The Great Crash. Non Fiction, History. Subject: The Great Depression

A sample from the The Great Crash by Selwyn Parker


JACK Pierpont Morgan and his wife Jessie followed the same routine whenever they came to Britain. They crossed the Atlantic aboard the elegant British-built Mauretania, or the newer Aquitania with its four racy-looking, angled smokestacks, or the Corsair, Morgan’s private ocean-going vessel. After berthing at Southampton, they were chauffeured to their stately home in the tiny village of Aldenham in leafy Hertfordshire where they generally settled in for a long stay.

Wall Hall was a grandiose home befitting the world’s best-known banker, and probably its richest man. Dating from the early 1800s, it was a late-model castle built in the Gothic revival style complete with a castellated façade and other medieval touches. Appropriately enough, the original occupant of Wall Hall was another prosperous banker, one George Woodford Thelluson, who achieved immortality as a character in Charles Dickens’ novel of the French revolution A Tale of Two Cities. Tellson, as Dickens chose to call him, owned a bank in Temple Bar that functioned as ‘a kind of high exchange’ to which aristocrats, mainly refugees from various revolutions, entrusted their wealth.

In 1929, Jack, as his friends knew him, or J.P. Morgan Jr as the papers usually described him, could hardly wait to get away from New York and take up residence in Hertfordshire. Having lived in London for several years before returning to New York to take over the parent bank from his father, the fabled Junius Pierpont, he had bought Wall Hall in 1908 after he and his wife fell in love with it. For Boston-educated Jessie, herself the daughter of a banker, the English countryside provided a respite from the teeming streets of the big city; for her husband, it served to lighten the load of the onerous responsibilities that had fallen by inheritance on his shoulders. And at Wall Hall he could become an English gentleman, albeit with an American accent. The residence’s panelled dining room regularly hosted the upper strata of English society: members of the royal family including Elizabeth, the future Queen Mother, representatives of the aristocracy, leading churchmen, politicians and bankers. They formed a circle natural to a man who possessed seemingly unlimited wealth and enviable influence in the highest levels of government around the world.

Proud of Wall Hall and its immediate environs, Jack Morgan lavished considerable expense on the estate, and on the village that sat practically on its doorstep. He was in all but name the lord of Aldenham, his wife the lady. Jessie threw herself into activities at the local Women’s Institute, which met regularly in an old brick building barely five minutes’ walk from the castle. The couple sometimes worshipped in the seven-hundred-year-old Church of St John the Baptist, and occasionally joined locals for a beer at the Three Compasses pub nearby. The local schools regularly benefited from the banker’s largesse. And although he knew little about the game, he was an enthusiastic and generous patron of Wall Hall’s resident cricket team.

Jack Morgan was in some ways a reluctant banker. Much of his affection for Aldenham derived from the freedom it gave him to pursue non-business interests. At Wall Hall, he set aside a natural history room for his microscope and his cherished specimens. He created a darkroom where he played around with the new miracle of colour photography. He took a city boy’s delight in the farming of the estate, partly to provide a livelihood for the people who worked on it but also to earn a satisfactory return on the investment: the financial disciplines he had inherited from his formidable father would not permit him to sink money into any venture that did not produce a profit. ‘I think now that within a year or so we shall be really producing here enough of milk and pigs and eggs to keep the whole place and all the people on it and [who] work for it going well on a paying basis,’ he enthusiastically noted in his diaries. ‘Though what rate of interest we shall earn on the investment remains to be seen. If we don’t earn a fair rate, one year with another, it will mean that we have not been successful.’ Thus wool from the estate’s Southdown sheep was sold for conversion into cloth for suits that went on sale in London. Still, profitable or not, he was invariably delighted when the farm won prizes at agricultural shows.

Wall Hall also served as a launching point for motoring escapades around the countryside, and for extended grouse-shooting trips to Gannochy in Scotland, where Jack socialised with the flower of English society. In a typical season he would blaze away over the heather-covered Highlands with the likes of the Duke and Duchess of Beaufort, the Earl of Dalkeith, the Duke of Roxburghe (a later Viceroy of India) and the Marquis of Linlithgow, Viscount Lewisham. ‘My mind is singing a little song of joy in back of my head all the time at the thought of the delights of that month up there!’ he confided to his diary.

In 1929, J.P. Morgan Jr was 61 years old and at the zenith of an illustrious career. Honoured in Britain for having arranged the finance for much of the 1914-18 war effort (albeit at a fat return of some $30 million in fees to his banking empire), a confidant of the world’s central bankers – in part for helping to solve the German reparations crisis – and the undisputed head of the world’s greatest bank with fabulous deposits of nearly $500 million, he was an essential presence around the table in most major international negotiations involving finance. It was Jack Morgan who was instrumental in stabilising the tottering French franc in 1924 by arranging a credit of $100 million – a stupendous sum at the time. In that year he also underwrote a massive German loan to shore up the struggling German currency. A year later, as the financial agents of Benito Mussolini’s fascist government, J.P. Morgan & Co raised another $100 million to rescue the lira. Shortly after that, another J.P. Morgan – syndicated loan stabilised the Spanish currency. Jack Morgan’s power, reputation and influence was of vital importance in rescuing Europe’s economies from the ravages of war, to the considerable benefit of governments and the people.

The parent bank, J.P. Morgan & Co, dominated Wall Street, and the London branch of the bank, Morgan, Grenfell & Co, held an assured position in the City as a trusted name and a leading issuer of sovereign bonds for governments. Edward Grenfell, senior partner of the London branch, was one of Jack Morgan’s closest friends. As banking was a business based on trust, Jack liked to associate with people he considered to be of impeccable reputation, and Grenfell certainly fulfilled that criterion. Son of a former governor of the Bank of England, educated at Harrow and Trinity College, Cambridge, he was a director of the Bank of England, a financial agent for the Treasury and a Member of Parliament. In short, a man to do business with.

