American Experience (1988) s03e08 Episode Script
The Crash of 1929
1
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NEWSREEL ANNOUNCER:
The tremendous crowds
which you see gathered
outside the stock exchange
are due to the greatest crash
in the history of
the New York Stock Exchange
in market prices.
CROWD:
Three, two
(balloon bursts)
(crowd laughing and cheering)
NARRATOR:
December 31, New Year's Eve.
The crash and
its terrible consequences
were still in the future.
Financial leaders, everyone,
celebrated what had been
a decade of prosperity
and boundless optimism.
They thought
the party would last forever.
They called it the "new era."
1929
All the hope and promise
and illusion of the '20s
converged in that one year.
MAN:
The United States is afflicted
with new eras.
Let us not think for a moment
that the illusion
The aberration
of the 1920s was unique.
It is intimately a part
of the American character.
MAN:
The mood of the era I think
can best be remembered
by the hit song
Was that 1929? "Blue Skies."
WOMAN:
In the '20s, yes.
Blue skies
smiling at me
BOTH:
Nothing but blue skies do I see.
Never saw the sun
shining so bright ♪
Never saw things
going so right. ♪
Gray days,
all of them gone ♪
Nothing but blue skies
from now on. ♪
MAN:
Nothing but blue skies
from now on. ♪
WOMAN:
That was the whole tenor
of the day.
I mean, people
believed that everything
was going to be great
always always.
There was a feeling
of optimism in the air
that you cannot even
describe today.
And everybody seemed
to have an interest
in the stock market.
Certainly the bootblack,
the tailor, the grocer
owned shares of one
kind or another.
NARRATOR:
This was the first time
that many ordinary Americans
had begun to invest in stocks.
A stock, a share of a company,
is bought and sold
here on the floor
of the New York Stock Exchange.
The stocks themselves
have no fixed value.
As in an auction, if the stock
is in demand, its price goes up.
No demand,
and the price goes down.
For almost eight straight years,
stock values had been rising.
By 1929, there seemed to be
no upper limits
in this world of paper,
numbers and dreams.
MAN:
It was an arena
of unbounded opportunity
where somebody
like my grandfather
could come into it
and make a fortune.
So many people made
so much money in the market
that late in the '20s it seemed
that you just couldn't go wrong
buying stocks
in American companies.
NARRATOR:
Here was a whole new way
to make a fortune.
Unlike the Carnegies
and the Rockefellers
of previous decades,
who built steel mills
and dug oil wells,
men like Michael Meehan,
Jesse Livermore
and Charles Mitchell
had amassed their fortunes
buying and selling stocks
Pieces of paper.
The public was fascinated.
Bankers, brokers and speculators
had become celebrities
and they lived like royalty.
CUSHMAN:
I can hardly believe
that a family
lived in this kind of a house.
I mean, today it would
be almost unbelievable
Six stories and
these great big rooms.
Enormous!
We counted it up the other day.
We had 16 live-in help
in this house
Not counting the
chauffeurs and others.
Not counting the chauffeurs
Aside from all the help we
had in the Tuxedo Park house
and the Southampton house
as well.
But those days are gone forever.
I should say.
But we never thought of it
as being grandiose
because practically
everybody we knew
seemed to live in the same way.
WOMAN:
Jesse Livermore had
a ticker tape
in every home that he owned.
They had a beautiful house
on 76th Street in Manhattan
on the West Side,
off Central Park.
They had a floor
at 813 Fifth Avenue
because Dorothea did not like
to go to the West Side
to change her clothes.
So they had a house
in Great Neck.
They had a summer house
in Lake Placid.
They had a house in Palm Beach.
They had a private railroad car,
two yachts.
Oh, they lived
They really lived.
NARRATOR:
Few Americans lived
like Jesse Livermore,
but there was
a rising expectation
that everyone could have
a piece of this prosperity.
During his presidential campaign
of 1928,
candidate Herbert Hoover would
make this extraordinary promise.
HOOVER:
Given a chance to go forward
with the policies
of the last eight years,
we shall soon, with the help
of God, be in sight of the day
when poverty will be banished
from this nation.
(crowd cheering)
MAN:
There was great hope.
America came out of World War I
with the economy intact.
We were the only strong country;
the dollar was king.
We had a very popular president
in the middle of the decade,
Calvin Coolidge,
and an even more popular one
elected in 1928, Herbert Hoover,
so things looked pretty good.
NARRATOR:
The economy was changing
in this new America.
It was the dawn
of the consumer revolution
New inventions, mass marketing,
factories turning out
amazing products like radios
rayon
air conditioners
underarm deodorant.
SOBEL:
This is a period in which
the American household
gets the washing machine,
gets a refrigerator,
goes off gaslight and gets
electricity in some cities.
This is a period in which people
would buy little plugs
to put into the outlets in
the wall so the electricity
wouldn't leak on the floor.
"What will they think of next?!"
was a 1920s saying.
There were new things
constantly coming out,
and they were new things
which you could enjoy
Not just for the few.
NARRATOR:
One of the most wondrous
inventions of the age
was consumer credit.
Before 1920, the average worker
couldn't borrow money.
By 1929, "Buy now, pay later"
had become a way of life.
So there were changes,
many changes, in the way
people viewed the world
and all of them optimistic.
You extrapolate the curve,
and what do you have?
Permanent prosperity.
That was the term one heard
in the late 1920s
"We've entered an age
of permanent prosperity."
NARRATOR:
Wall Street got the credit
for this prosperity
and Wall Street was dominated
by just a small group
of wealthy men.
Rarely in the history
of this nation
had so much raw power
been concentrated
in the hands
of a few businessmen
Men like William C. Durant.
MAN:
It is almost impossible
to realize the power
and significance of the man.
In Flint, when Mr. Durant came
to Flint occasionally,
people used to say,
"Durant is in town!";
just like that
"Durant is in town!"
He was bigger than life.
NARRATOR:
Earlier in the century, Durant
had founded General Motors.
Now, he made his money
on Wall Street.
Backed by Midwestern
auto industrialists,
he controlled so much money
that he could single-handedly
drive up the price of a stock
and then sell,
reaping huge profits.
SCROBOGNA:
He was just at the apotheosis,
at the maximum of his power.
He managed, according
to the voices of the time,
according to what was said,
anywhere between two
to five billion dollars,
which in those days
was fabulous.
The market was filled with bulls
and he was the bull
of the bulls.
NARRATOR:
Durant came to Wall Street as
one of the titans of industry.
Jesse Livermore,
whose fortune was estimated
at over $100 million,
never did anything in his life
but play the market.
Everything Jesse Livermore
touched turned to gold,
it seemed.
All he had to do was
to press a button
and the stock
would go up ten points,
and that meant, of course,
that Jesse Livermore would make
a lot of money.
So, the average American
would look at this and say,
"Gee, if only I knew what he was
doing, I could make money too.
How do you get in
on Jesse Livermore's brains?"
NARRATOR:
Livermore was a speculator,
pure and simple.
He didn't study
the health of a company.
He didn't care whether it made
a profit or paid a dividend.
For him, the stock market was
an abstract game of numbers.
Money was not the end
for this man at all.
Money was a very peripheral
thing for him,
but beating the odds,
winning a game
That was his objective.
He was a numbers man.
He lived by the numbers.
He took an elevator
by the numbers;
he came into town
by the numbers.
Everything was done by numbers.
When he left his house
in the morning,
he did not leave at 8:10,
he left at 8:07.
All of the policemen knew,
because of his time schedule,
that he would be going down
Fifth Avenue, let's say,
at 8:37.
Well, of course, traffic lights
were hand-operated then.
You had policemen on boxes.
So the instant that they saw
his car, the lights were green.
He never stopped
for a red light.
NARRATOR:
The success of large speculators
like Livermore and Durant
lured smaller investors
to Wall Street.
But Charles Mitchell,
president of National City Bank,
virtually invented the idea of
mass marketing stocks and bonds
to the general public.
This was a totally new idea
and a huge success.
MITCHELL:
The bank, prior to father's
being elected president in 1921,
was geared mainly
to doing business
with large corporations.
Father pointed the bank
for the first time
in the direction of going
after the little man.
Don't call him
"the little man"
It was "everyman."
Well, "jedermann."
How old was he then?
38 years old.
And the National City company
had four offices,
and then within three years
there were over 50 offices.
And by 1929
it was the largest distributor
of securities in the world.
NARRATOR:
Even at the height
of the speculative frenzy,
only a small percentage
of the American public
actually invested in stocks,
but the market had entered
popular culture.
Wall Street became Main Street.
Everyone was talking stocks.
Watching the ticker became
a national sport.
Popular magazines covered
financial news.
Dozens of bestsellers promised
investors the inside track.
WOMAN:
Oh, what a feeling ♪
You've got me feeling
bigger and better than ever. ♪
NARRATOR:
The characters in the popular
comic strip Gasoline Alley
were investing in a company
called "Rubber Keyhole."
Stock tips came from everywhere.
Some investors
followed the advice
of Evangeline Adams,
an astrologer.
She was able to calculate the
variations of the stock exchange
so accurately that there was
practically no difference
to having have read it
in a ledger somewhere.
"Among her more interesting
clients were Charles Chaplin,
Mary Pickford
and J. Pierpont Morgan.
