Wall Street crash

Wall Street Crash of 1929

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This article is about the Stock Market Crash of 1929. For the British vocal group Wall Street Crash, see Wall Street Crash (group).

"Black Tuesday" redirects here. For other uses, see Black Tuesday (disambiguation).

Crowd gathering on Wall Street after the 1929 crash.

The Wall Street Crash of 1929, also known as Black Tuesday[1] and the Stock Market Crash of 1929, began in late October 1929 and was the most devastating stock market crash in the history of the United States, when taking into consideration the full extent and duration of its fallout.[2] The crash signaled the beginning of the 10-year Great Depression that affected all Western industrialized countries[3] and did not end in the United States until the onset of American mobilization for World War II at the end of 1941.

Anyone who bought stocks in mid-1929 and held onto them saw most of his or her adult life pass by before getting back to even.

—Richard M. Salsman[4]

Contents

1 Timeline

2 Analysis

2.1 Economic fundamentals

2.2 Subsequent actions

3 Effects and Academic Debate

4 See also

5 Notes

6 Further reading

7 External links

Timeline

The Dow Jones Industrial, 1928–1930.

The Roaring Twenties, the decade that led up to the Crash,[5] was a time of wealth and excess. Despite the dangers of speculation, many believed that the stock market would continue to rise indefinitely. The market had been on a nine-year run that saw the Dow Jones Industrial Average increase in value tenfold, peaking at 381.17 on September 3, 1929.[6] Shortly before the crash, economist Irving Fisher famously proclaimed, "Stock prices have reached what looks like a permanently high plateau."[7] The optimism and financial gains of the great bull market were shaken on September 18, 1929, when share prices on the New York Stock Exchange (NYSE) abruptly fell.

On September 20, the London Stock Exchange (LSE) officially crashed when top British investor Clarence Hatry and many of his associates were jailed for fraud and forgery.[8] The LSE's crash greatly weakened the optimism of American investment in markets overseas.[8] In the days leading up to the crash, the market was severely unstable. Periods of selling and high volumes of trading were interspersed with brief periods of rising prices and recovery. Economist and author Jude Wanniski later correlated these swings with the prospects for passage of the Smoot–Hawley Tariff Act, which was then being debated in Congress.[9]

On October 24 ("Black Thursday"), the market lost 11% of its value at the opening bell on very heavy trading. Several leading Wall Street bankers met to find a solution to the panic and chaos on the trading floor.[10] The meeting included Thomas W. Lamont, acting head of Morgan Bank; Albert Wiggin, head of the Chase National Bank; and Charles E. Mitchell, president of the National City Bank of New York. They chose Richard Whitney, vice president of the Exchange, to act on their behalf.

With the bankers' financial resources behind him, Whitney placed a bid to purchase a large block of shares in U.S. Steel at a price well above the current market. As traders watched, Whitney then placed similar bids on other "blue chip" stocks. This tactic was similar to one that ended the Panic of 1907. It succeeded in halting the slide. The Dow Jones Industrial Average recovered, closing with it down only 6.38 points for the day; however, unlike 1907, the respite was only temporary.

The trading floor of the New York Stock Exchange in 1930, six months after the crash of 1929

Over the weekend, the events were covered by the newspapers across the United States. On October 28, "Black Monday",[11] more investors decided to get out of the market, and the slide continued with a record loss in the Dow for the day of 38.33 points, or 13%.

The next day, "Black Tuesday", October 29, 1929, about 16 million shares were traded, and the Dow lost an additional 30 points, or 12%,[12][13][14] amid rumors that U.S. President Herbert Hoover would not veto the pending Smoot–Hawley Tariff Act.[4] The volume of stocks traded on October 29, 1929 was a record that was not broken for nearly 40 years.[13]

On October 29, William C. Durant joined with members of the Rockefeller family and other financial giants to buy large quantities of stocks in order to demonstrate to the public their confidence in the market, but their efforts failed to stop the large decline in prices. Due to the massive volume of stocks traded that day, the ticker did not stop running until about 7:45 p.m. that evening. The market had lost over $30 billion in the space of two days which included $14 billion on October 29 alone.[15]

Dow Jones Industrial Average on Black Monday and Black Tuesday[16]

Date Change % Change Close

October 28, 1929 −38.33 −12.82 260.64

October 29, 1929 −30.57 −11.73 230.07

After a one-day recovery on October 30, where the Dow regained an additional 28.40 points, or 12%, to close at 258.47, the market continued to fall, arriving at an interim bottom on November 13, 1929, with the Dow closing at 198.60. The market then recovered for several months, starting on November 14, with the Dow gaining 18.59 points to close at 217.28, and reaching a secondary closing peak (i.e., bear market rally) of 294.07 on April 17, 1930. After the Smoot–Hawley Tariff Act was enacted in mid-June, the Dow dropped again, stabilizing above 200. The following year, the Dow embarked on another, much longer, steady slide from April 1931 to July 8, 1932 when it closed at 41.22—its lowest level of the 20th century, concluding an 89% loss rate for all of the market's stocks. For most of the 1930s, the Dow began slowly

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