1929: The Great Crash (2009) Movie Script
1
In 1929, years of booming prosperity
ended in catastrophe.
It was the biggest stock market
crash since records began.
It is impossible to underestimate the
shock, a sense of stunned disbelief.
First-time investors borrowed huge amounts
of money to speculate on the market.
The market broke very sharply, and a
lot of people were wiped out with it.
It was very painful.
Later, thousands of banks failed.
Millions lost everything.
The poverty was really all around
us. It was really, really pitiful.
The Crash was followed by a Depression
that spread across the world,
lasted for a decade
and was a prelude to war.
This is a story
of a financial disaster
that we hoped
would never happen again.
Wednesday 23rd October 1929,
without warning,
share prices are plummeting
on the New York Stock Exchange.
Investors are stunned.
For the last five years,
the market has only gone up.
In the space of an hour, a staggering
2.5 million shares are sold.
The next day,
the downward spiral continues.
As people came in
to trade stocks on October 24th,
there was a sense that
maybe something had changed.
All of a sudden,
there just weren't buyers.
People were willing to sell, but there
weren't buyers coming forth to buy the stocks.
And prices began to fall $2, $4,
$10 a share. It was horrifying.
That morning, there were drops on the Stock
Exchange that were so sharp and so dire,
stock suddenly dropping
10, 20, 30 points at a time,
that it's said that there were
shrieks and gasps in the gallery
of the New York Stock Exchange.
People are stunned
by what is happening, and terrified.
Thousands of people begin to gather
outside the Stock Market.
10,000 people.
They fill the streets
from Broadway to the East River.
People wanting to know what
was going, they went there.
These huge crowds gathered around
the Stock Exchange,
around the statues
and on the stairs,
waiting to get any kind of news they
could as people came out of the exchange.
They could hear the shouting and
yelling as people were buying and selling
but they but they
didn't know what was going on
until they gathered
and they stayed there, to find out.
Few of the thousands waiting in the crowd appreciated
the scale of the disaster that was about to unfold.
Nor could they imagine that,
over the next five days,
a financial catastrophe would sweep away
the foundations of America's prosperity.
But to understand what brought about
the crash, we need to go back a decade,
to a time when American confidence grew so high
that it seemed the good times would last for ever.
In 1919, the US had emerged
victorious from World War one.
A mood of optimism was in the air.
Britain and its European Allies were
exhausted financially from the War.
But the US economy was thriving and
the world danced to the American tune.
The uncertainties were over.
There seemed little doubt about
what was going to happen.
America was going on the greatest,
gaudiest spree
in history, and there was
going to be plenty to tell about it.
In the 1920s, everyday life
was changing.
Electrification
transformed America.
Towns were hooked up to the grid.
New technologies emerged -
aeroplanes, radios.
Domestic goods that had started life
as luxuries, now became necessities.
The car industry also boomed as people flocked to
buy one of the new Ford or Chrysler automobiles.
An era of boundless prosperity
seemed to have begun.
This is the flowering of consumer culture and
mass consumption on a scale never before seen.
There is also heavy
instalment buying
to encourage people to buy big ticket consumer
items, so that they can buy those items on credit.
This type of consumer credit
was another innovation of the 1920s.
For the first time, the idea of "buy
now, pay later" hit the mainstream.
There's a kind of a play culture that
develops alongside this consumerism which says,
"We believe now in instant gratification.
Take care of the now. Live for the moment. "
It was a whole ideology,
that we were in a new economic era,
and it was the birthright of every
self-respecting American to be rich.
With easy credit
and more disposable income,
Americans were now looking for
new ways to get even richer.
Since World War One, the US government had sold
bonds, known as Liberty Bonds, to pay for the war.
This was a way to
borrow money from the public,
who, in turn, would receive interest
payments on the bond's value.
Celebrities such as Charlie Chaplin
and Douglas Fairbanks
had been recruited to promote them
at huge rallies.
Liberty bonds caused many people to become
investors in securities for the first time.
For the first time in their lives,
they got interest payments
every six months,
And the security was something
they could trade on the markets,
so they could look in the newspaper and
see what the price of my bond is today.
Liberty bonds
created an investing culture.
Most people had never purchased
securities before
and it got ordinary people
accustomed to buying securities.
Now there was another group
of people who thought
they could take advantage
of this new investing culture -
the bankers of Wall Street.
For years Wall Street,
the centre of American finance,
was made up of
a small, elite group of bankers
doing business with each other in a
society closed off to the general public.
But one man saw an opportunity that would
change the face of the financial world.
Charles Mitchell, president of National City
Bank, spotted a lucrative gap in the market.
Mitchell saw that investors had purchased a
lot of government bonds during World War I,
and so, he said, "Now we
have an investing public there,
"all we need to do is market other
products like corporate bonds,
"common stocks, and just tell people
these are respectable investments. "
Mitchell was a natural salesman
with a big ambition.
If people were willing to buy bonds
to raise capital for the government,
surely they could be tempted to buy
stocks and shares,
to raise capital for private companies
listed on the New York Stock Exchange?
And they could make a profit
for themselves in the process.
Gradually, people who never dreamed that
they would invest in stocks were doing so,
and stocks lost a lot of the stigma.
Historically, stocks had been considered
much too risky for ordinary people,
whereas in the 1920s, there was a sense that,
investing in stocks was, in fact, not only safe
but reliable and respectable.
The idea took off.
And to exploit this lucrative new market, Mitchell
opened brokerage offices all across the country
where people who had the money
but not the investment know-how
could speculate in
stocks and shares.
This speculative frenzy embraced all
kinds of people, not just professionals.
Ordinary people began participating,
as well, in unprecedented numbers
all across the country - not just in New
York City but in cities and small towns -
all across America people
were in love with the Stock Market.
Technology made it all possible.
The latest share prices flashed from Wall Street
could be printed out within minutes across America
using telegraphic
ticker-tape machines.
You could find ticker tape
in night clubs in railroad depots,
in beauty parlours, on ocean liners.
The market became a pervasive part of
America's play culture in the 1920s.
I eat sleep, dream, talk stocks,
the only way, I believe,
to make money. It's exciting.
I love it
17,000 dollars' profit
on 3,500 dollars' capital.
Not bad!
There were wild speculations
in all kinds of securities -
movie company stocks, aeronautical
stocks, all the auto company stocks.
One of the hot stocks of the 1920s
was Radio Corporation of America.
It was a lot like today's Google.
It was cutting-edge technology.
They had this idea that you could
put radios in cars - imagine that(!)
The American investing public began
to connect the products they were using
that were coming from
corporate America
with the notion that, "hey, I might own a share of
the company that makes that product that I like. "
By the mid-20s, around 3 million
Americans were in the market,
and Wall Street gripped the public imagination.
With tales of fortunes being made overnight,
the idea of a great bull market - where
shares only seemed to go up - took hold.
Every popular magazine,
every newspaper, every radio station
was fascinated by what was going on
in the Stock Market.
People charted the activities of celebrities
like Charlie Chaplin or Groucho Marx
and were fascinated by what stocks
they happened to be speculating in.
The young comic actor Groucho Marx
invested all his savings into the market
and was so pleased with his profits on paper
that he persuaded his brothers to invest, too.
What an easy racket.
RCA went up seven points
since this morning.
I just made myself
7,000 dollars.
But it wasn't just
celebrities becoming speculators.
The big Wall Street speculators
were becoming celebrities themselves.
They were thought of as creative,
entrepreneurial and bringing wealth to America.
Joseph Kennedy, father of
the future President Kennedy,
was one of this new breed
of shrewd financial superstar.
People were fascinated because some of these
men, like Joseph Kennedy, were ordinary folks.
They were men from nowhere
and their rapid rise on the market
was a kind of inspiration to ordinary folk that
that might even be possible for them some day.
Stories circulated that anyone from bellboys
to barbers could make easy money on the market.
A shoeshine boy on Wall Street, Pat Bologna, was one
of those inspired by these tales of rags to riches.
Everyone was going
to make a fortune.
If you lived in New York,
the Stock Market was king.
My father was
probably about 17 or 18.
On a daily basis,
he would shine the shoes
of, literally,
the great men of America.
People like Joseph Kennedy,
executives like Mitchell.
He would converse with them and became somewhat
of an expert on things like the Federal Reserve
and things that you wouldn't think
that a shoeshine would be expert on.
But he was talking to the great minds
of Wall Street every day, all day.
So my father began to invest
in the Stock Market.
If the truth be told, I learned how
to read reading the stock pages.
Cos that was what my father did. I
mean, we grew up with the Stock Market.
There was the Stock Market for breakfast,
and for dinner when he came home.
The Stock Market was the world.
I started in 1928 because,
like many young people,
I wanted to go to the place where
everybody was making all this money.
My first job was to be a messenger
boy on the floor of the Exchange.
It took only a week or two to find out
that, most of the time, people are greedy.
People had so much faith
in the bull market
that they borrowed increasing sums of
money to speculate on rising share prices.
This way of buying shares was known
as "buying on margin".
The investor was required
to put down only part of the money,
with their broker
funding the rest.
The culture of "buy now, pay later"
had spread to the Stock Market.
Buying stocks on margin means essentially
that you're buying them with borrowed money.
By the late 1920s, 90% of the purchase price
of the stock is being made with borrowed money.
There were no rules about
how much you could borrow,
and people borrowed
enormous sums of money to buy stocks.
You could buy $100 stock for $25,
and then the brokerage firm
would loan you the other 75.