Jack Morgan certainly had his enemies in the City, among them Lord Revelstoke, the head of Barings, who resented an American house pirating the City’s long-established business, especially the prestigious and lucrative syndicating of sovereign loans to governments. As far as Revelstoke was concerned, Morgan money was ill-gotten, ‘insolent wealth’ acquired through Britain’s ‘loss of blood and treasure’ in the First World War. They were ‘the greatest profiteers the world has ever seen’, he once wrote in a fit of spleen. But at that time many bankers profited by financing the reconstruction that inevitably followed war; Barings itself had turned to good account similar business in the wake of earlier wars. Ruinous though war was for the majority of a population, both its prosecution and aftermath were highly lucrative for the lenders.

As the 1920s drew to a close, the head of J.P. Morgan & Co could afford to be philosophical about criticism. Never an instinctive dealmaker like his father, he was steadily withdrawing from the firm. He felt he had done enough. Also, his beloved wife Jessie had died in 1925 at the early age of 57 after contracting sleeping sickness (encephalitis lethargica), for which there was no cure. A grief-stricken Morgan gave $200,000 for the study and treatment of the disease – enough to equip and maintain an entire floor of the neurological institute in Manhattan.

From that point on he began to devote himself to extra-curricular interest: his photography and specimens, his valued New York library of old books, cruises in company aboard Corsair, his many charities, and the further development of Wall Hall, probably the favourite of his three residences. In short, he was looking forward to twilight years free from the rigours of financial diplomacy, with his wealth and reputation seemingly impregnable.

Then, almost overnight, Jack Morgan’s world began to crumble.

Chapter 1

Song of the Stock Ticker

The Western Union stock ticker was a marvel of modern technology. Clacking away in most of the western world’s stock exchanges, it combined an advanced knowledge of several sciences and technologies: electricity, electromagnets, mechanical devices and production engineering. Popularly known as the self-winder, it incorporated several breakthroughs that enabled it to punch out the stock prices considerably faster than any of its numerous predecessors, each of them equally impressive in their time.

Typed in at the stock exchange end, dozens of quotations were printed out every minute on a three-quarter-inch-wide length of tape that rolled into thousands of offices in America and beyond. And with the volume of share-dealing rising by the week during the roaring twenties, especially in Wall Street and other exchanges in the United States, speed was of the essence. Bankers, brokers, manufacturers, businesspeople, professional investors, anybody trading on a daily basis – they all owned, rented or had regular access to the self-winder or plain ‘ticker’. By the late 1920s the ticker had become the symbol of the sharemarket boom, the only price-issuing technology that could match the furious pace of the exchanges. The noise it made, like that of a hyperactive clock, became the theme music of the boom, inspiring songs such as the sardonic ‘A Tale of a Ticker’, composed by two musicians from Ohio, Frank Crumit and Frank O’Brien:

And here is the song they sing the whole day long:

‘Oh! The market’s not so good today.

Your stocks look kind of sick.

In fact they all dropped down a point a time the tickers’s tick.’

 The heritage of the self-winder says much about America’s growing infatuation with the stockmarket throughout the roaring twenties. For half a century the competition to produce the fastest stock price printing machine was almost as frantic as the pursuit of the stocks and shares themselves. Indeed for many, the two were inseparable. Had not broker and banker Horace L. Hotchkiss, a founder of manufacturer Gold & Stock which would later produce the self-winder, once declared that it was ‘through the instant dissemination of the quotations made on [the stock exchange] floor that the active and continuous interest in the markets is sustained’?

The first machine to sustain this ‘active and continuous interest’ was the gold indicator in 1867, a mechanical device that cleverly spun three barrels to display the latest prices from Wall Street’s Gold Exchange. Over the ensuing years a series of constantly improved printers appeared: the popular Calahan, which the London Stock Exchange installed in 1872, the Edison and Pope, the Phelps, and, in the mid-1870s, Thomas Alva Edison’s robust Universal, which put the great inventor on the scientific map. Gradually, the machines came to replace foot-borne quotations conveyed by sweating ‘runners’ who sprinted up and down the steps of banks and broking houses, pausing only long enough to shout the latest prices before heading off, chests heaving, to the next location.

As volumes of business continued to build, the participants in the market demanded ever more timely quotations and the quest for faster tickers never let up. Around 1910, manufacturer Stock Quotation Telegraph produced the Burry machine that was not only lighter than existing models but also offered a limited self-winding capability. But it was Western Union, the offspring of Gold & Stock, that achieved the breakthrough that came closest to satisfying the rampant appetite for share dealing. Its machine was smaller than the Burry, achieved in part by locating the escapement magnet and adjustment screws in the frame of the device. More importantly, it was faster. At first burdened with the title the Scott-Phelps-Barclay-Page Ticker, it soon became known around the world as the Western Union self-winder, and it cornered the market. No fewer than sixteen thousand self-winders left the factories in the 1920s, and many were exported. Now everybody could keep up with the markets, buying and selling at the same speed as Wall Street.

The decade finally had the stock quotation machine it needed. But, as Hotchkiss had observed, the Western Union was more than a mere machine. By churning out quotes at ever-increasing speeds, the ticker actually helped feed the sharemarket boom. As we shall see, much of the information it delivered with such reliability proved to be of dubious value, but that only bothered the more astute traders. Yet even this marvel of technology would soon experience difficulties in keeping up with the markets.

THE epicentre of the sharemarket boom, both worldwide and in the United States, was the New York Stock Exchange. A noble-looking building of neo-classic design located at 18 Broad Street, it featured an elaborate marble sculpture above a grand façade supported by six Corinthian pillars. Called ‘Integrity Protecting the Works of Man’, the sculpture portrayed the benign presence of a Greek goddess presiding over toiling individuals. The implicit message of John Quincy Adams Ward’s work was that the exchange was there to ensure that the production of the people was converted into greater wealth for the general good.

This was certainly the ethic the exchange had steadily assumed for itself in the 137 years since it was founded under a buttonwood tree outside 68 Wall Street. The people who governed the exchange in 1929 were the grandees of the market and, like their predecessors, ran it with complete independence from government. They had done so since its establishment, a state of affairs with which Washington was reasonably content. Not everybody liked the arrangement though. From time to time the exchange’s freedom from independent supervision came under attack, one critic denouncing ‘the carnival – I would almost say orgy – of corruption and swindling that has marked its history’.