NARRATOR:
In February, Evangeline Adams
looked at the stars
and predicted a dramatic upswing
in stock prices
for the coming months.
I'm looking up at the sky,
I see the clouds rolling by ♪
Hello, sunshine, hello! ♪
NARRATOR:
The stock market,
once considered a highly
risky place to put your money,
was now beginning to attract
a whole new group
of amateur speculators.
Among the new players
was one Julius Marx.
Everyone knew him
by his stage name Groucho.
MAN:
They were poor, and
it always affected my father.
He was always thrifty
and worried about his future
and what would become of him
when no one else wanted him
as an actor anymore.
So he was always saving money,
turning off the lights
and turning off the water
around the house even after
he was in Hollywood
and making a lot of money.
NARRATOR:
Of all the Marx brothers,
Groucho was the most
financially conservative.
In 1929, he took
his life savings
and put it in a "sure thing"
The stock market.
MARX:
He was always
phoning a broker
and getting hot tips
and wanting to know
what the stocks were,
how they were doing.
If he wasn't on the phone, he
would take me into Great Neck,
which was a little village
at the time,
but they did have a stock broker
called Newman Brothers
and Worms.
And all these men who were
investing in the market
would all sit there in chairs
like a little theater
and watch the ticker tape go by.
NARRATOR:
Groucho, along with record
numbers of smaller investors,
was borrowing money
to buy stocks.
It was called
"buying on margin."
You only needed 10% down.
Just $1,000 would get you
$10,000 worth of stock.
Suddenly you were in the same
league with the big players,
or so it seemed.
But the stock market was not
a level playing field.
In the '20s and '30s,
one of the big features
of the stock market is the fact
that it wasn't controlled
and that operators could do
a lot of things that
are not permitted today.
NARRATOR:
One of the most
common tactics was
to manipulate the price
of a particular stock,
a stock like
Radio Corporation of America.
R.C.A. was in the '20s
what Xerox was in the '60s,
what was a great
growth stock.
The stock went from
I can't remember
the exact numbers
but from something like
20 to 400, split many times
and made many people, including
my grandfather, very wealthy.
It was one of the stocks
that was manipulated by a pool.
NARRATOR:
Wealthy investors
would pool their money
in a secret agreement to buy
a stock, inflate its price
and then sell it
to an unsuspecting public.
Most stocks in the 1920s
were regularly manipulated
by insiders, like R.C.A.
specialist Michael Meehan.
NESBITT:
In those days, that was legal
and it was quite common practice
for a group of Wall Streeters
to take a stock in hand
and they would acquire
a position in the stock early on
and then they would see to it
that there was good press on
the stock a lot of publicity.
I would say that practically all
the financial journalists
were on the take.
This includes reporters
for the Wall Street Journal,
the New York Times, the
Herald Tribune, you name it.
So if you were a pool operator,
you'd call your friend
at the Times
and say, "Look, Charlie, there's
an envelope waiting for you here
"and we think that perhaps
you should write something nice
about R.C.A."
And Charlie would write
something nice about R.C.A.
A publicity man called A. Newton
Plummer had canceled checks
from practically every major
journalist in New York City.
Then they would begin to, what
was called, "painting the tape,"
and they would make
the stock look exciting.
They would trade
among themselves
and you'd see these big prints
in R.C.A. and people would say,
"It looks as though that stock
is being accumulated."
SOBEL:
Now that they are behind it,
you want to join them,
so you go out
and you buy stock also.
And what's happening is the
stock goes from ten to 15 to 20.
And now it's at 20
and you start buying.
Other people start buying
30, 40.
The original group, the pool,
they stop buying.
They're selling you the stock.
Now 50, and they're out of it.
And what happens, of course,
is the stock collapses.
NARRATOR:
On March 8, 1929,
Michael Meehan began
one of the most successful pools
on Wall Street.
From the eighth to the 17th,
Meehan and the pool pushed up
the value of R.C.A. almost 50%.
On March 18, they sold
and divided up their profits.
In today's money,
they had made $100 million
for one week's work.
The pools were a little
like musical chairs.
When the music stopped,
somebody owned the stocks
and those were the sufferers.
NARRATOR:
If small investors suffered,
they would soon
be back for more.
They knew the game was rigged,
but maybe next time
they could beat the system.
WOMAN:
If you want the rainbow,
you must have the rain. ♪
NARRATOR:
Wall Street had its critics,
among them,
economist Roger Babson.
He questioned the boom, and was
accused of lack of patriotism,
of selling America short.
Roger Babson warned
of the speculation,
said there's going to be a crash
and the aftermath
is going to be quite terrible.
And people jumped on Babson
from all around
for saying such a thing.
So that people who were cautious
about their personal reputation,
who didn't want to call down
on themselves a lot of calumny,
kept quiet.
NARRATOR:
Mobster Al Capone
was not a cautious man.
From his Chicago headquarters,
he condemned the wild
speculation on Wall Street.
"It's a racket!" he said.
"Those stock market guys
are crooked!"
Capone invested his money
in a $100 million
bootleg liquor business.
Business was good
on Valentine's Day, 1929.
He had just eliminated
the competition.
March 4, Inauguration Day.
Republican president
Calvin Coolidge
had run his administration
on the belief
that business was the basis
of America's prosperity.
Government should not interfere.
Herbert Hoover had won
a landslide victory
promising to carry on
the tradition.
GALBRAITH:
This was a time in our history
when governments did not,
as now, take responsibility
for the economy.
They presided over it,
but the level
of economic activity
and the level of economic growth
and the stability of prices
were not yet everyday concerns
of the president.
And what Coolidge did was
to say how wonderful times were,
how happy
everybody was going to be
and how prosperous
everyone was going to be.
And Hoover's responsibility
was to continue that optimism.
You, Herbert Hoover,
do solemnly swear
NARRATOR:
Politicians came and went,
but in the '20s,
the businessman was king.
New York City had
a dapper, corrupt
and vastly popular mayor,
Jimmy Walker.
But behind the scenes
were powerful financial leaders
like Charles Mitchell.
MITCHELL:
Jimmy Walker was
high, wide and fancy
with the city finances.
One day, father called
Mayor Walker up here
and he had
some other bankers with him,
and Mayor Walker was sort of
put on the grill
in the upstairs library
while these bankers
read the riot act to him
to try and get some
fiscal responsibility
instilled into him.
And I know
that after the meeting
someone took me into the library
and pointed me out the chair
that the mayor
had been sitting in
and he had been so nervous
were those Louis XIV chairs
with all the little
Louis XV.
With all the little
tacks in there, brass tacks,
and he'd pulled out
almost all the brass tacks
They were on the floor
Out of sheer nerves.
NARRATOR:
The stock market, too, was
getting a severe case of nerves.
On Friday, March 22,
all eyes were on that august
government body in Washington,
the Federal Reserve Board.
The board distrusted the boom.
They saw the speculation
as reckless and dangerous
because it was based
more and more
on the shaky foundation
of borrowed money margin.
The board had the power
to curb the borrowing,
but the market was now dependent
on borrowed money.
Without margin,
it would collapse.
The board met day after day.
Would they ask for regulation
of the stock market?
They issued
no public statements.
Their silence was terrifying.
Get my broker, say,
get my broker ♪
Got to get him,
got to get him ♪
NARRATOR:
On Monday, March 25,
investors began to sell.
Blue-chip stocks plunged.
Tuesday another wave
of selling swept the market.
As it fell, people holding stock
on margin were hit hard.
They'd put only 10% down,
but the value of their stock
dropped more than 10%,
so their down payment was gone.
To hold their stocks, they'd
have to put up more money.
On March 26,
millions of investors
suddenly found themselves
in deep trouble.
Your broker would call you
and say,
"We need more money
You're wiped out."
Unless you could
give him more money,
he would then sell the stock.
Now he would sell the stock,
which would cause the stock
to go down to 85, 86,
and now more margin calls
are triggered.
So one margin call
triggers another margin call,
triggers another margin call,
and it goes all the way down.
NARRATOR:
With everyone trying
to borrow money
to cover the falling value
of their stocks,
there was a credit crunch;
interest rates soared.
At 20%, few people could afford
to borrow more money.
The boom was about to collapse
like a house of cards.
Charlie Mitchell was horrified.
His success, his entire career,
his personal fortune,
had been based
on a rising market.
If nobody else was going
to stop the crash,
Charles Mitchell would.
MITCHELL:
Father, at that point,
stepped in
and announced that the National
City Bank would provide
$25 million of credit,
which was all very well
and very necessary,
but he added the fateful words,
"Whatever the Federal
Reserve Board thinks,"
and Senator Carter Glass,
who had been the father of
the Federal Reserve Act in 1913,
took that as a direct slap
across the face.
But whatever
Senator Glass thought,
immediately the credit crisis
was alleviated.
In fact,
within the next 24 hours,
call money went from 20% to 8%,
and that stopped
the panic, then, in March.
NARRATOR:
The next day,
the market rallied.
The Federal Reserve Board
remained silent,
tacitly accepting defeat.
The hero of the day
was Charlie Mitchell.
He had single-handedly
stopped the crash of '29.
(crowd noise)
With the start
of the baseball season,
people quickly forgot
the break in the market.