And if the stock went up - and in the late
'20s, everything seemed to go up and up -
then that $25 could turn into
an investment worth 200 or 300.
So it became a huge part of the US
economy to loan money for the Stock Market.
In fact, in the late 1920s, nearly 40
cents of every dollar loaned was for stocks.
This vast influx of borrowed money
into the Stock Market
created more demand for shares,
pushing prices ever upwards.
In 1928, the market went up
by almost 50% in just 12 months.
And as stocks continued to rise, more and more
investors borrowed money to get a piece of the action.
One of them was shoeshine boy
Pat Bologna.
My father didn't have a lot
of money in the Stock Market.
He told me at the time
he had about $6,000 in cash.
But remember, $6,000 in cash
translated into a lot of stock
because in those years, you only
had to put 10% down for margin.
So at $6,000, you could have
$60,000-worth of stock.
Wall Street
was hungry for new punters.
There was one group of would-be investors
that the Street had always ignored,
but whose money it now wanted.
Up until the 1920s, women had played
a very small role on the Stock Market.
Part of this was simply
gender prejudice.
They were considered incapable
of the kind of cool sangfroid
that was necessary if you speculated
in the market. But in the 1920s,
part of the popularisation of the Stock
Market included huge numbers of women.
Well, the '20s were
a big time for women, anyway.
They really stepped out
on their own.
They began to take control of their own money,
they went to college in record numbers in the 1920s,
and as they did that, they also
got interested in the Stock Market,
and it was a way for them
to build their own wealth.
One such investor was a pioneering New
York photographer called Alice Austen.
She lived on Staten Island, just
across the water from Wall Street.
She had moved into this house when
she was a couple of months old.
She was bright, she was adventurous.
By the time she was 11,
she had received a camera, which
was a new invention by the time.
And she immediately took to it.
Over the years, she took
some 8,000 glass-plate negatives,
making her one of America's earliest
and most prolific photographers.
Alice's inheritance from her grandfather
had funded a comfortable lifestyle,
but it had dwindled by the 1920s, and she was
tempted by Wall Street's promise of a quick buck.
Alice Austen discovers that she's running a
little low, and the question becomes, "What to do?"
Her friends
urged her to be conservative,
cut some spending, maybe not go
to Europe, maybe not buy a car.
Instead, Alice found a broker who advised her no,
buy stocks, become rich quick, and you know what?
You can borrow money, so you can buy
even more stocks, buying on margin.
And Alice Austen thought that, hey,
sounds like a good idea to me.
Throughout the soaring market
of the 1920s,
the Republican party stayed in power, on
the back of America's increasing prosperity.
Calvin Coolidge
became President in 1923.
An investor himself, he was notably silent
on the speculative mania gripping Wall Street.
Calvin Coolidge typifies the laissez-faire,
devil-may-care recklessness of the 1920s.
He was famous for saying that the
business of America IS business.
It was a prosperous period. Business was
making money. Wall Street was making money.
The politicians, I think, just said, "Well,
everything's fine. The economy's growing.
"The market takes care of things, and the
government's job is to get out of the way. "
During the Coolidge presidency, Wall
Street's power continued to grow unchecked.
His administration had close links with
an elite group of bankers and financiers -
Wall Street's inner circle.
Their wealth and connections gave them immense
influence over the government's financial policy.
There were small,
elite, private partnerships.
This was really the royalty
of Wall Street.
These were very mysterious
and discreet places.
They were small firms
with limited capital,
but they exercised
really an outsize power.
The most prestigious of these elite
firms was the JP Morgan Bank.
Strategically located directly
opposite the Stock Exchange,
it would play a key role
in events to come.
As senior partner at JP Morgan, Thomas Lamont
was the most powerful man on Wall Street.
His influence extended
well beyond New York.
Lamont and the other JP Morgan partners
spoke regularly with successive Presidents.
Grandfather was
a very, very busy man.
He didn't have time,
as some grandfathers might do,
to take his grandson
to the baseball game
or go fishing,
and do things like that.
Grandfather's lifestyle was certainly a very
handsome lifestyle. There's no question about it.
He did have his yacht, the Reynard,
which was a 72-foot, very handsome yacht,
which he often would cruise
down from his house in Palisades,
commuting by boat, if you will, down to Hudson
River to Wall Street, and then walk up to the bank.
Under Lamont's leadership, JP Morgan steered
clear of the worst excesses of the Stock Market.
But the close relationship between
elite bankers and politicians
helped keep government regulation
of Wall Street to a minimum.
While amateur speculators were transfixed
by the soaring value of their investments,
they were hopelessly unaware
of how Wall Street really worked.
With little government supervision,
the market was a law unto itself,
and insider-dealing was rife.
There was a lot of market
manipulation going on. It was rampant.
There was no disclosure at all. When Wall
Street was very small and very self-contained,
that was OK, but as people like you and me put our
hard-earned money into the market, then it really mattered.
The stock market of the 1920s was
neither fair nor democratic.
It was a big gambling casino and it
was rigged by professional speculators.
As smaller investors gambled
with their life savings,
they failed to realise that the odds
were stacked against them.
Men like Joseph Kennedy did not make their
fortunes by simply picking the right stocks.
The truth was that they were cashing
in on the naivety of gullible newcomers.
A bunch of sharp speculators
would get together
and in a co-ordinated fashion, they would start
quietly but relentlessly buying an individual's stock.
What they would do is hype up the
particular stock, buy it up themselves,
then dump it on the market
so that THEY took the profits
while the average investor in those
stocks were left with the losings.
Even some of the elite investment
houses on Wall Street
were engaged in
this type of market manipulation.
In March of 1929, a new Republican
President, Herbert Hoover, was inaugurated.
In his address,
he reassured Americans.
We have reached a higher degree
of comfort and security
than ever existed before
in the history of the world.
But behind the scenes,
he was less confident.
Hoover is actually sceptical about what's going
on on Wall Street, and the economy, generally.
But he doesn't have the political
courage of his convictions,
and so, when he becomes President,
he does nothing to rein in
this wild, speculative fervour.
He doesn't do anything to encourage
the Federal Reserve or the Treasury
to tighten up margin speculation
in the Stock Market.
In private, Hoover
talked of an "orgy of speculation",
but, like his predecessor Coolidge, he had
no appetite for regulation of the marketplace.
Yet Hoover was not alone in his fears that the
Stock Market bubble might be about to burst.
Days after the inauguration speech, a prominent
and highly respected banker - Paul Warburg -
broke ranks with the Wall Street
aristocracy, and issued a bleak warning.
If orgies of unrestrained speculation
are permitted to spread too far,
the ultimate collapse is certain to bring about
a general depression involving the entire country.
My great-grandfather issued a warning in
March of 1929. He actually used the word...
a "depression".
And he was shouted down.
I think he was disregarded.
He was, you know,
a party pooper.
I mean, "No, no! Everything's fine. "
Everybody's making money
and having a good time at the party.
So, when there is a good
bull market, the person who says,
"This might be getting over-valued,
"you'd better be careful",
he's dismissed.
Warburg's prediction
fell on deaf ears,
and between May and September 1929,
60 new companies were floated
on the New York Stock Exchange,
adding more than 100 million shares
to the marketplace,
fuelling the investment bubble.
You hear the same things
in every bubble -
this time is different, it's a different
financial world, it's a new financial world.
In fact, Groucho Marx went to his
broker at some point and said,
"I just don't understand how these prices
just keep going up", and the broker said,
"You just have to understand that
it's a global economy now. "
This was 1928, 1929! Gee, I think
I've heard that some time since then!
Some professional speculators sensed
that the market was overheating.
The more astute
got out during the summer.
One day, apparently, Joe Kennedy,
according to later recollections, he said,
"If the shoeshine guy knows as much
as I do about the Stock Market,
"maybe it's time for me to get out. "
In September, the market
became increasingly volatile.
Behind closed doors, President
Hoover's unease was growing.
Herbert Hoover did keep making
enquiries among his Wall Street friends,
asking if he should be concerned,
and he received a memo
from Thomas W Lamont, who was the
senior partner of JP Morgan & Co.
Grandfather said in that letter
that the market will correct itself
and there would not appear to be any need for
any kind of government intervention in the market.
Lamont reassured Hoover that there
was absolutely no cause for concern
and the memo ended with the line,
"The future appears brilliant. "
Five days later,
the Stock Market crashed.
No-one knows what triggered
the sudden loss of confidence
that happened at
the end of Wednesday 23rd October.
But out of nowhere, a sharp fall in automobile
stocks provoked a frantic last hour's trading.
Millions of shares
were suddenly sold.
The next day,
the Great Crash of 1929 began.
October 24th 1929, Black Thursday, is often
considered to be the beginning of the Crash.
There was really a tremendous drop,
which scared a lot of people.
It's impossible to underestimate
the shock.
A sense of stunned disbelief. People panic
as the market just drops and drops and drops.
Desperate for news, thousands
gathered outside the Stock Exchange.
Tremendous crowds standing there very grimly,
staring ahead. Men who had just been wiped out.
City officials are so alarmed by this
that they send 400 mounted police,
fearing that there's going to be a kind of
Bastille-like invasion of the Stock Exchange.
And it's said that there was
a strange murmur in the air,
that there was a very, very strange
kind of haunting sound,
which must have been the cumulative voices
of all of these people sharing their concerns.
The popular reaction is
one of, "This can't be happening. "
A visitor from Britain
was there that day, too.
