| September 1929 felt the first shock waves of | | | | |
| the earthquake that was to topple and destroy | | | | The market never knew what hit it. No one can |
| the great bull market of the Twenties. | | | | ever say what subtle shift in the thinking of |
| | | | thousands of stockholders across the nation |
| Unheeding, still cheering each other on with | | | | changed the eager scramble for the sunlit |
| the clichés of the new prosperity, the | | | | summits of September into a stampede back |
| speculators plunged in again on the premise, | | | | down the slopes. Perhaps it was no one thing, |
| true so often in the past, that every dip | | | | and perhaps if it was, it is not important; |
| heralded a rise to an even higher plateau. | | | | jitters were evident on many occasions before |
| | | | the panic. |
| This time they were wrong. The market danced | | | | |
| erratically for a while, but over-all it was | | | | But whatever may have pulled the trigger, the |
| losing ground, losing momentum, failing to | | | | fact remains that the market was powerless to |
| show the resilience on which the nation so | | | | withstand the blow. Surveys of the wreckage |
| desperately depended. By the third week of | | | | pointed up the unhealthy use of credit that |
| October, the Crash was in being. | | | | had so disastrously accelerated the collapse |
| | | | when it came, pointed up the manipulative |
| Even today the events of the week culminating | | | | operations that had gone unchecked, pointed |
| in the terrible Tuesday that was October 29 | | | | up the inadequate information available about |
| make sad and distressful reading. The only | | | | listed securities. |
| way to suggest them is in terms of the great | | | | |
| natural disasters: the avalanche, the tidal | | | | Had none of these abuses existed, it is still |
| wave, the volcanic eruption. And the human | | | | likely that the Crash, as the signal of a |
| response was equally fundamental: terror, | | | | general economic collapse, would have |
| panic, despair, and here and there courage. | | | | occurred. But it can be argued that the |
| | | | market would not have slid so far or so fast |
| When it came, the Crash utterly reversed the | | | | if, for instance, more stock holders had |
| pattern of the times. Up became down, high | | | | owned their shares outright and been able to |
| became low, rich became poor, success became | | | | ride out the storm. |
| failure, prosperity became depression. It | | | | |
| happened, too, with bewildering speed, and | | | | The road back was long and hard. Principal |
| nothing checked the descent. | | | | steps toward recovery were the Securities |
| | | | Acts of 1933 and 1934, and the establishment |
| It will be remembered that basic to all | | | | of the Securities and Exchange Commission, a |
| market action is the trade, the negotiated | | | | government agency, to administer them. |
| transaction between buyer and seller. With | | | | Financial experts can see loopholes and |
| the Crash, the inconceivable occurred: | | | | deficiencies in the acts and some Wall |
| suddenly, the buyers vanished. Suddenly, | | | | Streeters squirm under the onus of Federal |
| everyone was a seller. From all over the | | | | regulation, but it is generally acknowledged |
| nation, almost as if on signal, the orders | | | | that tighter control of the securities market |
| poured in: sell, sell, sell. Thousands upon | | | | was essential, if only to restore public |
| thousands of shares were offered at the | | | | confidence after the debacle. |
| market-and there was no market. | | | | |
| | | | Actually, the provisions of the acts can also |
| Down tumbled issue after issue from the proud | | | | be viewed as not stringent enough. |
| heights which supposedly were only foothills | | | | |
| of the heights to come. | | | | They require, first, that all new securities |
| | | | offered to the public, with some exceptions |
| The pace of the market accelerated beyond | | | | (Federal and municipal bonds, national and |
| human comprehension. The ticker lagged by | | | | state bank stocks, and, in some cases, issues |
| hours. Prices dove vertically down, 10, 20, | | | | under $300,000, to name a few), be registered |
| 30, 40 points. Inexorably, the great downward | | | | with the SEC. Registration, it should be |
| pressure grew. Margin calls went out, and | | | | noted, does not make the SEC an arbiter of a |
| went unanswered by thousands of speculators, | | | | security's worth, and does not in any way |
| big and small, whose entire fortunes were | | | | constitute an endorsement. |
| tied up in the stocks now diving through the | | | | |
| floor. Facing the loss of the billions they | | | | It is merely a procedure to place on the |
| had loaned, the brokers threw the collateral | | | | public record a full and fair account of the |
| stock onto the market for whatever it would | | | | financial, technical, commercial, and legal |
| bring, thus swelling the floodtide of | | | | condition of the issuing company. |
| unwanted securities. | | | | |
| | | | Capitalization, earnings, compensation of |
| There was no safety anywhere. No stock was | | | | officers, stockholdings of officers or |
| strong enoughto withstand the hammering. The | | | | options and other benefits available to them |
| best and bravest names in American industry | | | | -all this and more must be disclosed. As |
| were in full retreat, like any overblown | | | | anyone who has ever plowed through a stock |
| utilities holding company, like any cat and | | | | prospectus knows, the material is often |
| dog. | | | | difficult to digest, but it is complete, and |
| | | | no one need feel he is buying a pig in a |
| The huge investment trusts, commonly regarded | | | | poke. The SEC's only responsibility is to see |
| as financial Gibraltars impregnable against | | | | that the information submitted is adequate |
| the waves of adversity, were crumbling like | | | | and not misleading. |
| the rest. Then" reserves, supposedly a | | | | |
| cushion under a falling market, were | | | | The acts also prohibit all manipulations, |
| insufficient and ineffective. They, too, were | | | | such as pools, fake sales, or any artificial |
| dumping. | | | | trading which, by creating the appearance of |
| | | | activity, stimulates buying or selling by |
| At the end of the day, 16,410,030 shares had | | | | others. |
| changed hands at fantastically lower prices. | | | | |
| And the end was not yet. On through November | | | | Finally, they control, through the Federal |
| the slide continued. Amer Tel & Tel fell | | | | Reserve Board, the flow of credit into the |
| to 197, a loss of 138 points. Steel dropped | | | | securities market. The Board must approve the |
| to 150, a loss of 129 points. New York | | | | source from which a broker borrows, and it is |
| Central sank to 160, a loss of 96 points. | | | | responsible for setting margin rates. |
| General Motors fell to 36, a loss of 145 | | | | |
| points. The values represented in the leading | | | | There are other powers which the SEC may |
| stock averages were cut in half. The Crash | | | | exercise "in the public interest," but by and |
| wiped out all the gains so spiritedly made | | | | large the registration procedure, the ban on |
| since 1924-and more. In 1930 the market | | | | manipulation, and the control of credit have |
| twitched feebly, trying to get off its back, | | | | been the principal areas of government |
| but eventually sank even lower. | | | | intervention to assure an orderly market. |
| | | | |
| In 1931, it hit bottom, plumbing new depths | | | | At the same time, the exchanges-the New York |
| that made even the 1929 lows look good. | | | | Stock Exchange in particular-have undertaken |
| | | | to police themselves more rigorously. |
| A doleful story, a dark chapter in financial | | | | Requirements for listing a stock on the |
| history. Even today, veterans of the Street | | | | Exchange have tightened up. |
| speak of it wryly and with respect, like the | | | | |
| survivors of a memorable battle or a fire at | | | | Today we can also use software to help us |
| sea. The market, of course, did not cause the | | | | predict price movements with regard to shares |
| Crash. | | | | and the Forex. |