or the lowliest village of the plain, to realize that all sorts of people to whom the stock ticker had been a hitherto alien mystery were carrying a hundred shares of Studebaker or Houston Oil, learning the significance of such recondite symbols as GL and X and ITT, and whipping open the early editions of afternoon papers to catch the 1.30 quotations from Wall Street.

(2) Cecil Roberts, The Bright Twenties (1938)

The stock market hysteria reached its apex in 1929. Everyone gave you tips for a rise. Everyone gave you tips for a rise. Every was playing the market. Stocks soared dizzily. I found it hard not to be engulfed. I had invested my American earnings in good stocks. Should I sell for a profit? Everyone said, "Hang on - it's a rising market". On my last day in New York I went down to the barber. As he removed the sheet he said softly, "Buy Standard Gas. I've doubled. It's good for another double." As I walked upstairs, I reflected that if the hysteria had reached the barber-level, something must soon happen.

(3) John J. Raskob, Everybody Ought to be Rich (June, 1929)

If a man saves $15 a week, and invests in good common stocks, and allows the dividends and rights to accumulate, at the end of twenty years he will have at least $80,000 and an income from investments of around $400 a month. He will be rich. And because income can do that, I am firm in my belief that anyone not only can be rich, but ought to be rich.

(4) Alec Wilder was interviewed by Studs Terkel in Hard Times (1970)

I knew something was terribly wrong because I heard bellboys, everybody, talking about the stock market. About six weeks before the Wall Street Crash, I persuaded my mother in Rochester to let me talk to our family adviser. I wanted to sell stock which had been left me by my father. He got very sentimental: "Oh your father wouldn't have liked you to do that." He was so persuasive, I said O.K. I could have sold it for $160,000. Four years later, I sold it for $4,000.

(5) New York Times (25th October, 1929)

The most disastrous decline in the biggest and broadest stock market of history rocked the financial district yesterday. In the very midst of the collapse five of the country's most influential bankers hurried to the office of J. P. Morgan & Co., and after a brief conference gave out word that they believe the foundations of the market to be sound, that the market smash has been caused by technical rather than fundamental considerations, and that many sound stocks are selling too low.

Suddenly the market turned about on buying orders thrown into the pivotal issues, and before the final quotations were tapped out, four hours and eight minutes after the 3 o'clock bell, most stocks had regained a measurable part of their losses.

The break was one of the widest in the market's history, although the losses at the close were not particularly large, many having been recouped by the afternoon rally.

It carried down with it speculators, big and little, in every part of the country, wiping out thousands of accounts. It is probable that if the stockholders of the country's foremost corporations had not been calmed by the attitude of leading bankers and the subsequent rally, the business of the country would have been seriously affected. Doubtless business will feel the effects of the drastic stock shake-out, and this is expected to hit the luxuries most severely.

The total losses cannot be accurately calculated, because of the large number of markets and the thousands of securities not listed on any exchange. However, they were staggering, running into billions of dollars. Fear struck the big speculators and little ones, big investors and little ones. Thousands of them threw their holdings into the whirling Stock Exchange pit for what they would bring. Losses were tremendous and thousands of prosperous brokerage and bank accounts, sound and healthy a week ago were completely wrecked in the strange debacle, due to a combination of circumstances, but accelerated into a crash by fear.

Under these circumstances of late tickers and spreads of 10, 20, and at times 30 points between the tape prices and those on the floor of the Exchange, the entire financial district was thrown into hopeless confusion and excitement. Wild-eyed speculators crowded the brokerage offices, awed by the disaster which had overtaken many of them. They followed the market literally "in the dark," getting but meager reports via the financial news tickers which printed the Exchange floor prices at ten-minute intervals.

Rumors, most of them wild and false, spread throughout the Wall Street district and thence throughout the country. One of the reports was that eleven speculators had committed suicide. A peaceful workman atop a Wall Street building looked down and saw a big crowd watching him, for the rumor had spread that he was going to jump off. Reports that the Chicago and Buffalo Exchanges had closed spread throughout the district, as did rumors that the New York Stock Exchange and the New York Curb Exchange were going to suspend trading. These rumors and reports were all found, on investigation, to be untrue.