Winston Churchill had invested much
of his own money in the US Stock Market
and had decided to pay a visit.
I happened to be walking down Wall
Street at the worst moment of the panic,
and a perfect stranger,
who recognised me,
invited me to enter the gallery
of the Stock Exchange.
I expected to see pandemonium, but
the spectacle that met my eyes
was one of surprising calm
and orderliness.
The twelve hundred members
of the Stock Exchange...
were, walking to and fro like a
slow-motion picture of a disturbed
ant-heap, offering each other enormous blocks
of securities at a third of their old prices.
Churchill was to lose
a fortune in the Crash that day.
Outside, the crowds continued to
wait for news.
Rumours were fuelling
the mounting panic.
Once the Crash is under way, the real
question becomes one of confidence.
when you lose all confidence in the
economy good and bad go down together
and so the chief investment elite
is at great pains to try to restore
that confidence,
to convince people that the economy
and the stock market is sound.
The bankers knew they had to do something
to avert a total financial meltdown.
A Times journalist watched
events unfold.
The crowd grew thicker and noisier,
and then there was an eddy in the
middle of it
and a man in shirt-sleeves was pushing his way across
the street in the direction of the Morgan offices.
This was Charles E. Mitchell,
Chairman of the National City Bank.
He pushed his way into
the offices of the house of Morgan
and a little later,
we learned what he'd gone for.
Charles Mitchell had been summoned to
a meeting at the offices of JP Morgan.
Around the table were four other leading
bankers including Richard Whitney...
vice President of the
New York Stock Exchange.
These were some of the wealthiest
businessmen in America,
representing around six billion
dollars in assets.
Chairman was Thomas Lamont.
Oh, I think it was a
great shock to Grandfather.
He did not foresee that anything like the
Great Crash that took place would happen.
Grandfather called a meeting, at his office at 23
Wall Street of some of the leading bankers in town
and figured out what they could do to
support the stock market which was plunging.
What they came up with was a plan to put
together a pool of 250 million dollars.
And those funds would be used
to support a key list of stocks.
At lunchtime, Richard Whitney
marched across the street
back to the
trading floor of the Stock Exchange.
With a huge injection of the
bankers' cash,
Whitney hoped to
get the market moving again.
Whitney parades over to the
desk where US Steel is being sold
and buys 25,000 shares of US steel
at a price
well above what it was then selling
for and then makes...
a similar promenade
to other blue chip stocks
and makes a similar purchase,
the idea being,
"We will now restore everybody's
confidence in the market. "
And other great financial titans of the time
including John D Rockefeller make similar
purchases hoping that this
symbolic act will turn the tide.
And it worked.
Such was the magical power
of the Whitney name and the Morgan name that
stock suddenly turned around and started to go up.
By now, news of the meeting had leaked out,
and journalists were desperate for information.
Grandfather was meeting
with a group of reporters who
were assembled on Wall Street
outside of his bank office.
His style was always
to stay calm and never
say anything that would cause, er, that would
erode peoples' confidence in the Stock Market.
Silver-haired Mr Lamont received
us with a manner so reassuring...
It was like the man who comes on the
stage of a burning theatre and urges
everyone to keep perfectly cool,
stating there is no cause for alarm.
There has been a little distress
selling on the Stock Exchange
and we have held a meeting
to discuss the situation.
We have found that there are no Houses in difficulty
and margins are being maintained satisfactorily.
Grandfather and many others
felt that the worst was over.
But they were very, very wrong.
Over the weekend, the bankers'
intervention seemed to have worked...
trading on Friday and Saturday
was calm and uneventful.
President Hoover also tried to
steady nerves by repeating a mantra
that has been used during market
crashes many times since.
The fundamental business of the
country, that is production and
distribution of commodities,
is on a sound and prosperous basis.
But in the offices of the Financial
District, there was total chaos.
One of the things that we forget
is how primitive the technology was,
so many stocks traded on
October 24th that it took
four hours for the ticker to print all of
the stock trades after the market had closed.
The ticker, hopelessly swamped, fell hours behind
the actual trading and became completely meaningless.
All night long, the lights blazed
in the windows of the tall
office buildings
where margin clerks and bookkeepers
struggled with the desperate task
of trying to clear one day's
business before the next day began.
They fainted at their desks, the weary runner fell
exhausted on the marble floors of banks, and slept.
On Monday, with stock
tickers running out of tape,
panicking investors, desperate for
the latest share prices,
jammed the telephone lines between
New York and other major cities.
For the first time, many speculators were discovering
the downside of easy credit and buying on margin.
A fairly significant number of
people who are buying stocks in
the 1920s were buying it with borrowed money,
and of course the wonder of buying stocks with
borrowed money is that the gains are tremendously
accelerated and magnified on the way up,
and then of course on the way down
the entire machinery is thrown into the
reverse and the losses are also magnified.
All these people who had borrowed to buy
stock now had to put up more collateral
and this was something that had not
happened as the market had gone up and up.
If you've got 25 dollars down for 100 dollar
stock but now if the stock has dropped.
So the brokerage's that had made all these loans got
very concerned that the loans wouldn't be paid back.
So people got calls to bring in more
cash or their stocks would be sold.
Account needs six hundred dollars, unless
this amount received before 1.00pm Tuesday,
will sell all securities in
your account...
Consider this notice to that effect.
And that's a difficult thing to do, some people
didn't have additional cash to bring in or it took them
some time perhaps to do it, but the
brokers were very uneasy they couldn't wait.
So Monday, the market begins to fall, even
at a steeper rate than it fell on Thursday.
In fact this would turn out to be
one of the very worst days ever
in the history of the
United States stock market.
1929, when the stock market crashed I was
a very young lady, just seven years old.
However, I do remember bits
and pieces of that day
very clearly in my memory.
We did not have many means of
communication.
and when anything extraordinary
happened the papers, would put
out an extra, that's what it was
called, an extra, for two cents.
And the little boys in their
little peak hats
would come running through the streets
screaming "Extra, extra, read all about it!"
And invariably somebody in the
house would go down and buy a daily
for two cents and then we would know what happened
and that's how we found out about the Crash.
At the time, Vera
was with a family friend.
But news came that the friend's aunt
had lost everything.
The little lady was crying quietly,
she was crying quietly and wringing
her hands and wringing hands, and
walking from room to room to room.
So that was my actual memory...
of that day.
On Tuesday morning, some of the most
famous names in corporate America
saw their share price plummet -
US Steel, Radio, General Motors...
stocks that had been
symbols of the boom years.
On Tuesday, there were just tremendous
waves of selling that just kept coming.
This time, the selling was so
powerful and so relentless,
there was no lunchtime
meeting at JP Morgan.
Clearly the volume of the sales
overwhelmed any possibility
of the bankers trying to stem
the tide.
By evening Tuesday, all
American stocks were worth about
22% less than they were when the
market opened in the morning on Monday.
In 36 hours you lost 22% of
the value of American industry.
Hoover was President
and he and Andrew Mellon
the Secretary of the Treasury
were way to the right and felt that
it was not the Government's
job to interfere with this.
They believed in pure
unfettered capitalism
and so they did very little or
nothing to alleviate the crash.
They said it it'll solve itself.
The market broke very sharply and a
lot of people were wiped out with it.
It was very painful.
Almost everybody lost
money as is happened now.
# Oh, the market's not so good today
# Your stocks look kinda sick
# In fact they all dropped down a
point each time the tickers tick. #
It's estimated that by the
end of these five days trading,
$25 billion dollars worth of personal
wealth had simply disappeared.
The Stock Market
continues to sag without end.
Have orders in to sell everything.
I figure I'll have about 500 left,
if I'm lucky.
A humble ending to a potential
profit not four months ago
of nearly a 100,000.
At least, I say to myself, I lost all
in the greatest panic in history.
I was very lucky
I never lost my job.
I did get a cut in salary,
fortunately my employers were
wealthy people and when they
told me about this they said,
"Why are you smiling?' I said, "I
thought you were gonna fire me. "
Those who could afford to, faced
their losses with black humour.
I am one of the lambs
that Wall Street has shorn.
When I was a little girl,
a patron of art left me a million
dollars for my musical education.
But I thought I couldn't live on
the income from a million dollars,
so I asked all my rich
friends for tips on the market.
They gave them to me and I lost
my million.
Now the only thing I have left
is this chinchilla coat of mine.
From now, on my hands are off the
ticker and on the piano keys.
But if you're lucky enough
to have a million dollars,
hold everything
and don't play the market.
Another performer who had
gambled and lost was Groucho Marx.
His reckless speculation cost
him everything he'd earned.
The fate of Alice Austen, the
photographer from Staten Island,
was also typical of those who had been lured
into the market without realizing the risks.
Basically, she loses everything.
In '29, '30 her account is
wiped out.
And it comes as a shock for
Alice Austen.
And I don't think she believes it, like a
lot of people, you just can't believe it.
And she thinks all I have to do
is to wait a little bit and
the market will come back.
And she continued living
as if she was rich.
And Alice also mortgaged her house,
not to pay her bills, but because she once
again wanted to take a fancy trip to Europe.
My father lost everything. He was
losing everything, but he was 22.
He took it magnanimously.
When you're 22 it isn't as dramatic.
The people around him were more...
established people in
their fifties and sixties and were losing
their life savings, were in an absolute panic.
Not everyone coped with
their losses.
Although the number of suicides has been
exaggerated, to some it seemed the only way out.
I know that people read about the
stories on Wall Street of people
opening the windows in their
offices and jumping out...