New events filled the papers.
There was a crisis in Nicaragua
where the nationalist hero
Augusto Sandino
was threatening
American marines;
tragedy in the British mandate
of Palestine
as Jews and Arabs clashed
over control of holy sites
in Jerusalem;
and in Antarctica,
Commander Byrd was at his
base camp, Little America,
waiting for a break
in the weather.
His elaborately planned flight
over the South Pole
was still on ice.
The newsreels had
come into their own.
Now, in living sound,
patrons could keep abreast
of the important events
of the day.
The biggest news of the day
is not the naval agreement,
not even Prohibition, but the
return of the natural waistline.
LIVERMORE:
Dorothea Livermore
was a typical flapper.
She has to embody the '20s.
She would do almost anything
on an impulse.
She had some priceless pieces
of 18th-century furniture,
but the house had settled
and the floors were not level.
But Mrs. Livermore didn't like
to spend money that didn't show,
so instead of having
the hoists put underneath,
she simply solved the problem
by having the legs
of the furniture cut off
to fit the sloping floors,
so that the tops
of all the furniture were level,
but of course the legs
were on different angles.
And this was
her typical solution
As long as the tops were level,
everything was fine.
NARRATOR:
Everything was not fine
that spring
with the American economy.
It was showing
ominous signs of trouble:
steel production was declining;
the construction industry
was sluggish;
car sales dropped; customers
were getting harder to find,
and because of easy credit,
many people were deeply in debt.
Large sections of the population
were poor and getting poorer.
Just as Wall Street
had reflected
a steady growth in the economy
throughout most of the '20s,
it would seem that now
the market should reflect
the economic slowdown.
Instead, it soared
to record heights.
Stock prices no longer
had anything to do
with company profits,
the economy or anything else.
The speculative boom had
acquired a momentum of its own.
This is the nature
of mass illusion.
Prices were going up,
people bought,
that forced prices up further,
that brought in more people.
And eventually the process
becomes self-perpetuating
Every increase brings in
more people
convinced of their
God-given right to get rich.
NARRATOR:
The '20s was a decade of
all sorts of fast money schemes.
Three years earlier, everyone
was buying Florida real estate.
As prices of land skyrocketed,
more people jumped in,
hoping to make a killing.
Then, overnight,
the boom turned to bust
and investors lost everything.
Florida, folks
Sunshine, sunshine,
perpetual sunshine
all the year round.
Let's get the auction started
before we get a tornado.
NARRATOR:
In May, the Marx brothers
were before the cameras
with their first film,
The Cocoanuts.
Its subject:
the Florida land boom.
Now, in 1929, the gullibility
of those naive speculators
was something to laugh about.
800 wonderful residences
will be built right here.
Why, they're as good as up
Better!
You can have any kind
of a home you want to.
You can even get stucco
Oh, how you can get stucco.
Now is the time to buy,
while the new boom is on.
Remember that old saying,
"A new boom sweeps clean."
And don't forget the guarantee.
NARRATOR:
Groucho Marx would
film these scenes
and then rush to his broker
to put more of his savings
into the booming market
On margin, of course.
MARX:
Max Gordon,
the Broadway producer,
was also heavily in the market.
And Gordon could never
get over the fact
that the market was going
up and up and up all the time.
He said to my father,
"How long has this been going
on, Groucho?"
My father said, "I don't know,
but my broker down in Great Neck
"tells me that it's because
there's a worldwide market
"for American goods and it's
never going to go down
The market will just keep
going up and up and up."
NARRATOR:
May 1929: stock prices
were going up and up.
With so much money to be made,
people were borrowing more money
than ever before to buy stocks.
Market leaders
like William Durant,
far from being worried,
were ecstatic.
Off on his annual visit
to Europe,
he announced that
everything would be fine
as long as we all
continued to believe:
"Confidence! Not halfway
confidence, but 100% confidence,
is the real basis
for our prosperity."
Astrologer Evangeline Adams was
now putting out a newsletter.
Her 100,000 subscribers learned
how the zodiac could
influence stock prices.
Her advice
for the coming summer: buy!
(jazz music)
MAN:
Hitting the ceiling,
hitting the ceiling ♪
Breaking through
to the sky ♪
MAN:
They thought this was a ride
that was never going to end.
It just goes on and on and on
and every day they got
more money
and they're counting up
their paper profits
and they're selling and buying
and buying and selling
and they're doing great!
up to the top! ♪
Hitting the ceiling,
hitting the ♪
MAN:
I'd go to get a shoeshine,
they'd say, "How's the market?"
You went to the barber
"How's the market?"
Everybody was in the market.
SOBEL:
They were people who were
looking for the one lucky break,
people who were just hoping
they would strike it right.
You'd take a rifle,
aim at the ocean
and you hope to hit a fish.
NARRATOR:
Along with the market,
temperatures soared that summer.
It was a record heat wave
and a record three months
at the exchange.
Some stocks doubled in value.
In June, the New York Times
index of stocks rose 52
points;
in July, another 25.
In the middle of the summer,
the Graf Zeppelin was completing
its first leisurely trip
around the world.
The Marx brothers had
finished shooting their film
The Cocoanuts.
Commander Byrd was still at his
base camp near the South Pole.
He too had money in the market
and radioed his broker
for the latest quotes.
Back in Cleveland,
George Herman Ruth
hit his 500th home run,
and on the radio, they were
playing the latest hit tune
"I'm in the Market for You."
MAN:
I want a thousand shares
of your caresses, too. ♪
We'll count
the hugs and kisses ♪
When dividends are due ♪
'Cause I'm in the market
for you. ♪
NARRATOR:
On August 17,
Michael Meehan's brokerage firm
launched a new service.
NESBITT:
One of my grandfather's
innovations
was putting brokerage houses
on the ocean liners.
The first went
on the Berengaria.
That allowed you during the
Whatever it was, six or
seven-day passage to Europe
If you were such
a stock market addict
that you couldn't stand
to withdraw for that period,
you could walk into the office
and place your order
to buy or sell
100 shares of General Motors
or General Electric or whatever,
and they would radio
that order back to New York.
It was being very modern
at the time.
They were very wealthy people
on the transatlantic liners
and it gave them
something to do.
NARRATOR:
At sea and on land, everyone
seemed to be making money.
It was a stampede of buying,
and major speculators
like John Jacob Raskob
whipped up the frenzy.
He told readers
of the Ladies' Home Journal
that now everyone could be rich.
September 2, Labor Day:
it was the hottest day
of the year.
The markets were closed
and people were at the beach.
A reporter checked in with
astrologer Evangeline Adams
to ask about the future
of stock prices.
Her answer: "The Dow Jones
could climb to heaven."
The very next day, September 3
the stock market hit
its all-time high.
(babble of voices)
KAROL:
My father and I
had an ongoing discussion
about the stock market.
I used to say, "Pop, everybody's
getting rich but you.
"You work so hard and you're
never going to make a nickel.
"All you do is you keep
delivering these newspapers
"and that's about it.
"The guy who's shining shoes
is in the stock market;
"the grocery clerk
is in the stock market;
"the schoolteacher
is in the stock market;
"the teller at the bank
is in the stock market.
"Everybody's
in the stock market.
You're the only one
that's not in the stock market."
And he used to sort of laugh and
say, "You'll see, you'll see."
NARRATOR:
On September 5, economist
Roger Babson gave a speech
to a group of businessmen:
"Sooner or later a crash is
coming, and it may be terrific."
He'd been saying
the same thing for two years,
but now, for some reason,
investors were listening.
The market took a severe dip.
They called it
"the Babson break."
The next day prices stabilized,
but several days later
they began to drift lower.
Though investors
had no way of knowing it,
the collapse had already begun.
In the weeks to follow,
the market fluctuated
wildly, up and down.
On September 12,
prices dropped 10%.
They dipped sharply again
on the 20th.
Stock markets around
the world were falling too.
Then, on September 25,
the market suddenly rallied.
MAN:
I remember well that I thought,
"Why is this doing this?"
And then I thought, "Well, I'm
new here and these people"
like every day in the paper
Charlie Mitchell
would have something to say,
the J.P. Morgan people
would have something to say
about how good things were,
and I thought,
"Well, they know a lot more
"about this market than I do
I'm fairly new here and I really
can't see why it's going up."
But then when they say,
"It can't go down,"
or, "If it does go down today,
it'll go back tomorrow,"
you think, "Well, they
really are like God
"they know it all and it must be
the way it's going
because they say so."
NARRATOR:
As the market floundered,
financial leaders were as
optimistic as ever more so.
Just five days before
the crash, Thomas Lamont,
acting head of the highly
conservative Morgan Bank,
wrote a letter
to President Hoover:
"The future appears brilliant.
Our securities are the most
desirable in the world."
Charles Mitchell assured
nervous investors
that "things have
never been better."
Practically every business
leader in America and banker,
right around the time of 1929,
saying how wonderful things were
and the economy had only one
way to go, and that was up.
Unfortunately,
he didn't have a crystal ball
to predict the future.
There is an old saying
on Wall Street
that the two most important
emotions are fear and greed.
And you go from fear to greed
in about a fraction of a second.
So you're very, very greedy
and you say to yourself,
"I want to make more."