Yet as long as the economy prospered, as it was assuredly doing in the 1920s, President Calvin Coolidge saw no reason to regulate the nation’s premier palace of investment. The United States was in the middle of what was known as the Coolidge bull market, and the famously taciturn president, by 1929 into his seventh and final year in office, was the hero of a business community very much in the ascendant. New industries were prospering such as automobile manufacturing and radio, and corporate profits were on the rise. The stock market was the beneficiary of this surge in prosperity; during the period of the Coolidge bull market the dividends paid to investors had risen by more than 100 per cent.

Foreign money had flooded into the United States during the decade, looking for a high-earning home. This was partly the result of the 1914-18 war, which had left Britain and Europe economically devastated and heavily indebted, in particular to the United States. About 15 per cent of Britain’s overseas investments, and especially those in America, had been sold off to help fight the war. America had emerged from the conflict as a creditor nation owning vast assets abroad. The proceeds of these assets in the form of dividends, interest and profits – in short, capital – were making the country cash-rich.

By contrast, lenders in the City of London had been hamstrung by the Bank of England, which was so worried about the weakness of the British pound that it placed tight limits on the amount of capital that could be loaned abroad. This slowed the business in which London’s bankers had long considered themselves world leaders – the provision of capital for overseas development. Although the City could still claim a reputation as the true centre of banking expertise – most London bankers regarded their counterparts across the Atlantic as buccaneers – it was undoubtedly New York that had most of the money.

In the late 1920s though, as the stockmarket boom showed no sign of slowing, some in the government began to fear the economy was overheating. ‘Silent Cal’ was not one of them. Ignoring the warnings of Commerce Secretary Herbert Hoover, who feared the boom was unsustainable and would end in tears, Coolidge continued to relax business regulations in the conviction that commerce could be trusted to behave sensibly, decently and honestly without Washington becoming its conscience. He made sure that the numerous supervisory authorities under the control of federal government were stacked with pro-business appointees only too happy to let the boom run. Unlike some of his predecessors – such as trust-busting William Howard Taft, who sought to curb the power of big business, for instance by forcing the break-up of all-powerful companies such as Rockefeller’s Standard Oil, American Tobacco and railway giant Northern Securities; or Taft’s immediate successor Woodrow Wilson, who moved to prevent companies from colluding to rig prices – Coolidge had a benign faith in the inherent goodness of America’s captains of industry. About the only law passed during his laissez-faire administration that could be described as anti-business was one outlawing corruption – hardly something a president could oppose. Coolidge liked to mix with the titans of commerce. In their final month in office, the presidential couple were guests of honour at a cabinet dinner attended by Henry Ford and his wife, among other leaders of the commercial community. Essentially, Coolidge believed in the decency of individuals, whether employers or employees, and in letting them get on with their industrious lives without excessive interference. ‘All growth depends upon activity,’ he observed in one of his radio speeches. ‘There is no development physically or intellectually without effort and effort means work.’ Under his minimalist stewardship, commercial monopolies multiplied and America’s mighty economic engine fell into the hands of fewer and fewer people. By 1929, one half of all America’s corporate wealth was controlled by just two hundred companies.

Not that anybody was particularly worried. Coolidge had complete faith that the profits of business would eventually flow into the pockets of the general population. More than that, he was convinced that business was the people’s hope for an ever-rising material future. In 1925, as the decade was starting to roar, he once lectured the American Society of Newspaper Editors on the importance of reporting commerce more conscientiously: ‘It is probable that a press which maintains an intimate touch with the business currents of the nation is likely to be more reliable than it would be if it were a stranger to these influences. After all, the chief business of the American people is business. They are profoundly concerned with buying, selling, investing and prospering in the world.’

Ever the farm boy, Coolidge was a thrifty president. He set great store on the federal budgeting process, which had only been initiated two years before he took office, and under his watchful eye government spending stuck remarkably closely to the preliminary estimates. In his final budget statement, Coolidge fired his usual shot across the bows of Congress, warning them to disburse taxpayers’ money with prudence and astuteness. ‘Our splendid Treasury is not a bottomless, automatically replenishing fountain of fiscal supply, and its outflow must be eternally watched and carefully and wisely directed into proper channels,’ he warned. Coolidge prided himself on the surpluses the government accounts usually showed after the money had been disbursed on the business of the nation.

In Andrew Mellon, he had a like-minded treasury secretary. A champion of big business who had built his own industrial empire in oil, steel, shipbuilding and construction, Mellon was the epitome of the American dream, the son of immigrants from Northern Ireland who had parlayed his father’s social and financial success into enormous wealth (Mellon senior was a banker and a judge in an era when it was by no means considered incompatible to be both). One of the most successful of self-made men, the younger Mellon believed in America, self-help, hard work and a government that did not intrude. ‘Any man of energy and initiative in this country can get what he wants out of life,’ he wrote. ‘But when initiative is crippled by legislation or by a tax system which denies him the right to receive a reasonable share of his earnings, then he will no longer exert himself and the country will be deprived of the energy on which its continued greatness depends.’

Mellon had been secretary of the treasury since 1921, reforming the tax system in a way that in general favoured the wealthy but which also encouraged honest toil. He put it elegantly in a 1924 book called Taxation: The People’s Business: ‘The fairness of taxing more lightly income from wages, salaries or from investments is beyond question. In the first case, the income is uncertain and limited in duration; sickness or death destroys it and old age diminishes it…Surely we can afford to make a distinction between the people whose only capital is their mental and physical energy and the people whose income is derived from instruments.’ And in his eleven-year reign as treasury secretary, Mellon behaved as he preached. He halved (from 40 per cent to 20 per cent) the maximum tax payable on earnings and, even better for the rich, halved estate tax. A stickler for prudence in government finance, he also reduced the public debt by nearly 40 per cent. By 1929, Mellon had a legendary reputation as a sure hand at the helm of America’s finances.

So as the boom accelerated, Coolidge saw no reason to discourage it. After all, was not the welfare of the people synonymous with the profits of commerce? In January 1929, two months before he left office, it was difficult to gainsay him. Factories were sprouting up everywhere — 22,800 new ones in Coolidge’s final four-year term.