That actually happened, that isn't
an urban legend.
People did commit suicide.
People who had worked 30 and 40 years
on Wall Street and had amassed fortunes,
within a period of days,
lost everything.
I'm sorry I was unable to return
the two books until now,
the conditions down in the
financial neighbourhood
have been such as
to keep us working...
Yesterday, a woman jumped from the roof of
our building, 44 floors, right past our window.
I saw her body lying in the street and the
sight was so harrowing, that I became half sick.
The effects of the catastrophic Crash on
Wall Street rippled out across America.
Even
those who'd never owned shares...
and who'd never benefited
from the stock-market boom...
became victims too.
The Crash had undermined Americans' faith in their
fragile banking system, made up of thousands of
small town banks that lacked the size or reputation
to convince customers that their money was safe.
As confidence in the economy sank
further, a domino effect began.
In 1931, over 2,000 banks failed.
After the Crash. The banks closed.
That I think affected us
a little more seriously,
us, meaning
us the people of my stature.
Many people had money in the bank, little
bit of money, couple of hundred dollars,
you know, 1,000 maybe.
There was no infrastructure then, there
was no Federal Deposit Insurance Corporation
to guarantee people's deposits,
there was no way to back up
the banks,
so if the banks had made
bad choices,
you as a depositor paid for it,
your money wasn't there.
And then people would hear that
the bank down the street wasn't good
and they worried about their own bank and that'd cause
a run on their bank and it was a terrible vicious cycle.
And something like 3,000 banks closed
in the following
couple of years after that, and the
whole financial system then seemed,
not just unstable, but worthless.
After that, when people saved money they were very
leery of banks and money went under the mattress.
The stock market crash in 1929
did not create the Great Depression,
but it did start a sequence
of events
that eventually culminated
with the Great Depression.
Some of this is
going to sound sort of familiar.
The banks were loaning money for the stock
market, the company's were loaning money,
the brokerages were loaning money and when those
prices fell, all that money just disappeared.
Almost immediately company's began
to feel the pinch of not having
the capital and of having lost money,
and they began to lay off people, to
let people go, to shut down production.
There were mass bankruptcies there
was a liquidity crisis of exactly
the same kind we have today, that is to say
all kinds of businesses could no longer get
loans to keep themselves afloat even if those businesses
were entirely solvent, they couldn't get the kind
of short term commercial credit to pay their
workers, to buy new inventory, to pay their suppliers.
And so they began going bankrupt and
as they went bankrupt they laid
people off and as they
laid people off demand fell.
And this is what does traumatic damage
to the whole society, so traumatic that
it's second only to the Civil War in American
memory as a tragic moment in American history.
My father had a modest-sized
insurance brokerage agency.
One night at dinner, my father
said that he had to fire an employee
and I very cavalierly said, "Well,
he'll be able to get a job, won't he?"
And my father said,
"No, he's an older man who isn't very
capable and I don't think he can. "
And at that point,
my father burst into tears.
It was the first time I
had ever seen my father cry.
There was such a change in our lives
and all the people around me
after the Crash.
Many of my girlfriends' fathers
lost their jobs
and they couldn't
pay the rent, they were evicted.
The poverty was really all
around us. Men had no clothing.
They were in rags, really rags.
They used to wrap their feet up in
newspaper and put them in cardboard,
makeshift shoes to
walk around the street.
And then if you took a walk over to
Central Park you saw this big area,
a deserted reservoir that had been
drained and they made little
huts of cardboard boxes,
and they
would sleep there overnight.
And they called
it Hooverville, because that was
the name of our President at the
time and, of course, all this...
stock market crash and all this
poverty was, of course, put in his lap.
It was really, really pitiful.
Like many others, the photographer,
Alice Austen struggled to keep up
mortgage payments
as the Great Depression took hold.
A few years into the Depression,
Alice Austen runs out of money.
There is nothing left.
She is out of her house.
They take her to a poor house, and it's
a poor house out of a Dickens' novel
and she lingers there for a
couple of years.
Miraculously, her photographs
are discovered.
A few of her photos
are sold to Time and Life Magazine
and that earns her enough money to move out of
the poor house and into a decent retirement home.
In a sense, her photographs
come to her rescue and take
her out of poverty and
into a year or two of decent living.
Paul Warburg, who so accurately
predicted the Crash and the Depression,
saved the bank he ran from disaster
by getting out of the market in time.
But it was of little
consolation to him.
My great-grandfather probably never
really recovered
his own personal
equilibrium after the Crash.
To be
called the Cassandra of Wall Street,
I think was very painful for him and
if we all remember Cassandra,
she couldn't just see the future,
she was also doomed to be disregarded.
And I think it caused him to
go into a depression of his own.
I'm not sure that he ever
would have said I told you so,
I think he felt that it was
really tragic
that this worldwide depression
could have been averted or headed off
or at least it didn't have to crash
so hard and, and I think...
it probably led to his early death.
When he died, it was the last
year of Hoover's presidency
and there was no end in sight.
But in 1932, 12 years of
Republican rule came to an end.
I, Franklin Delano Roosevelt,
do solemnly swear...
that I will faithfully execute the office
of the President of the United States.
Democrat, Franklin Roosevelt was
elected President in a landslide victory.
His first task
was to restore confidence.
ROOSEVELT: The only thing
we have to fear, is fear itself.
Seen as a saviour, Roosevelt promised
a New Deal for the American people,
and to regulate the
financial system.
There must be a strict supervision of
all banking and credit and investment.
There must be an end to speculation
with other people's money.
The new President acted quickly.
He guaranteed bank deposits
and introduced laws forcing bankers
to operate under strict
government supervision.
An investigation into the Crash was
launched by the Senate Banking Committee.
It would last more than three years,
and the 10,000 pages of testimony
blackened the
reputation of Wall Street.
The committee's ambitious lawyer,
Ferdinand Pecora,
challenged the banking elite
to account for their behaviour.
He calls these bankers to testify
and what does he learn?
He learns that Charlie Mitchell of National City
Corp had sold stock to his wife to avoid taxes.
Richard Whitney, who had so boldly bought
stock on Black Thursday lost money of his own
and began borrowing from his brother and when
that didn't work, he began stealing from customers.
He ended up in jail, doing time.
The most prestigious bank in America, JP
Morgan was also found to be far from blameless.
The hearings uncovered evidence
of a list that offered preferential
deals on stocks
to friends in high places...
including a former President.
There were not only Morgan partners
and Morgan family members, but also
prominent corporate executives and
even some politicians...
Calvin Coolidge was on the
preferred stock-list, for example.
That was a practice...
that a lot of people felt was wrong.
Ferdinand Pecora had a great quote, he said, "it was
shocking disclosures of low standards in high places,"
which I love because you know
you could say the same thing today.
In response to public outrage
at the bankers' dirty dealings,
President Roosevelt set up the
Securities and Exchange Commission...
its task - to clean up Wall Street.
At its head, he chose a man who knew
more about unethical practice than most.
President Roosevelt when he introduced the
Securities and Exchange Commission to regulate
Wall Street, named his old friend and
supporter Joe Kennedy to be the first chairman.
That's putting the fox
in the chicken coup.
Although Roosevelt restored
confidence in the banking system,
the Great Depression would last
until the outbreak of World War II.
Then as now, the globalised
economy meant that
the Crash and subsequent Depression
rippled out across the world.
In Britain, there was a slump in
manufacturing and millions lost their jobs.
Germany... still suffering from
defeat in the First World War...
was hit even harder.
So many people had their life
savings destroyed during
the Great Depression that it created
in many countries a desire for some
authoritarian government that would
save them, that would rescue the economy.
No doubt that the Crash and the Depression
strengthened anti-capitalist movements.
The communists had taken over in Russia
and there were rising fascist movements.
Mussolini was already in power
in Italy.
And Hitler's political
base was growing in Germany.
And when American-style free-market
capitalism suffered from this Wall Street Crash
followed by a depression, it just strengthened
those people who wanted to say there's a better way.
While communism and fascism prospered, many
nations put up barriers to prevent free trade
and turned inwards, in an
attempt to save their economies.
Economic nationalism
led to trade wars, and later...
world war.
80 years on, those
who remember the bubble of the '20s
and the Crash that followed, feel
that they have seen it all before.
I don't think we
learned anything from it.
I have found that people's
memories are very short.
They make the same type of leveraged commitments
where they don't look at the downside risk.
You have a lot of cheap
credit in the 1920s.
Now we've had cheap credit and
people have speculated on houses
and now the housing
bubble has collapsed.
You have a heavily
leveraged American consumer...
he's into debt up to his eyeballs,
and he can't sustain that debt.
The sub-prime mortgage
crisis is a symptom of that.
In the '80s and '90s,
faith in the free market had
revived, and as optimism returned,
many of the financial regulations
which Roosevelt had introduced
were felt to be outdated, and
were slowly dismantled.
Yet again, a lightly regulated market
allowed speculation to grow unchecked.
We are now reaping the whirlwind of that
deregulation and in that sense we're in
exactly the same position as people
were in 1929 when the Government
turned a blind eye to what was
going on in the financial world.
What I do hope and I
do think, is that the government has
learned it lessons and is trying to
take steps that are much active
and much more aggressive than what
was taken in the '30s,
to try and stem
the pain and stem the decline.
The hope is that
such steps will work.
But the lessons from the Crash of
1929 are that history repeats itself,
that human folly and greed are much
stronger forces in financial affairs
than reason and restraint.