And then the market goes down
ten points
and you get frightened
"I want to keep what I have"
So you sell everything,
and that's how you have a panic.
So you can have a panic
on the up side
People rushing to get in
before the train takes off,
and a panic on the down side
Trying to get off the train
before disaster hits.
NARRATOR:
Monday, October 21.
Hoover, along with the political
and financial leaders
of the country, arrives in
Dearborn, Michigan,
to celebrate
the 50th anniversary
of Edison's invention
of the light bulb.
The host is Henry Ford.
The country is reminded
that in 50 short years,
men like Ford, Durant and Edison
had transformed America
from a third-rate power into the
industrial giant of the world.
And while they celebrated,
their world was beginning
to fall apart.
GALBRAITH:
There came a Wednesday,
October 23,
when the market was
a little shaky, weak.
Whether this caused
some spread of pessimism,
one doesn't know.
It certainly led a lot of people
to think they should get out.
And so on Thursday, October 24,
the first Black Thursday,
the market, beginning in the
morning, took a terrific tumble.
(clamor)
MITCHELL:
The market opened
in an absolutely free fall
and some people couldn't even
get any bids for their shares,
and it was wild panic.
And an ugly crowd gathered
outside the stock exchange
and it was described as making
weird and threatening noises.
It was indeed one
of the worst days
that had ever been seen
down there.
NARRATOR:
There was a glimmer of hope
on Black Thursday.
Directly across from
the New York Stock Exchange
was a low, stately building,
the House of Morgan.
22 years earlier,
J. Pierpont Morgan
had stopped the panic of 1907.
October 24, high noon:
all eyes were now
on acting head Thomas W. Lamont.
MAN:
Tom Lamont called
a number of the other bankers,
like Charles Mitchell of the
National City Bank, and
people from the Bankers Trust
and J. Albert Wiggin
of the Chase Bank and so forth.
There were about
a half a dozen of them there,
and they were gathered together
to really discuss
what they could do
to stem this tremendous
onslaught of selling stocks
on the stock exchange
that was taking place.
About 12:30,
there was an announcement
that this group of bankers
would make available
a very substantial sum
to ease the credit stringency
and support the market.
And right after that, Dick
Whitney made his famous walk
across the floor
of the New York Stock Exchange.
NARRATOR:
Richard Whitney,
vice president of the Exchange,
was chosen by the bankers
to be their representative.
At 1:30 in the afternoon,
at the height of the panic,
he strode across the floor,
and in a loud, clear voice,
ordered 10,000 shares
of U.S. Steel
at a price considerably higher
than the last bid.
He then went from post to post
shouting "buy" orders
for key stocks.
He stood up on one of the seats
at the post, and he said,
"I give 45 for 50,000
Standard Oil."
And everybody started
to applaud, all of us
"The crash is over!
If Morgan is putting his money
in, maybe the crash is over."
GALBRAITH:
And sure enough,
this seemed to be evidence
that the bankers
had moved in to end the panic,
and they did end it
for that day;
the market stabilized
and even went up.
LAMONT:
The New York Times said
that thanks to the formation
of this bankers pool,
most observers felt
that the panic and
the great sell-off was over.
And most people
did feel that way;
Tom Lamont felt that way.
But Monday was not good.
Apparently people had
thought about things
over the weekend, over Sunday,
and decided maybe they might
be safer to get out.
Then came the real crash,
which was on Tuesday,
when the market
went down and down and down
without seeming limit.
NARRATOR:
October 29.
Morgan's bankers could
no longer stem the tide.
It was like trying
to stop Niagara Falls.
Everyone wanted to sell.
AT&T down 50%;
R.C.A., once $110 a share,
couldn't find buyers at 26;
Blue Ridge, 100, plunged to $3,
and still no buyers.
On the floor they had
never seen anything like it.
SILVERSTONE:
It was just like a nightmare
and I couldn't believe
what was going on.
In those days every "buy" order
was on a black pad
and every "sell" order
was on a red pad.
And all I saw was
members running around
with a fistful of red orders
just like chickens
with their head cut off.
They didn't know which way
to run.
They were panicking, screaming.
Everybody was bumping
into everybody else.
(groans)
Don't remind him.
Anyhow, this is what happened,
and I tell you
and I was supposed to answer,
everybody's yelling at me.
I said,
"What am I supposed to do?"
Nobody knew what the hell to do.
NARRATOR:
William Durant,
the bull of the bulls,
now tried single-handedly
to support the market.
The further it plunged,
the more of his millions
he poured into it.
SCROBOGNA:
He became truly convinced
that he was omnipotent.
He thought that nothing
would really unseat him.
It was unfortunate;
the forces were too great.
There was no one man
that could have been so powerful
to control the market.
NARRATOR:
There were some people, however,
whose investment strategies
made money.
On October 29, Jesse Livermore's
wife, hearing of the crash,
ordered the servants to move
all the furniture
out of their mansion, into
a small cottage on the estate.
So when Mr. Livermore
got home that night,
he walked into
a totally vacant house.
When she told him that
she had effected the move
because she was sure that
they had lost all their money,
he told her that he had
made more money that day
than he had ever made before.
NARRATOR:
For most others,
it was all over.
In brokers' offices across the
country, the small investors
The tailors, the grocers,
the secretaries
Stared at the moving ticker
in numb silence.
Hope of an easy retirement,
the new home,
their children's education
Everything was gone.
MARX:
My father was ready
to kill himself.
The morning of the crash,
he got a call,
and it was Max Gordon.
And Max Gordon says, "Groucho,"
and my father said, "What?"
and Gordon said,
"Groucho, the jig is up."
There were all sorts of rumors
and you'd see people going down
the street looking up
to see if they could catch
somebody jumping out the window.
It turned out there weren't
as many people jumped
out the window as they reported,
but some did
and others committed suicide
other ways.
NARRATOR:
500 miles from Wall Street
in the Atlantic,
the luxury liner the Berengaria
was heading home.
From Michael Meehan's
brokerage office,
word spread through the ship:
"The bottom has fallen
out of the market!"
Men came running out of their
Turkish baths in towels;
card games ended abruptly;
everyone tried to jam
into the tiny office
yelling, "Sell at market!"
They had left England
wealthy men;
they docked in New York
without a penny.
(seagulls crying)
GALBRAITH:
There's nothing unique
about this.
It is something which happens
every 20 or 30 years,
because that is about the
length of the financial memory.
It's about the length
of time that it requires
for one for a new set
of suckers, if you will,
a new set of people capable
of wonderful self-delusion
to come in and imagine that they
have a new and wonderful fix
on the future.
NARRATOR:
In the 1930s,
Charles Mitchell was hounded
by Senate committees
and the I.R.S.
The crash had left him
$12 million in debt.
This house was taken over,
of course, and things changed.
And
I began to know what
the real world was all about.
It was about time
I was 19 years old.
NARRATOR:
Mitchell made
a remarkable comeback.
He paid off his debts
and died in 1955
a highly respected figure
on Wall Street.
In 1936, William Durant
filed for bankruptcy.
His only assets,
which he valued at $250,
were the clothes on his back.
In the late '30s,
the founder of General Motors
tried his hand at everything
from running a bowling alley
to selling a cure for dandruff.
He died in 1947, still talking
about making a comeback.
Herbert Hoover spent much
of the early 1930s fishing.
He explained in a speech
that "fishing
is a constant reminder
"of humility and
of human frailty,
for all men are equal
before fishes."
The game on Wall Street
had changed a great deal
for Livermore,
and the S.E.C. was becoming
a powerful factor
and the rules were changed.
He couldn't operate freely
Buy and sell the way
he had in the past
And he couldn't adapt
to the new regulations.
So, in a sense, his playing
with the market was over,
and I think a great deal of
his interest in life was over
at that point;
the game was gone.
NARRATOR:
In 1940, the day
before Thanksgiving,
a photographer snapped
this photograph
of an old and very tired
Jesse Livermore.
Several hours later, Livermore
would go into a men's washroom
and put a bullet
through his head.
At the end of 1929, as they
celebrated New Year's Eve,
all that lay in the future.
Nobody knew that
the Great Depression was coming;
unemployment, bread lines,
bank failures
This was unimaginable.
MAN:
Then good luck came
a-knocking at my door ♪
NARRATOR:
But the bubble had burst.
Gone was that innocent
optimism, the confidence,
the illusion
of wealth without work.
One era had ended.
They toasted the coming
of the '30s,
but somewhere, deep down,
they knew
The party was over.
MAN:
Blue skies smiling at me ♪
Nothing but blue skies
do I see. ♪
I never saw things
going so right ♪
Noticing the days
hurrying by ♪
When you're in love ♪
My, how they fly ♪
Blue days, all of them gone ♪
Nothing but blue skies
from now on ♪
Blue skies smiling at me ♪
Nothing but blue skies ♪
Do I see ♪
I hear those
little bluebirds ♪
They're singing our song ♪
Nothing but bluebirds
all day long ♪
I'm sittin' on the world,
wearing a grin ♪
Counting the clouds
that I'm not in ♪
Blue days, blue days ♪
All of them gone, gone, gone ♪
Nothing but blue skies
from now on. ♪
Exclusive corporate funding
for American Experience
is provided by:
Major funding by:
American Experience is
also made possible
by the Corporation for Public
Broadcasting.