For all this output Coolidge could thank, at least in part, a management revolution inspired by Frederick Winslow Taylor. The founder of a genuinely new way of organising production that enormously boosted industrial profits and reduced the price of consumer goods, Taylor was the scion of a wealthy Quaker family. His system dismantled the entire manufacturing process into its individual components and subjected them to minute analysis. Having done that, it devised ways of doing each one of them better, meaning faster and more cheaply. Finally, it reassembled the discrete parts into a much more efficient and coherent whole.

Deeply resented by the unions because ‘Taylorism’ took little or no account of workers’ welfare and even less of their own experience and insights into the manufacturing process, scientific management did little for employees’ morale. ‘It is only through enforced standardisation of methods, enforced adaptation of the best implements and working conditions, and enforced cooperation that this faster work can be assured,’ the uncompromising Taylor wrote (the italics are his). ‘And the duty of enforcing the adaptation of standards and enforcing this cooperation rests with management alone.’ This essential enforcement process was executed by a team of bosses who constantly monitored workers for speed, efficiency, discipline, conformity to instructions, costs and repairs, among various other measurements.

Taylor died in 1915, long before Coolidge took office, but his methods had steadily gained momentum in the United States with impressive results. Between 1921 and 1928, the Federal Reserve’s index of industrial production shot up from 67 to 110, and it would continue to accelerate deep into 1929. Taylorism was also gaining traction in France, Switzerland, Britain, and even in the USSR, where Lenin and, later, Stalin saw the system as a way of turning post-revolutionary Russia into an economic powerhouse.

As Coolidge’s final term drew to a close, Americans had every reason to feel optimistic. Generally they were getting richer, although at unconscionably different rates, and the price of goods was falling relative to income. Factory workers might not have been enamoured of Taylorism but its undoubted benefit was more affordable consumer goods such as fridges — one of the luxuries of the inter-war years — automobiles, radios and other exciting products. Thanks to rampant production, the stores were full of goods that just a few years earlier were priced beyond the average person’s reach. Even if they weren’t rich in the same sense as an Andrew Mellon or a Jack Morgan, many Americans feltprosperous. They had disposable income for the first time and were acquiring more possessions than ever before. And in a virtuous circle, because Americans were spending, factories were working overtime.

Every year promised to be better than the previous one. A nationwide business survey conducted in January by a Manhattan advertising agency (and duly delivered to a delighted Coolidge) concluded that all the signs ‘pointed to a prosperous 1929’. In his final State of the Union address that year, Coolidge congratulated himself on ‘the highest record of prosperity in years’ and declared that no other Congress ‘has met with a more pleasing prospect than that which appears at the present time. In the domestic field there is tranquillity and contentment.’

In short, what could possibly go wrong?

In statistical terms, the total real (after inflation) income of Americans had increased by an average 3-4 per cent a year for most of Coolidge’s period in office. As economist Harold Bierman Jr noted,  1920s were in fact a period of real growth and prosperity.’ Although richer Americans had done much better than the average American, and the richest had done far better than everybody else, most of the nation was sharing to a greater or lesser extent in the benefits of economic growth.

NONE of those benefits was considered more desirable than the automobile, the shining symbol of prosperity. In 1929 Americans bought, usually on credit, 4.45 million passenger cars at an average retail price of around $876. No fewer than 21.6 million automobiles and 3.1 million trucks were registered by 1928, giving Americans an extraordinary 78 per cent of the world’s total stock of automobiles. Predictably, the biggest-selling models were the cheaper ones like Ford’s Model A, General Motors’ Chevrolet and Durant Motors’ Star, but the increasingly affluent were fast trading up to the mid-line Princetons, Packards, Chryslers and Cadillacs, while the wealthiest travelled in eight-cylinder monsters such as the Cadillac Locomobile Stearns-Knight, one of the luxury speedsters. There was such a strong market for these top-of-the-line models that Manhattan’s National Automobile Show of January 1929 set aside a specially carpeted area of the exhibition building where, as Time magazine reported, ‘soft-voiced salesmen, in tuxedos, point out the glories of the Auburn Jordan Peerless, Black Hawk La Salle Pierce-Arrow, Stutz’s Lincoln Reo, Franklin Moon Stutz, Gardner Packard’. Faced with such chrome-bedecked, low-slung wonders, ticket-holders did not know quite what to make of the stubby little British cars (Austin and Vauxhall were now owned by General Motors after a deal brokered in London by Morgan, Grenfell) which were displayed in a less prestigious corner of the exhibition. Although designed for a country of narrower roads and more expensive petrol, the cars from the other side of the Atlantic were still snapped up to fill a spare space in American garages. These heaper models were popular with the wealthy as ‘an auxiliary gadabout’ to complement the luxury vehicles that dominated Wall Street. Yes, the American automobile industry had travelled a long way since just before the turn of the century when, after a bad experience, an unimpressed Rudyard Kipling described the highly unreliable steam-engined version of the Locomobile as a ‘nickel-plated fraud’.

As automobiles were the aspirational symbol of this highly acquisitive, unworried decade, one magnate of the industry decided to commission a building to pay them homage — more specifically, homage to his own particular brand. Having bought a plot of land in lower Manhattan, Walter P. Chrysler hired architect William van Alen to produce a suitably triumphant edifice that would serve as a totem for the roaring twenties. Like so many American industrialists, Chrysler came from humble origins, which did nothing to deter his sense of ambition. Quite the reverse. Unlike Britain and many other western European nations with their highly stratified societies, humble birth was not considered a handicap in America. Men like Chrysler almost revelled in their dirt-poor backgrounds.