E- mail subtitling@bbc. co. uk
In 1929, years of booming prosperity
ended in catastrophe.
It was the biggest stock market
crash since records began.
It is impossible to underestimate the
shock, a sense of stunned disbelief.
First-time investors borrowed huge amounts
of money to speculate on the market.
The market broke very sharply, and a
lot of people were wiped out with it.
It was very painful.
Later, thousands of banks failed.
Millions lost everything.
The poverty was really all around
us. It was really, really pitiful.
The Crash was followed by a Depression
that spread across the world,
lasted for a decade
and was a prelude to war.
This is a story
of a financial disaster
that we hoped
would never happen again.
Wednesday 23rd October 1929,
without warning,
share prices are plummeting
on the New York Stock Exchange.
Investors are stunned.
For the last five years,
the market has only gone up.
In the space of an hour, a staggering
2.5 million shares are sold.
The next day,
the downward spiral continues.
As people came in
to trade stocks on October 24th,
there was a sense that
maybe something had changed.
All of a sudden,
there just weren't buyers.
People were willing to sell, but there
weren't buyers coming forth to buy the stocks.
And prices began to fall $2, $4,
$10 a share. It was horrifying.
That morning, there were drops on the Stock
Exchange that were so sharp and so dire,
stock suddenly dropping
10, 20, 30 points at a time,
that it's said that there were
shrieks and gasps in the gallery
of the New York Stock Exchange.
People are stunned
by what is happening, and terrified.
Thousands of people begin to gather
outside the Stock Market.
10,000 people.
They fill the streets
from Broadway to the East River.
People wanting to know what
was going, they went there.
These huge crowds gathered around
the Stock Exchange,
around the statues
and on the stairs,
waiting to get any kind of news they
could as people came out of the exchange.
They could hear the shouting and
yelling as people were buying and selling
but they but they
didn't know what was going on
until they gathered
and they stayed there, to find out.
Few of the thousands waiting in the crowd appreciated
the scale of the disaster that was about to unfold.
Nor could they imagine that,
over the next five days,
a financial catastrophe would sweep away
the foundations of America's prosperity.
But to understand what brought about
the crash, we need to go back a decade,
to a time when American confidence grew so high
that it seemed the good times would last for ever.
In 1919, the US had emerged
victorious from World War one.
A mood of optimism was in the air.
Britain and its European Allies were
exhausted financially from the War.
But the US economy was thriving and
the world danced to the American tune.
The uncertainties were over.
There seemed little doubt about
what was going to happen.
America was going on the greatest,
gaudiest spree
in history, and there was
going to be plenty to tell about it.
In the 1920s, everyday life
was changing.
Electrification
transformed America.
Towns were hooked up to the grid.
New technologies emerged -
aeroplanes, radios.
Domestic goods that had started life
as luxuries, now became necessities.
The car industry also boomed as people flocked to
buy one of the new Ford or Chrysler automobiles.
An era of boundless prosperity
seemed to have begun.
This is the flowering of consumer culture and
mass consumption on a scale never before seen.
There is also heavy
instalment buying
to encourage people to buy big ticket consumer
items, so that they can buy those items on credit.
This type of consumer credit
was another innovation of the 1920s.
For the first time, the idea of "buy
now, pay later" hit the mainstream.
There's a kind of a play culture that
develops alongside this consumerism which says,
"We believe now in instant gratification.
Take care of the now. Live for the moment. "
It was a whole ideology,
that we were in a new economic era,
and it was the birthright of every
self-respecting American to be rich.
With easy credit
and more disposable income,
Americans were now looking for
new ways to get even richer.
Since World War One, the US government had sold
bonds, known as Liberty Bonds, to pay for the war.
This was a way to
borrow money from the public,
who, in turn, would receive interest
payments on the bond's value.
Celebrities such as Charlie Chaplin
and Douglas Fairbanks
had been recruited to promote them
at huge rallies.
Liberty bonds caused many people to become
investors in securities for the first time.
For the first time in their lives,
they got interest payments
every six months,
And the security was something
they could trade on the markets,
so they could look in the newspaper and
see what the price of my bond is today.
Liberty bonds
created an investing culture.
Most people had never purchased
securities before
and it got ordinary people
accustomed to buying securities.
Now there was another group
of people who thought
they could take advantage
of this new investing culture -
the bankers of Wall Street.
For years Wall Street,
the centre of American finance,
was made up of
a small, elite group of bankers
doing business with each other in a
society closed off to the general public.
But one man saw an opportunity that would
change the face of the financial world.
Charles Mitchell, president of National City
Bank, spotted a lucrative gap in the market.
Mitchell saw that investors had purchased a
lot of government bonds during World War I,
and so, he said, "Now we
have an investing public there,
"all we need to do is market other
products like corporate bonds,
"common stocks, and just tell people
these are respectable investments. "
Mitchell was a natural salesman
with a big ambition.
If people were willing to buy bonds
to raise capital for the government,
surely they could be tempted to buy
stocks and shares,
to raise capital for private companies
listed on the New York Stock Exchange?
And they could make a profit
for themselves in the process.
Gradually, people who never dreamed that
they would invest in stocks were doing so,
and stocks lost a lot of the stigma.
Historically, stocks had been considered
much too risky for ordinary people,
whereas in the 1920s, there was a sense that,
investing in stocks was, in fact, not only safe
but reliable and respectable.
The idea took off.
And to exploit this lucrative new market, Mitchell
opened brokerage offices all across the country
where people who had the money
but not the investment know-how
could speculate in
stocks and shares.
This speculative frenzy embraced all
kinds of people, not just professionals.
Ordinary people began participating,
as well, in unprecedented numbers
all across the country - not just in New
York City but in cities and small towns -
all across America people
were in love with the Stock Market.
Technology made it all possible.
The latest share prices flashed from Wall Street
could be printed out within minutes across America
using telegraphic
ticker-tape machines.
You could find ticker tape
in night clubs in railroad depots,
in beauty parlours, on ocean liners.
The market became a pervasive part of
America's play culture in the 1920s.
I eat sleep, dream, talk stocks,
the only way, I believe,
to make money. It's exciting.
I love it
17,000 dollars' profit
on 3,500 dollars' capital.
Not bad!
There were wild speculations
in all kinds of securities -
movie company stocks, aeronautical
stocks, all the auto company stocks.
One of the hot stocks of the 1920s
was Radio Corporation of America.
It was a lot like today's Google.
It was cutting-edge technology.
They had this idea that you could
put radios in cars - imagine that(!)
The American investing public began
to connect the products they were using
that were coming from
corporate America
with the notion that, "hey, I might own a share of
the company that makes that product that I like. "
By the mid-20s, around 3 million
Americans were in the market,
and Wall Street gripped the public imagination.
With tales of fortunes being made overnight,
the idea of a great bull market - where
shares only seemed to go up - took hold.
Every popular magazine,
every newspaper, every radio station
was fascinated by what was going on
in the Stock Market.
People charted the activities of celebrities
like Charlie Chaplin or Groucho Marx
and were fascinated by what stocks
they happened to be speculating in.
The young comic actor Groucho Marx
invested all his savings into the market
and was so pleased with his profits on paper
that he persuaded his brothers to invest, too.
What an easy racket.
RCA went up seven points
since this morning.
I just made myself
7,000 dollars.
But it wasn't just
celebrities becoming speculators.
The big Wall Street speculators
were becoming celebrities themselves.
They were thought of as creative,
entrepreneurial and bringing wealth to America.
Joseph Kennedy, father of
the future President Kennedy,
was one of this new breed
of shrewd financial superstar.
People were fascinated because some of these
men, like Joseph Kennedy, were ordinary folks.
They were men from nowhere
and their rapid rise on the market
was a kind of inspiration to ordinary folk that
that might even be possible for them some day.
Stories circulated that anyone from bellboys
to barbers could make easy money on the market.
A shoeshine boy on Wall Street, Pat Bologna, was one
of those inspired by these tales of rags to riches.
Everyone was going
to make a fortune.
If you lived in New York,
the Stock Market was king.
My father was
probably about 17 or 18.
On a daily basis,
he would shine the shoes
of, literally,
the great men of America.
People like Joseph Kennedy,
executives like Mitchell.
He would converse with them and became somewhat
of an expert on things like the Federal Reserve
and things that you wouldn't think
that a shoeshine would be expert on.
But he was talking to the great minds
of Wall Street every day, all day.
So my father began to invest
in the Stock Market.
If the truth be told, I learned how
to read reading the stock pages.
Cos that was what my father did. I
mean, we grew up with the Stock Market.
There was the Stock Market for breakfast,
and for dinner when he came home.
The Stock Market was the world.
I started in 1928 because,
like many young people,
I wanted to go to the place where
everybody was making all this money.
My first job was to be a messenger
boy on the floor of the Exchange.
It took only a week or two to find out
that, most of the time, people are greedy.
People had so much faith
in the bull market
that they borrowed increasing sums of
money to speculate on rising share prices.
This way of buying shares was known
as "buying on margin".
The investor was required
to put down only part of the money,
with their broker
funding the rest.
The culture of "buy now, pay later"
had spread to the Stock Market.
Buying stocks on margin means essentially
that you're buying them with borrowed money.
By the late 1920s, 90% of the purchase price
of the stock is being made with borrowed money.
There were no rules about
how much you could borrow,
and people borrowed
enormous sums of money to buy stocks.
You could buy $100 stock for $25,
and then the brokerage firm
would loan you the other 75.
