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