Son of a railway engineer, he had grown up in Ellis, a railroad shop town in Kansas, and started working life as a dollar-a-day sweeper in the local Union Pacific yards. Yet, ‘mad with curiosity’ about machines, as he put it, he became a brilliant, largely self-taught engineer who cut his teeth designing entire locomotives. He was also mad about cars: he once bought a $5000 Locomobile on credit just to pull it apart to see how it all worked. Very much a product of the industrial boom, Chrysler launched out on his own as soon as he could find financial backers, of which there was almost a surfeit in the United States (this was also very different from Britain). By the late 1920s, Chrysler had carved himself a reputation for imaginatively marketed, mechanically innovative vehicles. The company’s four main brands Chrysler, Plymouth, Dodge and DeSoto — were so successful that they became a thorn in the side of giants Ford and GM. The latest DeSoto was on the way to selling over 81,000 models in the first twelve months of production at a base price of $845 — a record for a new model that would not be beaten for more than thirty years. Walter Chrysler was even rivalling Ford in export sales: his cars could be found in the showrooms of 3800 dealerships around the world. Chrysler had a global vision for the automobile, particularly his own models, that was almost missionary. ‘It devolves upon the United States to help to motorize the world. Road building is taking root in Australia, vast Africa, Spain, South America. Every new development, highway, railroad, steamship line, building operation, whether it be a drainage project in old Greece or a new water system in Peru, means an added use of the automobile.’ He confidently predicted the United States would export a million automobiles in 1930. This toweringly ambitious automobile magnate saw no reason why he could not one day challenge both giants of the industry for supremacy.

With his company’s models soaring in popularity, Chrysler desired an appropriate architectural statement – ‘a bold structure’ as he described it to van Alen. He was determined that his building should typify the unstoppable ambition that animated the streets below, and that it should be the tallest in the world, even if it would be only briefly. He knew the Empire State Building, another expression of American industrial might that was under construction nearby, would be taller than his Chrysler Building, but he also knew it would not be completed until 1931. He ordered van Alen to proceed at all possible speed.

DESPITE the blame that has been heaped on it, the investing community of the roaring twenties was not entirely to blame. True, there was chicanery, greed and irrational exuberance, as we shall see. In the five-year run-up to the Crash, gullible investors borrowed wildly to get into the markets, and many were systematically duped by Wall Street and the stockmarket fraternity at large. The prevailing mood was summed up by poems like this sardonic lullaby which appeared in the Saturday Evening Post:

O hush thee, my babe, granny’s bought some more shares

Daddy’s gone to play with the bulls and the bears

Mother’s buying on tips and she simply can’t lose

And baby shall have some expensive new shoes.

An expert in the Department of Commerce would shortly establish that about half of the $50 billion worth of securities sold in the United States during the roaring twenties were ‘undesirable or worthless’. But that means the other half was more or less bona fide paper offering investors a stake in sectors of the economy that were producing genuine profits. These securities allowed the investor to participate in the growth of businesses in glamour sectors such as aviation, retailing, telephone and telegraph, oil and power, radio — the building blocks of huge future industries, Americans saw themselves as sharing in the unstoppable power of the US economy. Although in many cases the prices of the shares outstripped the underlying earnings of the companies issuing them, most of these companies were showing real growth.

One of the bellwethers of the market was mighty US Steel, its share price up $241 by late autumn 1929; another was pioneering phone company AT&T, sky-high at $304. General Electric tripled in value over the eighteen months to early September to an almost unaffordable $396 a share. Some of the most glamorous stocks were those in aviation, among them Wright Aeronautics, whose main shareholders were none other than the pioneering aviators, the Wright brothers, and Boeing, which was flying mail across America in its two-passenger 40As and which had just unveiled a four-seater flying boat available for private buyers. Highly acquisitive, Boeing had swallowed up nine other competitors including Pratt & Whitney Aircraft, Northrop Aircraft and Sikorsky Aviation. Another popular stock was that of a fledgling escalator and elevator manufacturer named Otis, surely a fitting symbol of the upward trend of the sharemarket. Most investors were firmly convinced that stocks would rise pretty much for ever.

Automobile stocks were particularly fashionable. As Walter Chrysler pointed out in a booklet, anybody who bought a $100 block of shares in his company in 1923 was now $1353 richer — a gain by a factor of over thirteen. Averaged out over six years, that represented an annual return of over 200 per cent, or at least twenty times what would be considered a handsome reward in more normal circumstances. GM’s stock had done even better: a $10,000 investment in ‘The General’s’ shares in 1920 would have produced $1,490,000 by 1929. No wonder ordinary people were rushing to buy into what all saw as a glorious future for the internal combustion engine.

The runaway returns of the shares of Radio Corporation of America, popularly known as Radio, provide another illustration of the furious pace of the market. Under the guidance of a tenacious Russian-born Jew named David Sarnoff, who was one of the first to foresee the future of popular broadcasting, Radio did it all. It manufactured sets, made commercial programmes which it transmitted through its own stations, and produced phonograph records as RCA-Victor. Even then, the far-sighted Sarnoff was quietly funding the development of all-electronic television. Radio was seen as an icon of the market, emblematic of America’s world-beating technological growth. It never paid a cent in dividends, but that did not stop its share price rising from a paltry $1.50 in 1921 to a high of $570 in April 1929 and that was after the stock was split, a process based on the multiplication of the shares available so they were more affordable.

By the late 1920s, most investors had almost come to expect such incredible gains, and the 1928 presidential election campaign to find a replacement for Coolidge did nothing to talk down this expectation. When Hoover, the former commerce secretary who was the Republican candidate, took to the husting, he sometimes sounded like Coolidge. ‘We shall soon, with the help of God, be in sight of the day when poverty will be banished from this nation,’ he roared. Both the Republicans and Democrats did their best to win votes by feeding voters’ optimism. The campaign manager for Al Smith, Hoover’s opponent, was General Motors executive John J. Raskob, author of an article entitled ‘Everybody Ought to be Rich’. Raskob argued that eternal wealth was more or less inevitable: ‘Prosperity is in the nature of an endless chain and we can break it only by refusing to see what it is.’

Given such encouragement, it is understandable that many Americans truly believed the secret of wealth had been discovered, right there in the United States. Just like their automobiles, the mighty economy would drive them ever onwards. Little wonder that Irving Berlin’s ‘Blue Skies’ became the hit song of 1929 (‘Blues skies smiling at me, Nothing but blue skies do I see’).