And if the stock went up - and in the late
'20s, everything seemed to go up and up -
then that $25 could turn into
an investment worth 200 or 300.
So it became a huge part of the US
economy to loan money for the Stock Market.
In fact, in the late 1920s, nearly 40
cents of every dollar loaned was for stocks.
This vast influx of borrowed money
into the Stock Market
created more demand for shares,
pushing prices ever upwards.
In 1928, the market went up
by almost 50% in just 12 months.
And as stocks continued to rise, more and more
investors borrowed money to get a piece of the action.
One of them was shoeshine boy
Pat Bologna.
My father didn't have a lot
of money in the Stock Market.
He told me at the time
he had about $6,000 in cash.
But remember, $6,000 in cash
translated into a lot of stock
because in those years, you only
had to put 10% down for margin.
So at $6,000, you could have
$60,000-worth of stock.
Wall Street
was hungry for new punters.
There was one group of would-be investors
that the Street had always ignored,
but whose money it now wanted.
Up until the 1920s, women had played
a very small role on the Stock Market.
Part of this was simply
gender prejudice.
They were considered incapable
of the kind of cool sangfroid
that was necessary if you speculated
in the market. But in the 1920s,
part of the popularisation of the Stock
Market included huge numbers of women.
Well, the '20s were
a big time for women, anyway.
They really stepped out
on their own.
They began to take control of their own money,
they went to college in record numbers in the 1920s,
and as they did that, they also
got interested in the Stock Market,
and it was a way for them
to build their own wealth.
One such investor was a pioneering New
York photographer called Alice Austen.
She lived on Staten Island, just
across the water from Wall Street.
She had moved into this house when
she was a couple of months old.
She was bright, she was adventurous.
By the time she was 11,
she had received a camera, which
was a new invention by the time.
And she immediately took to it.
Over the years, she took
some 8,000 glass-plate negatives,
making her one of America's earliest
and most prolific photographers.
Alice's inheritance from her grandfather
had funded a comfortable lifestyle,
but it had dwindled by the 1920s, and she was
tempted by Wall Street's promise of a quick buck.
Alice Austen discovers that she's running a
little low, and the question becomes, "What to do?"
Her friends
urged her to be conservative,
cut some spending, maybe not go
to Europe, maybe not buy a car.
Instead, Alice found a broker who advised her no,
buy stocks, become rich quick, and you know what?
You can borrow money, so you can buy
even more stocks, buying on margin.
And Alice Austen thought that, hey,
sounds like a good idea to me.
Throughout the soaring market
of the 1920s,
the Republican party stayed in power, on
the back of America's increasing prosperity.
Calvin Coolidge
became President in 1923.
An investor himself, he was notably silent
on the speculative mania gripping Wall Street.
Calvin Coolidge typifies the laissez-faire,
devil-may-care recklessness of the 1920s.
He was famous for saying that the
business of America IS business.
It was a prosperous period. Business was
making money. Wall Street was making money.
The politicians, I think, just said, "Well,
everything's fine. The economy's growing.
"The market takes care of things, and the
government's job is to get out of the way. "
During the Coolidge presidency, Wall
Street's power continued to grow unchecked.
His administration had close links with
an elite group of bankers and financiers -
Wall Street's inner circle.
Their wealth and connections gave them immense
influence over the government's financial policy.
There were small,
elite, private partnerships.
This was really the royalty
of Wall Street.
These were very mysterious
and discreet places.
They were small firms
with limited capital,
but they exercised
really an outsize power.
The most prestigious of these elite
firms was the JP Morgan Bank.
Strategically located directly
opposite the Stock Exchange,
it would play a key role
in events to come.
As senior partner at JP Morgan, Thomas Lamont
was the most powerful man on Wall Street.
His influence extended
well beyond New York.
Lamont and the other JP Morgan partners
spoke regularly with successive Presidents.
Grandfather was
a very, very busy man.
He didn't have time,
as some grandfathers might do,
to take his grandson
to the baseball game
or go fishing,
and do things like that.
Grandfather's lifestyle was certainly a very
handsome lifestyle. There's no question about it.
He did have his yacht, the Reynard,
which was a 72-foot, very handsome yacht,
which he often would cruise
down from his house in Palisades,
commuting by boat, if you will, down to Hudson
River to Wall Street, and then walk up to the bank.
Under Lamont's leadership, JP Morgan steered
clear of the worst excesses of the Stock Market.
But the close relationship between
elite bankers and politicians
helped keep government regulation
of Wall Street to a minimum.
While amateur speculators were transfixed
by the soaring value of their investments,
they were hopelessly unaware
of how Wall Street really worked.
With little government supervision,
the market was a law unto itself,
and insider-dealing was rife.
There was a lot of market
manipulation going on. It was rampant.
There was no disclosure at all. When Wall
Street was very small and very self-contained,
that was OK, but as people like you and me put our
hard-earned money into the market, then it really mattered.
The stock market of the 1920s was
neither fair nor democratic.
It was a big gambling casino and it
was rigged by professional speculators.
As smaller investors gambled
with their life savings,
they failed to realise that the odds
were stacked against them.
Men like Joseph Kennedy did not make their
fortunes by simply picking the right stocks.
The truth was that they were cashing
in on the naivety of gullible newcomers.
A bunch of sharp speculators
would get together
and in a co-ordinated fashion, they would start
quietly but relentlessly buying an individual's stock.
What they would do is hype up the
particular stock, buy it up themselves,
then dump it on the market
so that THEY took the profits
while the average investor in those
stocks were left with the losings.
Even some of the elite investment
houses on Wall Street
were engaged in
this type of market manipulation.
In March of 1929, a new Republican
President, Herbert Hoover, was inaugurated.
In his address,
he reassured Americans.
We have reached a higher degree
of comfort and security
than ever existed before
in the history of the world.
But behind the scenes,
he was less confident.
Hoover is actually sceptical about what's going
on on Wall Street, and the economy, generally.
But he doesn't have the political
courage of his convictions,
and so, when he becomes President,
he does nothing to rein in
this wild, speculative fervour.
He doesn't do anything to encourage
the Federal Reserve or the Treasury
to tighten up margin speculation
in the Stock Market.
In private, Hoover
talked of an "orgy of speculation",
but, like his predecessor Coolidge, he had
no appetite for regulation of the marketplace.
Yet Hoover was not alone in his fears that the
Stock Market bubble might be about to burst.
Days after the inauguration speech, a prominent
and highly respected banker - Paul Warburg -
broke ranks with the Wall Street
aristocracy, and issued a bleak warning.
If orgies of unrestrained speculation
are permitted to spread too far,
the ultimate collapse is certain to bring about
a general depression involving the entire country.
My great-grandfather issued a warning in
March of 1929. He actually used the word...
a "depression".
And he was shouted down.
I think he was disregarded.
He was, you know,
a party pooper.
I mean, "No, no! Everything's fine. "
Everybody's making money
and having a good time at the party.
So, when there is a good
bull market, the person who says,
"This might be getting over-valued,
"you'd better be careful",
he's dismissed.
Warburg's prediction
fell on deaf ears,
and between May and September 1929,
60 new companies were floated
on the New York Stock Exchange,
adding more than 100 million shares
to the marketplace,
fuelling the investment bubble.
You hear the same things
in every bubble -
this time is different, it's a different
financial world, it's a new financial world.
In fact, Groucho Marx went to his
broker at some point and said,
"I just don't understand how these prices
just keep going up", and the broker said,
"You just have to understand that
it's a global economy now. "
This was 1928, 1929! Gee, I think
I've heard that some time since then!
Some professional speculators sensed
that the market was overheating.
The more astute
got out during the summer.
One day, apparently, Joe Kennedy,
according to later recollections, he said,
"If the shoeshine guy knows as much
as I do about the Stock Market,
"maybe it's time for me to get out. "
In September, the market
became increasingly volatile.
Behind closed doors, President
Hoover's unease was growing.
Herbert Hoover did keep making
enquiries among his Wall Street friends,
asking if he should be concerned,
and he received a memo
from Thomas W Lamont, who was the
senior partner of JP Morgan & Co.
Grandfather said in that letter
that the market will correct itself
and there would not appear to be any need for
any kind of government intervention in the market.
Lamont reassured Hoover that there
was absolutely no cause for concern
and the memo ended with the line,
"The future appears brilliant. "
Five days later,
the Stock Market crashed.
No-one knows what triggered
the sudden loss of confidence
that happened at
the end of Wednesday 23rd October.
But out of nowhere, a sharp fall in automobile
stocks provoked a frantic last hour's trading.
Millions of shares
were suddenly sold.
The next day,
the Great Crash of 1929 began.
October 24th 1929, Black Thursday, is often
considered to be the beginning of the Crash.
There was really a tremendous drop,
which scared a lot of people.
It's impossible to underestimate
the shock.
A sense of stunned disbelief. People panic
as the market just drops and drops and drops.
Desperate for news, thousands
gathered outside the Stock Exchange.
Tremendous crowds standing there very grimly,
staring ahead. Men who had just been wiped out.
City officials are so alarmed by this
that they send 400 mounted police,
fearing that there's going to be a kind of
Bastille-like invasion of the Stock Exchange.
And it's said that there was
a strange murmur in the air,
that there was a very, very strange
kind of haunting sound,
which must have been the cumulative voices
of all of these people sharing their concerns.
The popular reaction is
one of, "This can't be happening. "
A visitor from Britain
was there that day, too.
Winston Churchill had invested much
of his own money in the US Stock Market
and had decided to pay a visit.