And:
Exclusive corporate funding
for American Experience
is provided by:
Major funding by:
American Experience
is also made possible
by the Corporation for Public
Broadcasting.
And:
NEWSREEL ANNOUNCER:
The tremendous crowds
which you see gathered
outside the stock exchange
are due to the greatest crash
in the history of
the New York Stock Exchange
in market prices.
CROWD:
Three, two
(balloon bursts)
(crowd laughing and cheering)
NARRATOR:
December 31, New Year's Eve.
The crash and
its terrible consequences
were still in the future.
Financial leaders, everyone,
celebrated what had been
a decade of prosperity
and boundless optimism.
They thought
the party would last forever.
They called it the "new era."
1929
All the hope and promise
and illusion of the '20s
converged in that one year.
MAN:
The United States is afflicted
with new eras.
Let us not think for a moment
that the illusion
The aberration
of the 1920s was unique.
It is intimately a part
of the American character.
MAN:
The mood of the era I think
can best be remembered
by the hit song
Was that 1929? "Blue Skies."
WOMAN:
In the '20s, yes.
Blue skies
smiling at me
BOTH:
Nothing but blue skies do I see.
Never saw the sun
shining so bright ♪
Never saw things
going so right. ♪
Gray days,
all of them gone ♪
Nothing but blue skies
from now on. ♪
MAN:
Nothing but blue skies
from now on. ♪
WOMAN:
That was the whole tenor
of the day.
I mean, people
believed that everything
was going to be great
always always.
There was a feeling
of optimism in the air
that you cannot even
describe today.
And everybody seemed
to have an interest
in the stock market.
Certainly the bootblack,
the tailor, the grocer
owned shares of one
kind or another.
NARRATOR:
This was the first time
that many ordinary Americans
had begun to invest in stocks.
A stock, a share of a company,
is bought and sold
here on the floor
of the New York Stock Exchange.
The stocks themselves
have no fixed value.
As in an auction, if the stock
is in demand, its price goes up.
No demand,
and the price goes down.
For almost eight straight years,
stock values had been rising.
By 1929, there seemed to be
no upper limits
in this world of paper,
numbers and dreams.
MAN:
It was an arena
of unbounded opportunity
where somebody
like my grandfather
could come into it
and make a fortune.
So many people made
so much money in the market
that late in the '20s it seemed
that you just couldn't go wrong
buying stocks
in American companies.
NARRATOR:
Here was a whole new way
to make a fortune.
Unlike the Carnegies
and the Rockefellers
of previous decades,
who built steel mills
and dug oil wells,
men like Michael Meehan,
Jesse Livermore
and Charles Mitchell
had amassed their fortunes
buying and selling stocks
Pieces of paper.
The public was fascinated.
Bankers, brokers and speculators
had become celebrities
and they lived like royalty.
CUSHMAN:
I can hardly believe
that a family
lived in this kind of a house.
I mean, today it would
be almost unbelievable
Six stories and
these great big rooms.
Enormous!
We counted it up the other day.
We had 16 live-in help
in this house
Not counting the
chauffeurs and others.
Not counting the chauffeurs
Aside from all the help we
had in the Tuxedo Park house
and the Southampton house
as well.
But those days are gone forever.
I should say.
But we never thought of it
as being grandiose
because practically
everybody we knew
seemed to live in the same way.
WOMAN:
Jesse Livermore had
a ticker tape
in every home that he owned.
They had a beautiful house
on 76th Street in Manhattan
on the West Side,
off Central Park.
They had a floor
at 813 Fifth Avenue
because Dorothea did not like
to go to the West Side
to change her clothes.
So they had a house
in Great Neck.
They had a summer house
in Lake Placid.
They had a house in Palm Beach.
They had a private railroad car,
two yachts.
Oh, they lived
They really lived.
NARRATOR:
Few Americans lived
like Jesse Livermore,
but there was
a rising expectation
that everyone could have
a piece of this prosperity.
During his presidential campaign
of 1928,
candidate Herbert Hoover would
make this extraordinary promise.
HOOVER:
Given a chance to go forward
with the policies
of the last eight years,
we shall soon, with the help
of God, be in sight of the day
when poverty will be banished
from this nation.
(crowd cheering)
MAN:
There was great hope.
America came out of World War I
with the economy intact.
We were the only strong country;
the dollar was king.
We had a very popular president
in the middle of the decade,
Calvin Coolidge,
and an even more popular one
elected in 1928, Herbert Hoover,
so things looked pretty good.
NARRATOR:
The economy was changing
in this new America.
It was the dawn
of the consumer revolution
New inventions, mass marketing,
factories turning out
amazing products like radios
rayon
air conditioners
underarm deodorant.
SOBEL:
This is a period in which
the American household
gets the washing machine,
gets a refrigerator,
goes off gaslight and gets
electricity in some cities.
This is a period in which people
would buy little plugs
to put into the outlets in
the wall so the electricity
wouldn't leak on the floor.
"What will they think of next?!"
was a 1920s saying.
There were new things
constantly coming out,
and they were new things
which you could enjoy
Not just for the few.
NARRATOR:
One of the most wondrous
inventions of the age
was consumer credit.
Before 1920, the average worker
couldn't borrow money.
By 1929, "Buy now, pay later"
had become a way of life.
So there were changes,
many changes, in the way
people viewed the world
and all of them optimistic.
You extrapolate the curve,
and what do you have?
Permanent prosperity.
That was the term one heard
in the late 1920s
"We've entered an age
of permanent prosperity."
NARRATOR:
Wall Street got the credit
for this prosperity
and Wall Street was dominated
by just a small group
of wealthy men.
Rarely in the history
of this nation
had so much raw power
been concentrated
in the hands
of a few businessmen
Men like William C. Durant.
MAN:
It is almost impossible
to realize the power
and significance of the man.
In Flint, when Mr. Durant came
to Flint occasionally,
people used to say,
"Durant is in town!";
just like that
"Durant is in town!"
He was bigger than life.
NARRATOR:
Earlier in the century, Durant
had founded General Motors.
Now, he made his money
on Wall Street.
Backed by Midwestern
auto industrialists,
he controlled so much money
that he could single-handedly
drive up the price of a stock
and then sell,
reaping huge profits.
SCROBOGNA:
He was just at the apotheosis,
at the maximum of his power.
He managed, according
to the voices of the time,
according to what was said,
anywhere between two
to five billion dollars,
which in those days
was fabulous.
The market was filled with bulls
and he was the bull
of the bulls.
NARRATOR:
Durant came to Wall Street as
one of the titans of industry.
Jesse Livermore,
whose fortune was estimated
at over $100 million,
never did anything in his life
but play the market.
Everything Jesse Livermore
touched turned to gold,
it seemed.
All he had to do was
to press a button
and the stock
would go up ten points,
and that meant, of course,
that Jesse Livermore would make
a lot of money.
So, the average American
would look at this and say,
"Gee, if only I knew what he was
doing, I could make money too.
How do you get in
on Jesse Livermore's brains?"
NARRATOR:
Livermore was a speculator,
pure and simple.
He didn't study
the health of a company.
He didn't care whether it made
a profit or paid a dividend.
For him, the stock market was
an abstract game of numbers.
Money was not the end
for this man at all.
Money was a very peripheral
thing for him,
but beating the odds,
winning a game
That was his objective.
He was a numbers man.
He lived by the numbers.
He took an elevator
by the numbers;
he came into town
by the numbers.
Everything was done by numbers.
When he left his house
in the morning,
he did not leave at 8:10,
he left at 8:07.
All of the policemen knew,
because of his time schedule,
that he would be going down
Fifth Avenue, let's say,
at 8:37.
Well, of course, traffic lights
were hand-operated then.
You had policemen on boxes.
So the instant that they saw
his car, the lights were green.
He never stopped
for a red light.
NARRATOR:
The success of large speculators
like Livermore and Durant
lured smaller investors
to Wall Street.
But Charles Mitchell,
president of National City Bank,
virtually invented the idea of
mass marketing stocks and bonds
to the general public.
This was a totally new idea
and a huge success.
MITCHELL:
The bank, prior to father's
being elected president in 1921,
was geared mainly
to doing business
with large corporations.
Father pointed the bank
for the first time
in the direction of going
after the little man.
Don't call him
"the little man"
It was "everyman."
Well, "jedermann."
How old was he then?
38 years old.
And the National City company
had four offices,
and then within three years
there were over 50 offices.
And by 1929
it was the largest distributor
of securities in the world.
NARRATOR:
Even at the height
of the speculative frenzy,
only a small percentage
of the American public
actually invested in stocks,
but the market had entered
popular culture.
Wall Street became Main Street.
Everyone was talking stocks.
Watching the ticker became
a national sport.
Popular magazines covered
financial news.
Dozens of bestsellers promised
investors the inside track.
WOMAN:
Oh, what a feeling ♪
You've got me feeling
bigger and better than ever. ♪
NARRATOR:
The characters in the popular
comic strip Gasoline Alley
were investing in a company
called "Rubber Keyhole."
Stock tips came from everywhere.
Some investors
followed the advice
of Evangeline Adams,
an astrologer.
She was able to calculate the
variations of the stock exchange
so accurately that there was
practically no difference
to having have read it
in a ledger somewhere.