EASILY the best known of the nine significant private banking firms in New York, J. P. Morgan & Co was one of the rocks on which this popular boom stood. Its office stood at 23 Wall Street, on the corner of Broad. Jack Morgan’s father, Junius Pierpont, could hardly have chosen a more prestigious location. Right opposite on one side was the New York Stock Exchange, on the other the United States Sub-Treasury. Since nobody could enter the building without invitation, it was considered quite unnecessary to affix a sign to the outside. If you did not know where the world’s biggest private bank was, you had no place being there. Wall Streeters reverentially dubbed the bank as The House on the Corner. Shoeshine boys competed to set up their stalls outside — not just for the tips, which were generous enough if you did a good job on the partners’ button-up boots, but also for the inside information. The story went that several shoeshine boys profited mightily on the strength of advice they gleaned from Jack Morgan and others.

The bank’s official discretion went further than an absence of signage; its notepaper did not even bother to state its business, just its name. And although J. P. Morgan & Co’s influence extended world-wide, it did not feel the need to divulge any details about itself. The institution had never issued a public statement. The only time a partner had gone on record on any matter whatsoever occurred during Junius’s unwilling but good-natured appearance (with son Jack lending moral support from the back seats) before the Pujo hearings in 1912. This was over the ‘money trust’ issue, one of the most headlined enquiries of the period. Conducted by chairman Arsène Pujo ‘to investigate banking and currency in the United States as a basis for remedial legislation’, the hearings attempted to uncover the existence of a cabal of bankers — the alleged ‘trust’ — that was supposed to control the nation’s supply of currency. As such, the enquiry reflected a growing suspicion – even paranoia – about an inner circle that printed money – or didn’t – according to their nefarious interests.

Nothing was proved, but a response was elicited from the elder Morgan, who reportedly displayed ‘unusual wit’ and ‘aroused laughter’ during his hours on the stand that inadvertently said much about his bank’s power. ‘There is no way in which one man could obtain a money monopoly,’ he indignantly responded to one question before a fascinated audience of politicians. ‘Commercial credit is based primarily on character. Money cannot buy it . . . A man I do not trust could not get money from me on all the bonds in Christendom… I have known men to come into my office and I have given them a check for $1 million when I knew they had not a cent in the world.’

Apart from such rare, forced appearances, discretion remained J. P. Morgan & Co’s watchword and preference (though it was virtually enforced by law: New York banking regulations made it an offence for a private banker to advertise his services or even to solicit deposits). The bank’s concern for confidentiality extended even to its daily partners’ conferences. For nearly a quarter of a century, as a matter of policy not a single record was kept of these hallowed discussions. Nor was there any chance of a leak because the only people present were the partners.

There were twenty of them in 1929, and they stood at the very heart of the rampant American economy. The partners did not run big business, as is often claimed, but they certainly pulled the financial strings and expected the captains of industry to be answerable to them. Between J. P. Morgan & Co and sister bank Drexel & Company, the partners held twenty directorships in fifteen big bank and trust companies, twelve in ten railroads, nineteen in thirteen power companies, and fifty-eight in thirty-eight industrial companies, all of them big. In total, it later emerged, the partners sat on the boards of eighty-nine corporations with total assets of $20 billion. Certainly, other private banks such as Kuhn, Loeb were nearly as powerful, especially in the railroads, but they were not seen to be as truly American as the House of Morgan assuredly was.

Because of its reputation, J. P. Morgan & Co was able to choose its customers. Anybody arriving without a letter of introduction from a trusted referee, no matter how wealthy, did not get inside the door. The bank selected its clients mainly from among the titans of the financial community. Charles E. Mitchell of National City, Seward Prosser of Bankers Trust, Artemus Gates of New York Trust, Charles G. Dawes of Chicago’s Central Trust, and similar illustrious names these were the chosen people who formed the inner clique. ‘They are friends of ours, and we know that they are good, sound, straight fellows,’ Jack Morgan would tell a subsequent Senate inquiry. These ‘straight fellows’ were of course all men and most of them had similar backgrounds.

The bank also did favours for the great, the famous and the powerful by distributing securities through what was delicately known in-house as the ‘preferred list’. With practically guaranteed profits, given the provenance of the promoter, there was naturally a lot of competition to make the list, but the bank, as its doorkeeper, ensured it retained a gilded nature. In mid-1929 the list included the now former president Coolidge, legendary aviator Charles Lindbergh, various US Navy top brass, senators from both political camps, ambassadors, local politicians, lawyers, bankers, professional investors such as Bernard Baruch, captains of industry, and former members of the cabinet. These were the people with the right credentials, ‘good, sound, straight fellows’. As the senior partner, Jack Morgan therefore had unrivalled access to the corridors of power. Indeed, it was at the president’s request that he left for Europe to offer his counsel to the reparations committee working on Germany’s punishing – and ultimately disastrous – fines and reparations for its role in instigating the 1914—18 war.

In the markets, that kind of weight was pure gold, as the bank’s promotion of United Corporation in January 1929 demonstrated. The House on the Corner had long prided itself on staying aloof from what it regarded as the discreditable speculation in stocks. Its main business was the infinitely more respectable (and steady) dealing in bonds, raising loans for industry and government. Yet unable to resist the siren song of the boom, J. P. Morgan & Co began to promote common stock which had hitherto been the traffic of lesser houses.

In practice, promoting a stock meant the bank raised the money for the company by wholesaling it, or selling it to major investors. It also took a lucrative slice of the action for doing so while generally retaining some stock for itself, which was often considered an indication of the promoter’s faith in the underlying business. United Corporation was a holding company, meaning its raison d’étre was solely to maintain shareholdings in other companies. United Corporation did not actually make or produce anything; it simply invested in companies that did. However those investments were extremely substantial and diverse. United owned a number of power utilities, which in turn held stakes in scores of other companies in the same industry. One of them, for example, United Gas Improvement, had no fewer than sixty subsidiaries under its belt. Altogether, through a spider’s web of loans and shareholdings in United Corporation, J. P. Morgan & Co held effective control over a swathe of electric power companies spread across the whole of America. (Although this was regarded as perfectly normal and acceptable business practice, the bank’s enormous reach over the utility companies was already being closely watched by supporters of an aspiring politician by the name of Franklin Delano Roosevelt.)