I happened to be walking down Wall
Street at the worst moment of the panic,
and a perfect stranger,
who recognised me,
invited me to enter the gallery
of the Stock Exchange.
I expected to see pandemonium, but
the spectacle that met my eyes
was one of surprising calm
and orderliness.
The twelve hundred members
of the Stock Exchange...
were, walking to and fro like a
slow-motion picture of a disturbed
ant-heap, offering each other enormous blocks
of securities at a third of their old prices.
Churchill was to lose
a fortune in the Crash that day.
Outside, the crowds continued to
wait for news.
Rumours were fuelling
the mounting panic.
Once the Crash is under way, the real
question becomes one of confidence.
when you lose all confidence in the
economy good and bad go down together
and so the chief investment elite
is at great pains to try to restore
that confidence,
to convince people that the economy
and the stock market is sound.
The bankers knew they had to do something
to avert a total financial meltdown.
A Times journalist watched
events unfold.
The crowd grew thicker and noisier,
and then there was an eddy in the
middle of it
and a man in shirt-sleeves was pushing his way across
the street in the direction of the Morgan offices.
This was Charles E. Mitchell,
Chairman of the National City Bank.
He pushed his way into
the offices of the house of Morgan
and a little later,
we learned what he'd gone for.
Charles Mitchell had been summoned to
a meeting at the offices of JP Morgan.
Around the table were four other leading
bankers including Richard Whitney...
vice President of the
New York Stock Exchange.
These were some of the wealthiest
businessmen in America,
representing around six billion
dollars in assets.
Chairman was Thomas Lamont.
Oh, I think it was a
great shock to Grandfather.
He did not foresee that anything like the
Great Crash that took place would happen.
Grandfather called a meeting, at his office at 23
Wall Street of some of the leading bankers in town
and figured out what they could do to
support the stock market which was plunging.
What they came up with was a plan to put
together a pool of 250 million dollars.
And those funds would be used
to support a key list of stocks.
At lunchtime, Richard Whitney
marched across the street
back to the
trading floor of the Stock Exchange.
With a huge injection of the
bankers' cash,
Whitney hoped to
get the market moving again.
Whitney parades over to the
desk where US Steel is being sold
and buys 25,000 shares of US steel
at a price
well above what it was then selling
for and then makes...
a similar promenade
to other blue chip stocks
and makes a similar purchase,
the idea being,
"We will now restore everybody's
confidence in the market. "
And other great financial titans of the time
including John D Rockefeller make similar
purchases hoping that this
symbolic act will turn the tide.
And it worked.
Such was the magical power
of the Whitney name and the Morgan name that
stock suddenly turned around and started to go up.
By now, news of the meeting had leaked out,
and journalists were desperate for information.
Grandfather was meeting
with a group of reporters who
were assembled on Wall Street
outside of his bank office.
His style was always
to stay calm and never
say anything that would cause, er, that would
erode peoples' confidence in the Stock Market.
Silver-haired Mr Lamont received
us with a manner so reassuring...
It was like the man who comes on the
stage of a burning theatre and urges
everyone to keep perfectly cool,
stating there is no cause for alarm.
There has been a little distress
selling on the Stock Exchange
and we have held a meeting
to discuss the situation.
We have found that there are no Houses in difficulty
and margins are being maintained satisfactorily.
Grandfather and many others
felt that the worst was over.
But they were very, very wrong.
Over the weekend, the bankers'
intervention seemed to have worked...
trading on Friday and Saturday
was calm and uneventful.
President Hoover also tried to
steady nerves by repeating a mantra
that has been used during market
crashes many times since.
The fundamental business of the
country, that is production and
distribution of commodities,
is on a sound and prosperous basis.
But in the offices of the Financial
District, there was total chaos.
One of the things that we forget
is how primitive the technology was,
so many stocks traded on
October 24th that it took
four hours for the ticker to print all of
the stock trades after the market had closed.
The ticker, hopelessly swamped, fell hours behind
the actual trading and became completely meaningless.
All night long, the lights blazed
in the windows of the tall
office buildings
where margin clerks and bookkeepers
struggled with the desperate task
of trying to clear one day's
business before the next day began.
They fainted at their desks, the weary runner fell
exhausted on the marble floors of banks, and slept.
On Monday, with stock
tickers running out of tape,
panicking investors, desperate for
the latest share prices,
jammed the telephone lines between
New York and other major cities.
For the first time, many speculators were discovering
the downside of easy credit and buying on margin.
A fairly significant number of
people who are buying stocks in
the 1920s were buying it with borrowed money,
and of course the wonder of buying stocks with
borrowed money is that the gains are tremendously
accelerated and magnified on the way up,
and then of course on the way down
the entire machinery is thrown into the
reverse and the losses are also magnified.
All these people who had borrowed to buy
stock now had to put up more collateral
and this was something that had not
happened as the market had gone up and up.
If you've got 25 dollars down for 100 dollar
stock but now if the stock has dropped.
So the brokerage's that had made all these loans got
very concerned that the loans wouldn't be paid back.
So people got calls to bring in more
cash or their stocks would be sold.
Account needs six hundred dollars, unless
this amount received before 1.00pm Tuesday,
will sell all securities in
your account...
Consider this notice to that effect.
And that's a difficult thing to do, some people
didn't have additional cash to bring in or it took them
some time perhaps to do it, but the
brokers were very uneasy they couldn't wait.
So Monday, the market begins to fall, even
at a steeper rate than it fell on Thursday.
In fact this would turn out to be
one of the very worst days ever
in the history of the
United States stock market.
1929, when the stock market crashed I was
a very young lady, just seven years old.
However, I do remember bits
and pieces of that day
very clearly in my memory.
We did not have many means of
communication.
and when anything extraordinary
happened the papers, would put
out an extra, that's what it was
called, an extra, for two cents.
And the little boys in their
little peak hats
would come running through the streets
screaming "Extra, extra, read all about it!"
And invariably somebody in the
house would go down and buy a daily
for two cents and then we would know what happened
and that's how we found out about the Crash.
At the time, Vera
was with a family friend.
But news came that the friend's aunt
had lost everything.
The little lady was crying quietly,
she was crying quietly and wringing
her hands and wringing hands, and
walking from room to room to room.
So that was my actual memory...
of that day.
On Tuesday morning, some of the most
famous names in corporate America
saw their share price plummet -
US Steel, Radio, General Motors...
stocks that had been
symbols of the boom years.
On Tuesday, there were just tremendous
waves of selling that just kept coming.
This time, the selling was so
powerful and so relentless,
there was no lunchtime
meeting at JP Morgan.
Clearly the volume of the sales
overwhelmed any possibility
of the bankers trying to stem
the tide.
By evening Tuesday, all
American stocks were worth about
22% less than they were when the
market opened in the morning on Monday.
In 36 hours you lost 22% of
the value of American industry.
Hoover was President
and he and Andrew Mellon
the Secretary of the Treasury
were way to the right and felt that
it was not the Government's
job to interfere with this.
They believed in pure
unfettered capitalism
and so they did very little or
nothing to alleviate the crash.
They said it it'll solve itself.
The market broke very sharply and a
lot of people were wiped out with it.
It was very painful.
Almost everybody lost
money as is happened now.
# Oh, the market's not so good today
# Your stocks look kinda sick
# In fact they all dropped down a
point each time the tickers tick. #
It's estimated that by the
end of these five days trading,
$25 billion dollars worth of personal
wealth had simply disappeared.
The Stock Market
continues to sag without end.
Have orders in to sell everything.
I figure I'll have about 500 left,
if I'm lucky.
A humble ending to a potential
profit not four months ago
of nearly a 100,000.
At least, I say to myself, I lost all
in the greatest panic in history.
I was very lucky
I never lost my job.
I did get a cut in salary,
fortunately my employers were
wealthy people and when they
told me about this they said,
"Why are you smiling?' I said, "I
thought you were gonna fire me. "
Those who could afford to, faced
their losses with black humour.
I am one of the lambs
that Wall Street has shorn.
When I was a little girl,
a patron of art left me a million
dollars for my musical education.
But I thought I couldn't live on
the income from a million dollars,
so I asked all my rich
friends for tips on the market.
They gave them to me and I lost
my million.
Now the only thing I have left
is this chinchilla coat of mine.
From now, on my hands are off the
ticker and on the piano keys.
But if you're lucky enough
to have a million dollars,
hold everything
and don't play the market.
Another performer who had
gambled and lost was Groucho Marx.
His reckless speculation cost
him everything he'd earned.
The fate of Alice Austen, the
photographer from Staten Island,
was also typical of those who had been lured
into the market without realizing the risks.
Basically, she loses everything.
In '29, '30 her account is
wiped out.
And it comes as a shock for
Alice Austen.
And I don't think she believes it, like a
lot of people, you just can't believe it.
And she thinks all I have to do
is to wait a little bit and
the market will come back.
And she continued living
as if she was rich.
And Alice also mortgaged her house,
not to pay her bills, but because she once
again wanted to take a fancy trip to Europe.
My father lost everything. He was
losing everything, but he was 22.
He took it magnanimously.
When you're 22 it isn't as dramatic.
The people around him were more...
established people in
their fifties and sixties and were losing
their life savings, were in an absolute panic.
Not everyone coped with
their losses.
Although the number of suicides has been
exaggerated, to some it seemed the only way out.
I know that people read about the
stories on Wall Street of people
opening the windows in their
offices and jumping out...
That actually happened, that isn't
an urban legend.