"Among her more interesting
clients were Charles Chaplin,
Mary Pickford
and J. Pierpont Morgan.
NARRATOR:
In February, Evangeline Adams
looked at the stars
and predicted a dramatic upswing
in stock prices
for the coming months.
I'm looking up at the sky,
I see the clouds rolling by ♪
Hello, sunshine, hello! ♪
NARRATOR:
The stock market,
once considered a highly
risky place to put your money,
was now beginning to attract
a whole new group
of amateur speculators.
Among the new players
was one Julius Marx.
Everyone knew him
by his stage name Groucho.
MAN:
They were poor, and
it always affected my father.
He was always thrifty
and worried about his future
and what would become of him
when no one else wanted him
as an actor anymore.
So he was always saving money,
turning off the lights
and turning off the water
around the house even after
he was in Hollywood
and making a lot of money.
NARRATOR:
Of all the Marx brothers,
Groucho was the most
financially conservative.
In 1929, he took
his life savings
and put it in a "sure thing"
The stock market.
MARX:
He was always
phoning a broker
and getting hot tips
and wanting to know
what the stocks were,
how they were doing.
If he wasn't on the phone, he
would take me into Great Neck,
which was a little village
at the time,
but they did have a stock broker
called Newman Brothers
and Worms.
And all these men who were
investing in the market
would all sit there in chairs
like a little theater
and watch the ticker tape go by.
NARRATOR:
Groucho, along with record
numbers of smaller investors,
was borrowing money
to buy stocks.
It was called
"buying on margin."
You only needed 10% down.
Just $1,000 would get you
$10,000 worth of stock.
Suddenly you were in the same
league with the big players,
or so it seemed.
But the stock market was not
a level playing field.
In the '20s and '30s,
one of the big features
of the stock market is the fact
that it wasn't controlled
and that operators could do
a lot of things that
are not permitted today.
NARRATOR:
One of the most
common tactics was
to manipulate the price
of a particular stock,
a stock like
Radio Corporation of America.
R.C.A. was in the '20s
what Xerox was in the '60s,
what was a great
growth stock.
The stock went from
I can't remember
the exact numbers
but from something like
20 to 400, split many times
and made many people, including
my grandfather, very wealthy.
It was one of the stocks
that was manipulated by a pool.
NARRATOR:
Wealthy investors
would pool their money
in a secret agreement to buy
a stock, inflate its price
and then sell it
to an unsuspecting public.
Most stocks in the 1920s
were regularly manipulated
by insiders, like R.C.A.
specialist Michael Meehan.
NESBITT:
In those days, that was legal
and it was quite common practice
for a group of Wall Streeters
to take a stock in hand
and they would acquire
a position in the stock early on
and then they would see to it
that there was good press on
the stock a lot of publicity.
I would say that practically all
the financial journalists
were on the take.
This includes reporters
for the Wall Street Journal,
the New York Times, the
Herald Tribune, you name it.
So if you were a pool operator,
you'd call your friend
at the Times
and say, "Look, Charlie, there's
an envelope waiting for you here
"and we think that perhaps
you should write something nice
about R.C.A."
And Charlie would write
something nice about R.C.A.
A publicity man called A. Newton
Plummer had canceled checks
from practically every major
journalist in New York City.
Then they would begin to, what
was called, "painting the tape,"
and they would make
the stock look exciting.
They would trade
among themselves
and you'd see these big prints
in R.C.A. and people would say,
"It looks as though that stock
is being accumulated."
SOBEL:
Now that they are behind it,
you want to join them,
so you go out
and you buy stock also.
And what's happening is the
stock goes from ten to 15 to 20.
And now it's at 20
and you start buying.
Other people start buying
30, 40.
The original group, the pool,
they stop buying.
They're selling you the stock.
Now 50, and they're out of it.
And what happens, of course,
is the stock collapses.
NARRATOR:
On March 8, 1929,
Michael Meehan began
one of the most successful pools
on Wall Street.
From the eighth to the 17th,
Meehan and the pool pushed up
the value of R.C.A. almost 50%.
On March 18, they sold
and divided up their profits.
In today's money,
they had made $100 million
for one week's work.
The pools were a little
like musical chairs.
When the music stopped,
somebody owned the stocks
and those were the sufferers.
NARRATOR:
If small investors suffered,
they would soon
be back for more.
They knew the game was rigged,
but maybe next time
they could beat the system.
WOMAN:
If you want the rainbow,
you must have the rain. ♪
NARRATOR:
Wall Street had its critics,
among them,
economist Roger Babson.
He questioned the boom, and was
accused of lack of patriotism,
of selling America short.
Roger Babson warned
of the speculation,
said there's going to be a crash
and the aftermath
is going to be quite terrible.
And people jumped on Babson
from all around
for saying such a thing.
So that people who were cautious
about their personal reputation,
who didn't want to call down
on themselves a lot of calumny,
kept quiet.
NARRATOR:
Mobster Al Capone
was not a cautious man.
From his Chicago headquarters,
he condemned the wild
speculation on Wall Street.
"It's a racket!" he said.
"Those stock market guys
are crooked!"
Capone invested his money
in a $100 million
bootleg liquor business.
Business was good
on Valentine's Day, 1929.
He had just eliminated
the competition.
March 4, Inauguration Day.
Republican president
Calvin Coolidge
had run his administration
on the belief
that business was the basis
of America's prosperity.
Government should not interfere.
Herbert Hoover had won
a landslide victory
promising to carry on
the tradition.
GALBRAITH:
This was a time in our history
when governments did not,
as now, take responsibility
for the economy.
They presided over it,
but the level
of economic activity
and the level of economic growth
and the stability of prices
were not yet everyday concerns
of the president.
And what Coolidge did was
to say how wonderful times were,
how happy
everybody was going to be
and how prosperous
everyone was going to be.
And Hoover's responsibility
was to continue that optimism.
You, Herbert Hoover,
do solemnly swear
NARRATOR:
Politicians came and went,
but in the '20s,
the businessman was king.
New York City had
a dapper, corrupt
and vastly popular mayor,
Jimmy Walker.
But behind the scenes
were powerful financial leaders
like Charles Mitchell.
MITCHELL:
Jimmy Walker was
high, wide and fancy
with the city finances.
One day, father called
Mayor Walker up here
and he had
some other bankers with him,
and Mayor Walker was sort of
put on the grill
in the upstairs library
while these bankers
read the riot act to him
to try and get some
fiscal responsibility
instilled into him.
And I know
that after the meeting
someone took me into the library
and pointed me out the chair
that the mayor
had been sitting in
and he had been so nervous
were those Louis XIV chairs
with all the little
Louis XV.
With all the little
tacks in there, brass tacks,
and he'd pulled out
almost all the brass tacks
They were on the floor
Out of sheer nerves.
NARRATOR:
The stock market, too, was
getting a severe case of nerves.
On Friday, March 22,
all eyes were on that august
government body in Washington,
the Federal Reserve Board.
The board distrusted the boom.
They saw the speculation
as reckless and dangerous
because it was based
more and more
on the shaky foundation
of borrowed money margin.
The board had the power
to curb the borrowing,
but the market was now dependent
on borrowed money.
Without margin,
it would collapse.
The board met day after day.
Would they ask for regulation
of the stock market?
They issued
no public statements.
Their silence was terrifying.
Get my broker, say,
get my broker ♪
Got to get him,
got to get him ♪
NARRATOR:
On Monday, March 25,
investors began to sell.
Blue-chip stocks plunged.
Tuesday another wave
of selling swept the market.
As it fell, people holding stock
on margin were hit hard.
They'd put only 10% down,
but the value of their stock
dropped more than 10%,
so their down payment was gone.
To hold their stocks, they'd
have to put up more money.
On March 26,
millions of investors
suddenly found themselves
in deep trouble.
Your broker would call you
and say,
"We need more money
You're wiped out."
Unless you could
give him more money,
he would then sell the stock.
Now he would sell the stock,
which would cause the stock
to go down to 85, 86,
and now more margin calls
are triggered.
So one margin call
triggers another margin call,
triggers another margin call,
and it goes all the way down.
NARRATOR:
With everyone trying
to borrow money
to cover the falling value
of their stocks,
there was a credit crunch;
interest rates soared.
At 20%, few people could afford
to borrow more money.
The boom was about to collapse
like a house of cards.
Charlie Mitchell was horrified.
His success, his entire career,
his personal fortune,
had been based
on a rising market.
If nobody else was going
to stop the crash,
Charles Mitchell would.
MITCHELL:
Father, at that point,
stepped in
and announced that the National
City Bank would provide
$25 million of credit,
which was all very well
and very necessary,
but he added the fateful words,
"Whatever the Federal
Reserve Board thinks,"
and Senator Carter Glass,
who had been the father of
the Federal Reserve Act in 1913,
took that as a direct slap
across the face.
But whatever
Senator Glass thought,
immediately the credit crisis
was alleviated.
In fact,
within the next 24 hours,
call money went from 20% to 8%,
and that stopped
the panic, then, in March.
NARRATOR:
The next day,
the market rallied.
The Federal Reserve Board
remained silent,
tacitly accepting defeat.
The hero of the day
was Charlie Mitchell.