(6) John D. Rockefeller, statement (29th October, 1929)

Believing that fundamental conditions of the country are sound and that there is nothing in the business situation to warrant the destruction of values that has taken place on the exchanges during the past week, my son and I have for some days been purchasing sound common stocks

(7) New York Times (30th October, 1929)

Stock prices virtually collapsed yesterday, swept downward with gigantic losses in the most disastrous trading day in the stock market's history. Billions of dollars in open market values were wiped out as prices crumbled under the pressure of liquidation of securities which had to be sold at any price.

There was an impressive rally just at the close, which brought many leading stocks back from 4 to 14 points from their lowest points of the day.

Efforts to estimate yesterday's market losses in dollars are futile because of the vast number of securities quoted over the counter and on out-of-town exchanges on which no calculations are possible. However, it was estimated that 880 issues, on the New York Stock Exchange, lost between $8,000,000,000 and $9,000,000,000 yesterday. Added to that loss is to be reckoned the depreciation on issues on the Curb Market, in the over the counter market and on other exchanges.

Banking support, which would have been impressive and successful under ordinary circumstances, was swept violently aside, as block after block of stock, tremendous in proportions, deluged the market. Bid prices placed by bankers, industrial leaders and brokers trying to halt the decline were crashed through violently, their orders were filled, and quotations plunged downward in a day of disorganization, confusion and financial impotence.

Groups of men, with here and there a woman, stood about inverted glass bowls all over the city yesterday watching spools of ticker tape unwind and as the tenuous paper with its cryptic numerals grew longer at their feet their fortunes shrunk. Others sat stolidly on tilted chairs in the customers' rooms of brokerage houses and watched a motion picture of waning wealth as the day's quotations moved silently across a screen.

It was among such groups as these, feeling the pulse of a feverish financial world whose heart is the Stock Exchange, that drama and perhaps tragedy were to be found. The crowds about the ticker tape, like friends around the bedside of a stricken friend, reflected in their faces the story the tape was telling. There were no smiles. There were no tears either. Just the cameraderie of fellow-sufferers. Everybody wanted to tell his neighbor how much he had lost. Nobody wanted to listen. It was too repetitious a tale.

(8) Selected share prices from the Wall Street Journal (1928)










Montgomery Ward





New York Central





Union Carbide & Carbon





American Telephone & Telegraph





Anaconda Copper










Electric Bond





(9) Frederick Lewis Allen, Only Yesterday (1931)

The New York Times averages for fifty leading stocks had been almost cut in half, falling from a high of 311.90 in September to a low of 164.43 on November 13th; and the Times averages for twenty-five leading industrials had fared still worse, diving from 469.49 to 220.95. The Big Bull Market was dead. Billions of dollars' of profits - and paper profits - had disappeared. The grocer, the window-cleaner, and the seamstress had lost their capital. In every town there were families which had suddenly dropped from showy affluence into debt. Investors who had dreamed of retiring to live on their fortunes now found themselves back once more at the very beginning of the long road to riches. Day by day the newspapers printed the grim reports of suicides.

(10) Yip Harburg was interviewed by Studs Terkel in Hard Times (1970)

We thought American business was the Rock of Gibraltar. We were the prosperous nation, and nothing could stop us now. A brownstone house was forever. You gave it to your kids and they put marble fronts on it. There was a feeling of continuity. If you made it, it was there forever. Suddenly the big dream exploded. The impact was unbelievable.

I was walking along the street at that time, and you'd see the bread lines. The biggest one in New York City was owned by William Randolph Hearst. He had a big truck with several people on it, and big cauldrons of hot soup, bread. Fellows with burlap on their shoes were lined up all around Columbus Circle, and went for blocks and blocks around the park, waiting.