People did commit suicide.
People who had worked 30 and 40 years
on Wall Street and had amassed fortunes,
within a period of days,
lost everything.
I'm sorry I was unable to return
the two books until now,
the conditions down in the
financial neighbourhood
have been such as
to keep us working...
Yesterday, a woman jumped from the roof of
our building, 44 floors, right past our window.
I saw her body lying in the street and the
sight was so harrowing, that I became half sick.
The effects of the catastrophic Crash on
Wall Street rippled out across America.
Even
those who'd never owned shares...
and who'd never benefited
from the stock-market boom...
became victims too.
The Crash had undermined Americans' faith in their
fragile banking system, made up of thousands of
small town banks that lacked the size or reputation
to convince customers that their money was safe.
As confidence in the economy sank
further, a domino effect began.
In 1931, over 2,000 banks failed.
After the Crash. The banks closed.
That I think affected us
a little more seriously,
us, meaning
us the people of my stature.
Many people had money in the bank, little
bit of money, couple of hundred dollars,
you know, 1,000 maybe.
There was no infrastructure then, there
was no Federal Deposit Insurance Corporation
to guarantee people's deposits,
there was no way to back up
the banks,
so if the banks had made
bad choices,
you as a depositor paid for it,
your money wasn't there.
And then people would hear that
the bank down the street wasn't good
and they worried about their own bank and that'd cause
a run on their bank and it was a terrible vicious cycle.
And something like 3,000 banks closed
in the following
couple of years after that, and the
whole financial system then seemed,
not just unstable, but worthless.
After that, when people saved money they were very
leery of banks and money went under the mattress.
The stock market crash in 1929
did not create the Great Depression,
but it did start a sequence
of events
that eventually culminated
with the Great Depression.
Some of this is
going to sound sort of familiar.
The banks were loaning money for the stock
market, the company's were loaning money,
the brokerages were loaning money and when those
prices fell, all that money just disappeared.
Almost immediately company's began
to feel the pinch of not having
the capital and of having lost money,
and they began to lay off people, to
let people go, to shut down production.
There were mass bankruptcies there
was a liquidity crisis of exactly
the same kind we have today, that is to say
all kinds of businesses could no longer get
loans to keep themselves afloat even if those businesses
were entirely solvent, they couldn't get the kind
of short term commercial credit to pay their
workers, to buy new inventory, to pay their suppliers.
And so they began going bankrupt and
as they went bankrupt they laid
people off and as they
laid people off demand fell.
And this is what does traumatic damage
to the whole society, so traumatic that
it's second only to the Civil War in American
memory as a tragic moment in American history.
My father had a modest-sized
insurance brokerage agency.
One night at dinner, my father
said that he had to fire an employee
and I very cavalierly said, "Well,
he'll be able to get a job, won't he?"
And my father said,
"No, he's an older man who isn't very
capable and I don't think he can. "
And at that point,
my father burst into tears.
It was the first time I
had ever seen my father cry.
There was such a change in our lives
and all the people around me
after the Crash.
Many of my girlfriends' fathers
lost their jobs
and they couldn't
pay the rent, they were evicted.
The poverty was really all
around us. Men had no clothing.
They were in rags, really rags.
They used to wrap their feet up in
newspaper and put them in cardboard,
makeshift shoes to
walk around the street.
And then if you took a walk over to
Central Park you saw this big area,
a deserted reservoir that had been
drained and they made little
huts of cardboard boxes,
and they
would sleep there overnight.
And they called
it Hooverville, because that was
the name of our President at the
time and, of course, all this...
stock market crash and all this
poverty was, of course, put in his lap.
It was really, really pitiful.
Like many others, the photographer,
Alice Austen struggled to keep up
mortgage payments
as the Great Depression took hold.
A few years into the Depression,
Alice Austen runs out of money.
There is nothing left.
She is out of her house.
They take her to a poor house, and it's
a poor house out of a Dickens' novel
and she lingers there for a
couple of years.
Miraculously, her photographs
are discovered.
A few of her photos
are sold to Time and Life Magazine
and that earns her enough money to move out of
the poor house and into a decent retirement home.
In a sense, her photographs
come to her rescue and take
her out of poverty and
into a year or two of decent living.
Paul Warburg, who so accurately
predicted the Crash and the Depression,
saved the bank he ran from disaster
by getting out of the market in time.
But it was of little
consolation to him.
My great-grandfather probably never
really recovered
his own personal
equilibrium after the Crash.
To be
called the Cassandra of Wall Street,
I think was very painful for him and
if we all remember Cassandra,
she couldn't just see the future,
she was also doomed to be disregarded.
And I think it caused him to
go into a depression of his own.
I'm not sure that he ever
would have said I told you so,
I think he felt that it was
really tragic
that this worldwide depression
could have been averted or headed off
or at least it didn't have to crash
so hard and, and I think...
it probably led to his early death.
When he died, it was the last
year of Hoover's presidency
and there was no end in sight.
But in 1932, 12 years of
Republican rule came to an end.
I, Franklin Delano Roosevelt,
do solemnly swear...
that I will faithfully execute the office
of the President of the United States.
Democrat, Franklin Roosevelt was
elected President in a landslide victory.
His first task
was to restore confidence.
ROOSEVELT: The only thing
we have to fear, is fear itself.
Seen as a saviour, Roosevelt promised
a New Deal for the American people,
and to regulate the
financial system.
There must be a strict supervision of
all banking and credit and investment.
There must be an end to speculation
with other people's money.
The new President acted quickly.
He guaranteed bank deposits
and introduced laws forcing bankers
to operate under strict
government supervision.
An investigation into the Crash was
launched by the Senate Banking Committee.
It would last more than three years,
and the 10,000 pages of testimony
blackened the
reputation of Wall Street.
The committee's ambitious lawyer,
Ferdinand Pecora,
challenged the banking elite
to account for their behaviour.
He calls these bankers to testify
and what does he learn?
He learns that Charlie Mitchell of National City
Corp had sold stock to his wife to avoid taxes.
Richard Whitney, who had so boldly bought
stock on Black Thursday lost money of his own
and began borrowing from his brother and when
that didn't work, he began stealing from customers.
He ended up in jail, doing time.
The most prestigious bank in America, JP
Morgan was also found to be far from blameless.
The hearings uncovered evidence
of a list that offered preferential
deals on stocks
to friends in high places...
including a former President.
There were not only Morgan partners
and Morgan family members, but also
prominent corporate executives and
even some politicians...
Calvin Coolidge was on the
preferred stock-list, for example.
That was a practice...
that a lot of people felt was wrong.
Ferdinand Pecora had a great quote, he said, "it was
shocking disclosures of low standards in high places,"
which I love because you know
you could say the same thing today.
In response to public outrage
at the bankers' dirty dealings,
President Roosevelt set up the
Securities and Exchange Commission...
its task - to clean up Wall Street.
At its head, he chose a man who knew
more about unethical practice than most.
President Roosevelt when he introduced the
Securities and Exchange Commission to regulate
Wall Street, named his old friend and
supporter Joe Kennedy to be the first chairman.
That's putting the fox
in the chicken coup.
Although Roosevelt restored
confidence in the banking system,
the Great Depression would last
until the outbreak of World War II.
Then as now, the globalised
economy meant that
the Crash and subsequent Depression
rippled out across the world.
In Britain, there was a slump in
manufacturing and millions lost their jobs.
Germany... still suffering from
defeat in the First World War...
was hit even harder.
So many people had their life
savings destroyed during
the Great Depression that it created
in many countries a desire for some
authoritarian government that would
save them, that would rescue the economy.
No doubt that the Crash and the Depression
strengthened anti-capitalist movements.
The communists had taken over in Russia
and there were rising fascist movements.
Mussolini was already in power
in Italy.
And Hitler's political
base was growing in Germany.
And when American-style free-market
capitalism suffered from this Wall Street Crash
followed by a depression, it just strengthened
those people who wanted to say there's a better way.
While communism and fascism prospered, many
nations put up barriers to prevent free trade
and turned inwards, in an
attempt to save their economies.
Economic nationalism
led to trade wars, and later...
world war.
80 years on, those
who remember the bubble of the '20s
and the Crash that followed, feel
that they have seen it all before.
I don't think we
learned anything from it.
I have found that people's
memories are very short.
They make the same type of leveraged commitments
where they don't look at the downside risk.
You have a lot of cheap
credit in the 1920s.
Now we've had cheap credit and
people have speculated on houses
and now the housing
bubble has collapsed.
You have a heavily
leveraged American consumer...
he's into debt up to his eyeballs,
and he can't sustain that debt.
The sub-prime mortgage
crisis is a symptom of that.
In the '80s and '90s,
faith in the free market had
revived, and as optimism returned,
many of the financial regulations
which Roosevelt had introduced
were felt to be outdated, and
were slowly dismantled.
Yet again, a lightly regulated market
allowed speculation to grow unchecked.
We are now reaping the whirlwind of that
deregulation and in that sense we're in
exactly the same position as people
were in 1929 when the Government
turned a blind eye to what was
going on in the financial world.
What I do hope and I
do think, is that the government has
learned it lessons and is trying to
take steps that are much active
and much more aggressive than what
was taken in the '30s,
to try and stem
the pain and stem the decline.
The hope is that
such steps will work.
But the lessons from the Crash of
1929 are that history repeats itself,
that human folly and greed are much
stronger forces in financial affairs
than reason and restraint.
E- mail subtitling@bbc. co. uk