He had single-handedly
stopped the crash of '29.
(crowd noise)
With the start
of the baseball season,
people quickly forgot
the break in the market.
New events filled the papers.
There was a crisis in Nicaragua
where the nationalist hero
Augusto Sandino
was threatening
American marines;
tragedy in the British mandate
of Palestine
as Jews and Arabs clashed
over control of holy sites
in Jerusalem;
and in Antarctica,
Commander Byrd was at his
base camp, Little America,
waiting for a break
in the weather.
His elaborately planned flight
over the South Pole
was still on ice.
The newsreels had
come into their own.
Now, in living sound,
patrons could keep abreast
of the important events
of the day.
The biggest news of the day
is not the naval agreement,
not even Prohibition, but the
return of the natural waistline.
LIVERMORE:
Dorothea Livermore
was a typical flapper.
She has to embody the '20s.
She would do almost anything
on an impulse.
She had some priceless pieces
of 18th-century furniture,
but the house had settled
and the floors were not level.
But Mrs. Livermore didn't like
to spend money that didn't show,
so instead of having
the hoists put underneath,
she simply solved the problem
by having the legs
of the furniture cut off
to fit the sloping floors,
so that the tops
of all the furniture were level,
but of course the legs
were on different angles.
And this was
her typical solution
As long as the tops were level,
everything was fine.
NARRATOR:
Everything was not fine
that spring
with the American economy.
It was showing
ominous signs of trouble:
steel production was declining;
the construction industry
was sluggish;
car sales dropped; customers
were getting harder to find,
and because of easy credit,
many people were deeply in debt.
Large sections of the population
were poor and getting poorer.
Just as Wall Street
had reflected
a steady growth in the economy
throughout most of the '20s,
it would seem that now
the market should reflect
the economic slowdown.
Instead, it soared
to record heights.
Stock prices no longer
had anything to do
with company profits,
the economy or anything else.
The speculative boom had
acquired a momentum of its own.
This is the nature
of mass illusion.
Prices were going up,
people bought,
that forced prices up further,
that brought in more people.
And eventually the process
becomes self-perpetuating
Every increase brings in
more people
convinced of their
God-given right to get rich.
NARRATOR:
The '20s was a decade of
all sorts of fast money schemes.
Three years earlier, everyone
was buying Florida real estate.
As prices of land skyrocketed,
more people jumped in,
hoping to make a killing.
Then, overnight,
the boom turned to bust
and investors lost everything.
Florida, folks
Sunshine, sunshine,
perpetual sunshine
all the year round.
Let's get the auction started
before we get a tornado.
NARRATOR:
In May, the Marx brothers
were before the cameras
with their first film,
The Cocoanuts.
Its subject:
the Florida land boom.
Now, in 1929, the gullibility
of those naive speculators
was something to laugh about.
800 wonderful residences
will be built right here.
Why, they're as good as up
Better!
You can have any kind
of a home you want to.
You can even get stucco
Oh, how you can get stucco.
Now is the time to buy,
while the new boom is on.
Remember that old saying,
"A new boom sweeps clean."
And don't forget the guarantee.
NARRATOR:
Groucho Marx would
film these scenes
and then rush to his broker
to put more of his savings
into the booming market
On margin, of course.
MARX:
Max Gordon,
the Broadway producer,
was also heavily in the market.
And Gordon could never
get over the fact
that the market was going
up and up and up all the time.
He said to my father,
"How long has this been going
on, Groucho?"
My father said, "I don't know,
but my broker down in Great Neck
"tells me that it's because
there's a worldwide market
"for American goods and it's
never going to go down
The market will just keep
going up and up and up."
NARRATOR:
May 1929: stock prices
were going up and up.
With so much money to be made,
people were borrowing more money
than ever before to buy stocks.
Market leaders
like William Durant,
far from being worried,
were ecstatic.
Off on his annual visit
to Europe,
he announced that
everything would be fine
as long as we all
continued to believe:
"Confidence! Not halfway
confidence, but 100% confidence,
is the real basis
for our prosperity."
Astrologer Evangeline Adams was
now putting out a newsletter.
Her 100,000 subscribers learned
how the zodiac could
influence stock prices.
Her advice
for the coming summer: buy!
(jazz music)
MAN:
Hitting the ceiling,
hitting the ceiling ♪
Breaking through
to the sky ♪
MAN:
They thought this was a ride
that was never going to end.
It just goes on and on and on
and every day they got
more money
and they're counting up
their paper profits
and they're selling and buying
and buying and selling
and they're doing great!
up to the top! ♪
Hitting the ceiling,
hitting the ♪
MAN:
I'd go to get a shoeshine,
they'd say, "How's the market?"
You went to the barber
"How's the market?"
Everybody was in the market.
SOBEL:
They were people who were
looking for the one lucky break,
people who were just hoping
they would strike it right.
You'd take a rifle,
aim at the ocean
and you hope to hit a fish.
NARRATOR:
Along with the market,
temperatures soared that summer.
It was a record heat wave
and a record three months
at the exchange.
Some stocks doubled in value.
In June, the New York Times
index of stocks rose 52
points;
in July, another 25.
In the middle of the summer,
the Graf Zeppelin was completing
its first leisurely trip
around the world.
The Marx brothers had
finished shooting their film
The Cocoanuts.
Commander Byrd was still at his
base camp near the South Pole.
He too had money in the market
and radioed his broker
for the latest quotes.
Back in Cleveland,
George Herman Ruth
hit his 500th home run,
and on the radio, they were
playing the latest hit tune
"I'm in the Market for You."
MAN:
I want a thousand shares
of your caresses, too. ♪
We'll count
the hugs and kisses ♪
When dividends are due ♪
'Cause I'm in the market
for you. ♪
NARRATOR:
On August 17,
Michael Meehan's brokerage firm
launched a new service.
NESBITT:
One of my grandfather's
innovations
was putting brokerage houses
on the ocean liners.
The first went
on the Berengaria.
That allowed you during the
Whatever it was, six or
seven-day passage to Europe
If you were such
a stock market addict
that you couldn't stand
to withdraw for that period,
you could walk into the office
and place your order
to buy or sell
100 shares of General Motors
or General Electric or whatever,
and they would radio
that order back to New York.
It was being very modern
at the time.
They were very wealthy people
on the transatlantic liners
and it gave them
something to do.
NARRATOR:
At sea and on land, everyone
seemed to be making money.
It was a stampede of buying,
and major speculators
like John Jacob Raskob
whipped up the frenzy.
He told readers
of the Ladies' Home Journal
that now everyone could be rich.
September 2, Labor Day:
it was the hottest day
of the year.
The markets were closed
and people were at the beach.
A reporter checked in with
astrologer Evangeline Adams
to ask about the future
of stock prices.
Her answer: "The Dow Jones
could climb to heaven."
The very next day, September 3
the stock market hit
its all-time high.
(babble of voices)
KAROL:
My father and I
had an ongoing discussion
about the stock market.
I used to say, "Pop, everybody's
getting rich but you.
"You work so hard and you're
never going to make a nickel.
"All you do is you keep
delivering these newspapers
"and that's about it.
"The guy who's shining shoes
is in the stock market;
"the grocery clerk
is in the stock market;
"the schoolteacher
is in the stock market;
"the teller at the bank
is in the stock market.
"Everybody's
in the stock market.
You're the only one
that's not in the stock market."
And he used to sort of laugh and
say, "You'll see, you'll see."
NARRATOR:
On September 5, economist
Roger Babson gave a speech
to a group of businessmen:
"Sooner or later a crash is
coming, and it may be terrific."
He'd been saying
the same thing for two years,
but now, for some reason,
investors were listening.
The market took a severe dip.
They called it
"the Babson break."
The next day prices stabilized,
but several days later
they began to drift lower.
Though investors
had no way of knowing it,
the collapse had already begun.
In the weeks to follow,
the market fluctuated
wildly, up and down.
On September 12,
prices dropped 10%.
They dipped sharply again
on the 20th.
Stock markets around
the world were falling too.
Then, on September 25,
the market suddenly rallied.
MAN:
I remember well that I thought,
"Why is this doing this?"
And then I thought, "Well, I'm
new here and these people"
like every day in the paper
Charlie Mitchell
would have something to say,
the J.P. Morgan people
would have something to say
about how good things were,
and I thought,
"Well, they know a lot more
"about this market than I do
I'm fairly new here and I really
can't see why it's going up."
But then when they say,
"It can't go down,"
or, "If it does go down today,
it'll go back tomorrow,"
you think, "Well, they
really are like God
"they know it all and it must be
the way it's going
because they say so."
NARRATOR:
As the market floundered,
financial leaders were as
optimistic as ever more so.
Just five days before
the crash, Thomas Lamont,
acting head of the highly
conservative Morgan Bank,
wrote a letter
to President Hoover:
"The future appears brilliant.
Our securities are the most
desirable in the world."
Charles Mitchell assured
nervous investors
that "things have
never been better."
Practically every business
leader in America and banker,
right around the time of 1929,
saying how wonderful things were
and the economy had only one
way to go, and that was up.
Unfortunately,
he didn't have a crystal ball
to predict the future.
There is an old saying
on Wall Street
that the two most important
emotions are fear and greed.
And you go from fear to greed
in about a fraction of a second.
