Book Description
“Inside the Greatest Crash in Wall Street History--and How It Shattered a Nation”
If You Just Remember One Thing
A main reason for the 1929 Wall Street crash, which led to the Great Depression, was that bankers ... More
Bullet Point Summary and Quotes
- “The almost singular through line behind every major financial crisis is one thing: debt.”
- October 1929: Charles Mitchell faces the impending ruin of his National City Bank. This crisis was caused by a decade of Americans buying items and stocks on credit.
- February 1, 1929: Banker Thomas Lamont of J.P. Morgan travels to Europe to negotiate German war reparations during a period of unprecedented stock market euphoria and risky investment trusts.
- Lamont believed that "There wasn't a problem in the world that couldn't be solved through the wizardry of credit." Meanwhile, J.P. Morgan was organizing speculative holding companies and secretly offering shares to influential friends at a steep discount.
- "Investors weren't buying companies so much as they were buying reputations."
- February 14, 1929: Charles Mitchell clashes with the Federal Reserve over its attempts to curb the margin lending that was inflating the stock market bubble.
- February 16, 1929: Angered by the Fed's tightening of credit, Mitchell recruits legendary market speculator William Durant to help lobby politicians in Washington. Durant, who fleeced small speculators, promised to try to reach President-elect Herbert Hoover to change the Fed's course.
- Durant was a “stock pool” investor, where wealthy investors pooled their assets together to artificially inflate a stock and dump them at peak prices.
- March 4, 1929: Hoover is inaugurated as President, inheriting a booming economy and retaining Andrew Mellon as Treasury Secretary despite his personal misgivings. Mellon believed the government should not interfere with stock speculation.
- March 5, 1929: Famous speculator Jesse Livermore executes a massive short-selling campaign, believing that the market was due for a crash.
- March 26, 1929: When a massive stock sell-off threatens a panic, Charles Mitchell publicly defies the Federal Reserve by announcing his bank will lend millions to support speculators. His intervention immediately stabilized the market but angered Washington.
- March 29, 1929: While Lamont negotiates a major communications merger in Europe, insider Michael Meehan orchestrates a highly profitable and manipulative stock pool to inflate RCA (Radio Corporation of America) shares. The insiders made about $5 million in just over a week by exploiting the public's infatuation with radio technology.
- April 5, 1929: Senator Carter Glass declares political war on Charles Mitchell, outraged by the banker's insubordination against the Federal Reserve. He condemned Mitchell's "vice of avowing one's obligation to stock gambling as superior to one's sworn obligation to his country."
- April 8, 1929: William Durant secretly meets with President Hoover to warn him that the Federal Reserve's credit restrictions will cause a crash, but Hoover declines to intervene.
- April 12, 1929: Wealthy financier John Raskob, bitter over Al Smith's presidential defeat, plans to use his fortune to fund a Democratic publicity machine to undermine Hoover's presidency.
- April 14, 1929: Durant takes to national radio to publicly denounce the Federal Reserve Board and defend Wall Street's use of credit. Meanwhile, Senator Glass prepared an amendment to levy a 5% tax on short-term stock transfers to penalize speculators.
- May 7, 1929: Raskob announces a new investment trust to let working-class Americans buy stocks on installment plans, while secretly hiring a propagandist to smear Hoover.
- June 4, 1929: The American delegation successfully negotiates the "Young Plan" for German war reparations. Despite the success, Lamont grew anxious about the markets, advising his son to liquidate holdings because "In my spare moments, I keep feeling cash is a good asset."
- June 29, 1929: During a booming summer market, Mitchell and Durant worry that Senator Glass's proposed tax on speculation will destroy the stock boom.
- September 2, 1929: Economist Roger Babson issues a warning of a market crash, causing a brief dip, but bullish reassurances quickly push the market to new heights.
- October 2, 1929: Raskob unveils the model of the Empire State Building to fellow financiers, urging them to be confident and keep buying stocks.
- Raskob told his guests, "a country which can provide the vision, the resources, the money and the people to build such an edifice as this, surely cannot be allowed to crash through lack of support from the likes of you and me."
- October 6, 1929: Winston Churchill tours the US and is fascinated by the booming economy. Churchill then opened a US trading account. He observed that unlike Europe, "the social life of the United States is built around business."
- October 10, 1929: Lamont hosts the British Prime Minister while privately advising President Hoover against intervening in the increasingly unstable stock market.
- October 24, 1929: A decade of rampant speculation and excessive use of credit triggers Black Thursday, a massive market crash, prompting Wall Street's top bankers to pool their funds and stage a highly publicized stock purchase to halt the collapse.
- Richard Whitney, vice president of the New York Stock Exchange bought large amounts of US Steel shares above market price, earning him the name “White Knight of Wall Street”.