The prestige of United Corporation’s backers ensured that the value of the stock soared, in particular the 1.7 million perpetual option warrants that J. P. Morgan & Co retained for itself. These $1 warrants gave J. P. Morgan & Co the right to buy common stock (ordinary shares) if the price rose above a certain level. In this case the trigger level for exercising that right was $27.50 a share, which quickly proved a low hurdle given the attractiveness of the paper. Within a few months the warrants were worth $47, and they just kept on going. If the partners had sold out at the peak, they would have banked a fabulous combined profit of $122 million in the space of a single year. Measured by the underlying earnings of United Corporation’s businesses, the warrants were not worth anything like that much; but investors saw nothing but blue skies overhead.

It was the success of the United Corporation and similar promotions that gave Americans such an unshakeable faith in the markets. Any Cassandras who dared to forewarn of a stockmarket Armageddon were seen as spoiling the party, even as unpatriotic. Yet some insisted on having their say, like statistician and mathematician Professor Roger Babson, one of the most stubborn of these unheeded prophets. He had consistently predicted a collapse pretty much since the start of the bull market, and he was far from a crank; he was a genuine authority on the sharemarket who had been analysing the value of stocks for a quarter of a century, and had written many books on the subject of investment, including Business Barometers, which would be reprinted for many years after the Crash. Much more than a stock picker, he also spent the 1920s trying to apply the laws of physics specifically Sir Isaac Newton’s theory of action and reaction — to the interpretation of business cycles. Despite his baleful forecasts about overheated markets, Babson was certainly not against sharemarket investment. Far from it: he believed the ownership of stocks was an essential element of wealth creation. But he was deeply worried by where, he believed, things were heading.

By 1929 Professor Babson was not alone in his prophecies of doom. Some of America’s best-known businessmen were beginning to deplore Wall Street’s injudicious exuberance. Myron C. Taylor, the boss of US Steel, expressed his alarm at ‘the folly of the speculative frenzy’ driving his firm’s share price ever higher, even though US Steel significantly benefited from it. Responsible bankers like Paul Warburg were worried too. He was a partner in the august firm of Kuhn, Loeb, a specialist securities house that had helped bankroll the development of the railroads. In a remarkably prescient speech in March 1929, Warburg tried to talk the market down: ‘If orgies of unrestrained speculation are permitted to spread too far, the ultimate collapse is certainly not only to affect the speculators themselves, but to bring about a general depression involving the entire country.’

Almost nobody was listening. As the firm’s distinguished elder partner Otto Kahn, a cultivated banker who had emigrated to America from Germany forty years earlier, would later observe, ‘The public was determined that every piece of paper would be worth tomorrow twice what it was today.’ Although Kuhn, Loeb behaved with high professionalism during the sharemarket boom, it did little good to the partners’ reputations after the boom collapsed. Lumped into an all-embracing category of ‘international money lenders’, bankers of German origin such as the Kahns, the Warburgs and others would be vilified as ‘money Jews’ and be given much of the blame.

Several historians of the Crash, especially those writing in the 1960s and 1970s, firmly believed that the market first started to become unhinged from reality in Coolidge’s last full year in office. It was early 1928, as distinguished economist John Kenneth Galbraith famously observed in The Great Crash of 1929, a bible of the event, that ‘the mass escape into make-believe, so much a part of the true speculative orgy, started in earnest’. Quite suddenly the prevailing sense of euphoria gathered further momentum, swamping the rational investors who had hitherto given the markets much of their legitimacy. By early 1929, the value of the New York Stock Exchange’s index of common stocks had nearly doubled from three years earlier, surpassing even the wildest predictions. In that year new securities worth a cataclysmic $15 billion were issued. A conviction had taken hold that the exchanges and the general economy were inextricably entwined and that ever-rising prosperity was inevitable.

After all, had not Coolidge and Hoover virtually promised exactly that?

OF all the products promoted on the sharemarket, it was the investment trusts that most completely embodied the mounting fever. And yet, created with the sole purpose of investing in other companies, investment trusts did not produce anything; they merely invested in other investments, burrowing deeper and deeper into other trusts, sometimes five to ten layers down. Their success – at least for the promoters — depended on a ready supply of fools to buy the bonds and preferred stock that were thrown out of them, like so much confetti. The attraction of trusts for ordinary investors was the interest and preferred dividends that they paid out. The serious profits, though, were buried in the so-called common stock, which the promoters were careful to retain for themselves.

A typical example was Trading Corporation — a suitably vague name. First launched by Goldman Sachs in 1928, the corporation’s principals — that is, Goldman Sachs — issued new blocks of shares at regular intervals. All were massively oversubscribed, so much so that by mid-1929 the stock was worth more than $220,  and rising. Along the way, Trading Corporation erected ever more companies on top of this shaky foundation, such as Shenandoah with authorised capital of $102.3 million and, bigger and bolder, Blue Ridge with $142 million. The presence of distinguished directors on the board always helped boost the attraction of investment trusts, and in the case of Trading Corporation the star was John Foster Dulles, a later secretary of state. Very soon, Trading Corporation turned into a pyramid of profit. As Galbraith pointed out, Trading Corporation ‘made’ $550 million in nine months without actually producing anything. Apart from the securities in which it dealt, Trading Corporation did not even trade, despite its name.

Goldman Sachs’ lucrative creation had many counterparts, like the impressive-sounding US & Foreign Securities Corporation. Established by investment bank Dillon, Read & Co in the mid-1920s, US & Foreign immediately attracted huge sums for its first preferred stock, non-voting paper that entitled the holder to receive dividends at 6 per cent — on nothing more than a sketchy prospectus. The bank’s founder was the self-made Clarence Dillon, son of a Pole named Lapowski who ran a general store in San Angelo, Texas, but who was shrewd enough to change his name in his adopted country. A banker called Lapowski would never have prospered in a community dominated by long-established American families who sent their sons, future partners in the business, to the best universities from which they emerged as ‘good straight fellows’.

Within a few years, US & Foreign was so profitable that Dillon and his partners floated another trust, the even grander-sounding US & International Securities, over the top of the first one. The public, which so far had gained only a modest cashflow from dividends, rushed to buy $50 million of preferred stock. By 1929, US & Foreign’s ‘common’ had soared to $72 a share. Nobody knew it at the time because it was never disclosed – there was no legal requirement to do so – but the partners’ return on the original investment was now 28,000 per cent. As the price soared, some of them quietly sold their stock and cashed in the gains. As Time magazine would later report, stock costing originally US$24,110 was unloaded for US$6,844,000′.

