End of a World

It was a preposterously wonderful world. "I am firm in my belief," wrote Millionaire John J. Raskob in the Ladies' Home Journal for August 1929, "that anyone not only can be rich, but ought to be rich." All anybody needed to do, said Raskob, was save $15 a month, put it into "good common stocks." At the end of 20 years it would have swelled to $80,000 and be yielding $400 a month in income. It was such an easy way to get rich that messenger boys stopped to read the stock-tickers in offices, chauffeurs drove with ears cocked to catch some word of a merger, and elevator operators were never long out of touch with their brokers.

There was hardly anybody who did not know somebody who had made a killing in the market. And last week, exactly 20 years after the era of wonderful nonsense suddenly collapsed, there was hardly anybody in Wall Street old enough to remember, who did not shiver a bit at the memory of October 1929.

The Peak. The great roaring bull market had reached its peak on Sept. 3, when U.S. Steel hit 261 3/4, General Electric reached 396 1/4, Radio Corporation of America passed 500 (on a pre-split basis), and the Dow-Jones industrial average reached its alltime high mark of 381.17. In the same week that Adams Express, an investment trust, split its stock 10-for-1, the stock jumped 100 points. As October came there was a series of severe shakeouts. But few took them as a warning. Smart operators thought a setback was only a golden chance to buy for the big new rise acoming.

Then, at 2 p.m. on Wednesday, Oct. 23, something like panic began. There seemed to be no reason for it, but everybody began to sell. In that final hour of trading, 2,500,000 shares changed hands and prices tumbled crazily: Auburn Auto, which had recently sold as high as 514, lost 77 points to close at 260; Adams Express, which had once been up to 750, lost 96 to close at 440. The closing bell stopped the selling. All night, brokers sent out frantic telegrams to the hundreds of thousands who had bought on margin, putting up as little as 10% of the cash price of the stock. Most of them had no more cash to put up to cover their losses. Thus the stage was set for Oct. 24--"Black Thursday."

The Deluge. With the opening gong, the selling wave began. By noon the tickers were so far behind sales that nobody had a way of finding out what actual prices were. Auburn Auto tumbled another 70 points to 190; U.S. Steel broke to 193 1/8, down 68 points from its recent high.

In the Morgan offices at 23 Wall Street, Morgan Partner Thomas W. Lament called a council of war with five of Manhattan's biggest bankers: Charles E. Mitchell, William C. Potter, Albert H. Wiggin, Seward Prosser and George F. Baker Jr. (J. P. Morgan himself was in Europe.) About 1:30 p.m. they sent the "Morgan broker," Richard Whitney,* to the Stock Exchange's No. 2 Post, where U.S. Steel is traded. Cried Whitney: "I bid $205 for 25,000 shares of Steel." He moved on to other posts, cried other bids for huge blocks at the price of the last sale. Around the floor word spread that the House of Morgan and the New York banks had put a cushion under the market. The market rallied. It looked as if the Morgan "miracle" had staved off disaster. "Business," announced Secretary of the Treasury Andrew W.Mellon, "is fundamentally sound." The Cleveland Trust Co.'s Leonard P. Ayres said there had been a security panic, with no economic basis. Banker Lament pronounced it only "a little distress selling." The National City Bank's Charles E. Mitchell saw "nothing fundamentally wrong with the stock market."

The Burial. Prices steadied, but on Monday the selling began again. Steel tumbled to 186, General Electric lost 47 1/8 points. Tickers again fell nearly three hours behind, and again thousands of new margin calls went out for the money that couldn't be begged or borrowed. Thus came "Black Tuesday."

From the bell's first ring, it was panic; by day's end an incredible 16,410,030 shares had been dumped, capping the selling that had wiped out an estimated $25 billion in stock values. Not until 2 1/2 hours after the market's close did the tickers catch up and carry the final sale. There was no longer any attempt by bankers or anybody else to stem the collapse. In just six days the whole world of easy prosperity had been buried.

* Who later spent three years and four months in Sing Sing for embezzlement while president of the Stock Exchange.

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