- October 27, 1929: The panic resumes, culminating in Black Tuesday, which overwhelms the bankers' pool, devastates Mitchell's bank, and yields massive profits for short-seller Jesse Livermore.
- National City accidentally bought 71,000 of its own crashing shares.
- November 6, 1929: Mitchell backs out of a major merger between National City and the Corn Exchange Bank to save cash, severely damaging his reputation among his peers.
- November 8, 1929: James Riordan (president of the County Trust Company bank), ruined by margin calls, shot himself. Raskob and Smith delayed reporting his death to the police and begged the Federal Reserve for cash to save the bank from panic withdrawals.
- November 13, 1929: President Hoover issues empty reassurances rather than intervening directly, while Carter Glass resumes his aggressive public attacks on Mitchell.
- December 19, 1929: Facing massive personal debts from buying his own bank's stock, Mitchell devises a plan to sell the shares to his wife for a massive tax write-off.
- December 21, 1929: The year ends with the market down but not completely decimated, but the severe loss of credit and public confidence sets off the Great Depression.
- September 30, 1930: As the Depression deepens, public sentiment turns against Wall Street. National City's aggressive tactics to sell stocks is exposed and ends the era of hero-worship for bankers like Mitchell.
- October 28, 1930: Raskob uses a national radio address to deny accusations that he orchestrated a smear campaign against Hoover and deliberately depressed the stock market.
- November 5, 1930: The midterm elections deal a bad defeat to Hoover's Republicans, While bank failures accelerate and the Bank of United States collapses.
- February 2, 1931: Mitchell testifies before Senator Glass's subcommittee, attempting to shift blame for the crash to outside lenders and advocating against government regulation. He lobbied for abolishing the capital gains tax and less government scrutiny.
- February 18, 1932: Hoover removes Andrew Mellon as Treasury Secretary. Congress quickly passed the Glass-Steagall Act of 1932 to save failing banks.
- November 8, 1932: Franklin Delano Roosevelt wins the presidential election in a landslide. As anxious citizens began hoarding cash, Hoover's attempts to manage the crisis stalled because Roosevelt refused to endorse the outgoing administration's policies.
- February 18, 1933: Hoover secretly begs Roosevelt to issue a statement to stop bank runs, but Roosevelt refuses to intervene before his inauguration, and Glass declines the role of Treasury Secretary.
- February 21, 1933: Prosecutor Ferdinand Pecora aggressively interrogates Mitchell before the Senate, exposing Mitchell's massive compensation and his scheme to avoid income taxes by selling stocks to his wife.
- February 22, 1933: The Pecora hearings continue to dismantle Mitchell's reputation, revealing National City's unethical lending practices, resulting in Mitchell's resignation in disgrace.
- Pecora revealed that shortly after the crash, National City established a $2.4 million fund to allow top executives to borrow money to buy company stock. These loans were secretly shifted off the books and never repaid, while low-level employees "were forced to keep making payments toward the full purchase price... If they failed to stay current on those payments, they lost their jobs."
- March 3, 1933: On the eve of his inauguration, Roosevelt ignores Hoover's final plea to close the banks, only to declare a national bank holiday immediately after taking office to halt the financial panic.
- March 7, 1933: Winthrop Aldrich of Chase Bank publicly demands that all banks, including private ones like J.P. Morgan, divorce their commercial and investment banking arms. Roosevelt backed Aldrich, forcing Glass to alter his reform bill.
- March 21, 1933: Mitchell is arrested and indicted for tax evasion, signaling the government's aggressive new stance against Wall Street executives.
- May 16, 1933: Mitchell goes on trial for tax evasion, with his defense attorney arguing that the stock sale to his wife was a legal and standard tax-avoidance practice.
- May 22, 1933: Glass pushes his banking reform bill through Congress, reluctantly accepting the Steagall provision for federal deposit insurance due to overwhelming public demand.
- May 23, 1933: The Pecora hearings target J.P. Morgan & Co., exposing the firm's unchecked power, its practice of offering discounted stocks to political insiders, and its partners' failure to pay income taxes.
- June 16, 1933: Roosevelt signs the Glass-Steagall Act into law, fundamentally transforming the American financial system by separating commercial and investment banking. The law also ensured deposits would be insured up to $2,500.
- June 21, 1933: Mitchell is acquitted of tax evasion, a verdict that sparks public outrage but validates his defense that he used legal tax loopholes.
- Years later, it's revealed that "White Knight" Richard Whitney stole from the New York Stock Exchange. He was sent to prison, dealing a final blow to Wall Street's reputation.
- The 1929 crash was a preventable disaster exacerbated by an outdated financial infrastructure, fragile banks, and the encouragement of unchecked speculation by Wall Street leaders promising outsized returns to inexperienced investors.
1929: Resources
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