(11) M. A. Hamilton, In America Today (1932)

For years it has been an article of faith with the normal American that America, somehow, was different from the rest of the world. The smash of 1929 did not, of itself, shake this serene conviction. It looked, at the time, lust because it was so spectacular and catastrophic, like a shooting star disconnected with the fundamental facts. So the plain citizen, no matter how hard hit, believed. His dreams were shattered; but after all they had been only dreams; he could settle back to hard work and win out.

Then he found his daily facts reeling and swimming about him, in a nightmare of continuous disappointment. The bottom had fallen out of the market, for good. And that market had a horrid connection with his bread and butter, his automobile, and his installment purchases. Worst of all, unemployment became a hideous fact, and one that lacerated and tore at self-respect.

That is the trouble that lies at the back of the American mind. If America really is not "different," then its troubles, the same as those of Old Europe, will not be cured automatically. Something will have to be done - but what?

(12) New York Times (5th June, 1932)

Darwin's theory that man can adapt himself to almost any new environment is being illustrated, in this day of economic change, by thousands of New Yorkers who have discovered new ways to live and new ways to earn a living since their formerly placid lives were thrown into chaos by unemployment or kindred exigencies. Occupations and duties which once were scorned have suddenly attained unprecedented popularity

Two years ago citizens shied at jury duty. John Doe and Richard Roe summoned to serve on a jury, thought of all sorts of excuses. They called upon their ward leaders and their lawyers for aid in getting exemption, and when their efforts were rewarded they sighed with relief But now things are different.

The Hall of Jurors in the Criminal Courts Building is jammed and packed on court days. Absences of talesmen are infrequent. Why? Jurors get $4 for every day they serve.

Once the average New Yorker got his shine in an established bootblack parlor paying 10 cents, with a nickel tip. But now, in the Times Square and Grand Central zones, the sidewalks are lined with neophyte "shine boys," drawn from almost all walks of life. They charge a nickel and although a nickel tip is welcomed it is not expected.

In one block, on West Forty-third Street, a recent count showed nineteen shoe-shiners. They ranged in age from a 16-year-old, who should have been in school, to a man of more than 70, who said he had been employed in a fruit store until six months ago. Some sit quietly on their little wooden boxes and wait patiently for the infrequent customers. Others show true initiative and ballyhoo their trade, pointing accusingly at every pair of unshined shoes that passes.

Shining shoes, said one, is more profitable than selling apples - and he's tried them both.

"You see, when you get a shine kit it's a permanent investment," he said, "and it doesn't cost as much as a box of apples anyway."

According to the Police Department, there are approximately 7,000 of these "shine boys" making a living on New York streets at present. Three years ago they were so rare as to be almost non-existent, and were almost entirely boys under 17.

To the streets, too, has turned an army of new salesmen, peddling everything from large rubber balls to cheap neckties. Within the past two years the number of these hawkers has doubled. Fourteenth Street is still the Mecca of this type of salesmen; thirty-eight were recently counted between Sixth Avenue and Union Square and at one point there was a cluster of five.

Unemployment has brought back the newsboy in increasing numbers. He avoids the busy corners, where news stands are frequent, and hawks his papers in the side streets with surprising success. His best client is the man who is "too tired to walk down to the corner for a paper."

Selling Sunday papers has become a science. Youngsters have found that it is extremely profitable to invade apartment houses between 11 and 12 o'clock Sunday morning, knock on each apartment door, and offer the Sunday editions. Their profits are usually between $1.50 and $2.

(13) Edmund Wilson, New Republic (February, 1933)

There is not a garbage-dump in Chicago which is not diligently haunted by the hungry. Last summer the hot weather when the smell was sickening and the flies were thick, there were a hundred people a day coming to one of the dumps. A widow who used to do housework and laundry, but now had no work at all, fed herself and her fourteen year old son on garbage. Before she picked up the meat, she would always take off her glasses so that she couldn't see the maggots.