So you're very, very greedy
and you say to yourself,
"I want to make more."
And then the market goes down
ten points
and you get frightened
"I want to keep what I have"
So you sell everything,
and that's how you have a panic.
So you can have a panic
on the up side
People rushing to get in
before the train takes off,
and a panic on the down side
Trying to get off the train
before disaster hits.
NARRATOR:
Monday, October 21.
Hoover, along with the political
and financial leaders
of the country, arrives in
Dearborn, Michigan,
to celebrate
the 50th anniversary
of Edison's invention
of the light bulb.
The host is Henry Ford.
The country is reminded
that in 50 short years,
men like Ford, Durant and Edison
had transformed America
from a third-rate power into the
industrial giant of the world.
And while they celebrated,
their world was beginning
to fall apart.
GALBRAITH:
There came a Wednesday,
October 23,
when the market was
a little shaky, weak.
Whether this caused
some spread of pessimism,
one doesn't know.
It certainly led a lot of people
to think they should get out.
And so on Thursday, October 24,
the first Black Thursday,
the market, beginning in the
morning, took a terrific tumble.
(clamor)
MITCHELL:
The market opened
in an absolutely free fall
and some people couldn't even
get any bids for their shares,
and it was wild panic.
And an ugly crowd gathered
outside the stock exchange
and it was described as making
weird and threatening noises.
It was indeed one
of the worst days
that had ever been seen
down there.
NARRATOR:
There was a glimmer of hope
on Black Thursday.
Directly across from
the New York Stock Exchange
was a low, stately building,
the House of Morgan.
22 years earlier,
J. Pierpont Morgan
had stopped the panic of 1907.
October 24, high noon:
all eyes were now
on acting head Thomas W. Lamont.
MAN:
Tom Lamont called
a number of the other bankers,
like Charles Mitchell of the
National City Bank, and
people from the Bankers Trust
and J. Albert Wiggin
of the Chase Bank and so forth.
There were about
a half a dozen of them there,
and they were gathered together
to really discuss
what they could do
to stem this tremendous
onslaught of selling stocks
on the stock exchange
that was taking place.
About 12:30,
there was an announcement
that this group of bankers
would make available
a very substantial sum
to ease the credit stringency
and support the market.
And right after that, Dick
Whitney made his famous walk
across the floor
of the New York Stock Exchange.
NARRATOR:
Richard Whitney,
vice president of the Exchange,
was chosen by the bankers
to be their representative.
At 1:30 in the afternoon,
at the height of the panic,
he strode across the floor,
and in a loud, clear voice,
ordered 10,000 shares
of U.S. Steel
at a price considerably higher
than the last bid.
He then went from post to post
shouting "buy" orders
for key stocks.
He stood up on one of the seats
at the post, and he said,
"I give 45 for 50,000
Standard Oil."
And everybody started
to applaud, all of us
"The crash is over!
If Morgan is putting his money
in, maybe the crash is over."
GALBRAITH:
And sure enough,
this seemed to be evidence
that the bankers
had moved in to end the panic,
and they did end it
for that day;
the market stabilized
and even went up.
LAMONT:
The New York Times said
that thanks to the formation
of this bankers pool,
most observers felt
that the panic and
the great sell-off was over.
And most people
did feel that way;
Tom Lamont felt that way.
But Monday was not good.
Apparently people had
thought about things
over the weekend, over Sunday,
and decided maybe they might
be safer to get out.
Then came the real crash,
which was on Tuesday,
when the market
went down and down and down
without seeming limit.
NARRATOR:
October 29.
Morgan's bankers could
no longer stem the tide.
It was like trying
to stop Niagara Falls.
Everyone wanted to sell.
AT&T down 50%;
R.C.A., once $110 a share,
couldn't find buyers at 26;
Blue Ridge, 100, plunged to $3,
and still no buyers.
On the floor they had
never seen anything like it.
SILVERSTONE:
It was just like a nightmare
and I couldn't believe
what was going on.
In those days every "buy" order
was on a black pad
and every "sell" order
was on a red pad.
And all I saw was
members running around
with a fistful of red orders
just like chickens
with their head cut off.
They didn't know which way
to run.
They were panicking, screaming.
Everybody was bumping
into everybody else.
(groans)
Don't remind him.
Anyhow, this is what happened,
and I tell you
and I was supposed to answer,
everybody's yelling at me.
I said,
"What am I supposed to do?"
Nobody knew what the hell to do.
NARRATOR:
William Durant,
the bull of the bulls,
now tried single-handedly
to support the market.
The further it plunged,
the more of his millions
he poured into it.
SCROBOGNA:
He became truly convinced
that he was omnipotent.
He thought that nothing
would really unseat him.
It was unfortunate;
the forces were too great.
There was no one man
that could have been so powerful
to control the market.
NARRATOR:
There were some people, however,
whose investment strategies
made money.
On October 29, Jesse Livermore's
wife, hearing of the crash,
ordered the servants to move
all the furniture
out of their mansion, into
a small cottage on the estate.
So when Mr. Livermore
got home that night,
he walked into
a totally vacant house.
When she told him that
she had effected the move
because she was sure that
they had lost all their money,
he told her that he had
made more money that day
than he had ever made before.
NARRATOR:
For most others,
it was all over.
In brokers' offices across the
country, the small investors
The tailors, the grocers,
the secretaries
Stared at the moving ticker
in numb silence.
Hope of an easy retirement,
the new home,
their children's education
Everything was gone.
MARX:
My father was ready
to kill himself.
The morning of the crash,
he got a call,
and it was Max Gordon.
And Max Gordon says, "Groucho,"
and my father said, "What?"
and Gordon said,
"Groucho, the jig is up."
There were all sorts of rumors
and you'd see people going down
the street looking up
to see if they could catch
somebody jumping out the window.
It turned out there weren't
as many people jumped
out the window as they reported,
but some did
and others committed suicide
other ways.
NARRATOR:
500 miles from Wall Street
in the Atlantic,
the luxury liner the Berengaria
was heading home.
From Michael Meehan's
brokerage office,
word spread through the ship:
"The bottom has fallen
out of the market!"
Men came running out of their
Turkish baths in towels;
card games ended abruptly;
everyone tried to jam
into the tiny office
yelling, "Sell at market!"
They had left England
wealthy men;
they docked in New York
without a penny.
(seagulls crying)
GALBRAITH:
There's nothing unique
about this.
It is something which happens
every 20 or 30 years,
because that is about the
length of the financial memory.
It's about the length
of time that it requires
for one for a new set
of suckers, if you will,
a new set of people capable
of wonderful self-delusion
to come in and imagine that they
have a new and wonderful fix
on the future.
NARRATOR:
In the 1930s,
Charles Mitchell was hounded
by Senate committees
and the I.R.S.
The crash had left him
$12 million in debt.
This house was taken over,
of course, and things changed.
And
I began to know what
the real world was all about.
It was about time
I was 19 years old.
NARRATOR:
Mitchell made
a remarkable comeback.
He paid off his debts
and died in 1955
a highly respected figure
on Wall Street.
In 1936, William Durant
filed for bankruptcy.
His only assets,
which he valued at $250,
were the clothes on his back.
In the late '30s,
the founder of General Motors
tried his hand at everything
from running a bowling alley
to selling a cure for dandruff.
He died in 1947, still talking
about making a comeback.
Herbert Hoover spent much
of the early 1930s fishing.
He explained in a speech
that "fishing
is a constant reminder
"of humility and
of human frailty,
for all men are equal
before fishes."
The game on Wall Street
had changed a great deal
for Livermore,
and the S.E.C. was becoming
a powerful factor
and the rules were changed.
He couldn't operate freely
Buy and sell the way
he had in the past
And he couldn't adapt
to the new regulations.
So, in a sense, his playing
with the market was over,
and I think a great deal of
his interest in life was over
at that point;
the game was gone.
NARRATOR:
In 1940, the day
before Thanksgiving,
a photographer snapped
this photograph
of an old and very tired
Jesse Livermore.
Several hours later, Livermore
would go into a men's washroom
and put a bullet
through his head.
At the end of 1929, as they
celebrated New Year's Eve,
all that lay in the future.
Nobody knew that
the Great Depression was coming;
unemployment, bread lines,
bank failures
This was unimaginable.
MAN:
Then good luck came
a-knocking at my door ♪
NARRATOR:
But the bubble had burst.
Gone was that innocent
optimism, the confidence,
the illusion
of wealth without work.
One era had ended.
They toasted the coming
of the '30s,
but somewhere, deep down,
they knew
The party was over.
MAN:
Blue skies smiling at me ♪
Nothing but blue skies
do I see. ♪
I never saw things
going so right ♪
Noticing the days
hurrying by ♪
When you're in love ♪
My, how they fly ♪
Blue days, all of them gone ♪
Nothing but blue skies
from now on ♪
Blue skies smiling at me ♪
Nothing but blue skies ♪
Do I see ♪
I hear those
little bluebirds ♪
They're singing our song ♪
Nothing but bluebirds
all day long ♪
I'm sittin' on the world,
wearing a grin ♪
Counting the clouds
that I'm not in ♪
Blue days, blue days ♪
All of them gone, gone, gone ♪
Nothing but blue skies
from now on. ♪
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