There was of course nothing to stop the public from cashing in for similar returns, but in general they opted not to do so, convinced that their investment would keep rising. Also, US & Foreign was a good dividend-payer, which helped convince shareholders to stay with the stock. It is though a comment on the expectations of the times that the public was happy to hold an investment that had already delivered fairy-tale returns and could not possibly continue to do so. Nor was US & Foreign’s pyramidal structure considered suspect; everybody was doing it. In the first eight months of 1929, $1 billion worth of investment trusts were sold, two and a half times more than for all of the previous year.

The market was running out of control.

Although investment trusts were not illegal, trickery was being deployed to fool the unsuspecting public. One ruse was the ‘wash sale’ whereby an operator of a pool of stock ‘sold’ a parcel of $40 shares to another party at a price of $41. Next day, or shortly afterwards, the first party bought the stock back at the new higher price. What had happened? ‘The first party banked $41 for $40 shares, and although the second party was temporarily exposed, he got his $41 back next day. By then, both parties were square, no better or worse off than before the trade. However, the public did not know that. All they had seen was a rising share price, making it a stock on the move and therefore one to watch. Another deceit was the ‘matched sale’ whereby one operator sold a stock at $41 under an agreement to buy it back for the same price. Nobody booked a profit, not even a temporary one as in the case of the ‘wash’, but it had the effect of making the stock look busy — another one to watch. The important point was that none of these trades had anything to do with the underlying value of the stock but everything to do with manipulation. Jiggery-pokery was the order of the day.

When Hoover became president in 1929, he began to see all too clearly where this was heading. Nicknamed the ‘great engineer’ for his globe-trotting work in mining, Hoover was fiscally astute, a millionaire before he reached thirty. He urged the Federal Reserve, America’s equivalent of the Bank of England, to take the heat out of the loan market by lifting the discount rate, a move that would have effectively increased interest rates across the nation. And although he may have agreed with his predecessor that ‘the business of America is business’, he was not nearly as confident as Coolidge about its good behaviour. Instead of advising newspaper editors to boost business, as Coolidge had done, he urged them to warn of the perils of this epidemic of speculation. He also instructed a reluctant Andrew Mellon to use his powers to promote the purchase of the much safer, if duller, fixed-interest bonds that offered guaranteed if unspectacular returns compared to overheated stocks. And he dispatched an emissary and friend, Los Angeles banker Henry Robinson, on a mission to urge caution on Wall Street. Naturally enough, one of Robinson’s first ports of call was The House on the Corner, where Jack Morgan’s senior lieutenant, the legendary and also fabulously rich Thomas W. Lamont — he usually commuted to Wall Street by private yacht — had no hesitation in rejecting the new president’s misgivings. As a partner of twenty years’ standing in a business that had long served as an unofficial arm of government — he had repeatedly undertaken missions abroad as a financial emissary — Lamont saw no reason to hide his views.

Wall Street proceeded to frustrate Hoover at every turn. Its bankers controlled the powerful New York branch of the Federal Reserve, meaning they had a significant voice in dictating economic policy. And nor did Wall Street heed an increasingly worried Senate, which in the spring deplored ‘illegitimate and harmful speculation’ and threatened to introduce regulation to prevent it.

Hoover next took on the mighty New York Stock Exchange by warning vice-president Richard Whitney, a pillar of the financial establishment and brother of George, one of J.P. Morgan & Co’s partners, that he might move to regulate the exchange if it did not help to curb the speculative excesses. Given the exchange’s history, this was a serious threat. The NYSE had jealously guarded its total independence since its founding in 1792, repulsing all attempts to change its self-policing constitution, just as it did Hoover’s.

As he tried to cool the markets, the president now found himself dealing with an unofficial conspiracy. For instance, when federal authorities tightened the money supply to try and cool things down, banking czars such as Charles E. Mitchell, head of National City Bank, pumped the money back in by authorising his officers to make available an extra $100 million in loans. In his own way, Mitchell — ‘Billion Dollar Charlie’ — was as big a figure as Jack Morgan. National City was the biggest retail bank in America, easily the biggest in New York with branches in London, Amsterdam, Geneva and Berlin. Unlike private banks like J. P. Morgan & Co, it handled enormous volumes of common stocks at the height of the boom. And equipped with a fast-talking sales team, National City peddled bonds like so many betting slips to gullible investors all over America.

One confused customer, Edgar J. Brown, would later testify to a full-scale federal inquiry that, instead of putting his money into the solid US government he had specified, a National City representative invested it into a ragbag of bonds issued by Austria, Germany, Greece, Peru, Chile, Hungary and even poverty-stricken Ireland. When these bonds predictably declined in value, National City loaned him $15,000 and urged him to invest his new-found borrowings in stocks. He did so, but as losses mounted a furious Brown marched into a National City branch in Los Angeles and demanded that his entire portfolio be cashed in before the bank lost all his money. He was however persuaded once again that the investments would recover so he walked out, leaving his money with this duplicitous institution.

National City’s salesmen could, it seems, sell just about anything. As the subsequent inquiry would establish, the salesmen once issued $16.5 million worth of bonds on behalf of the Brazilian state of Minas Gerais, an infamously delinquent borrower. But somehow the salesmen were able, straight-faced, to market the bonds with the following line: ‘Prudent and careful administration of the state’s finances has been characteristic with successive administrations in Minas Gerais.’ By the time the Minas Gerais business was finished, National City, other banks and retailers had booked a combined profit of $600,000 while the public had lost about $13 million.

In a market where practically any piece of paper was quickly worth more than its issue price, National City next latched on to Peru, another notoriously bad debtor. After dipping its toe in the water by floating a $15 million issue with gratifying ease, the bank waded in deeper with a $50 million issue, having first secured the business through the payment of a $450,000 ‘fee’ paid into the account of the president’s son, and followed that with a third issue for $25 million. In short order, all three issues would collapse into default. Unconstrained by any official obligation to inform the investing public of the risks of these or any other investments — after all, the New York Stock Exchange established its own rules — National City’s promotional literature was a masterpiece of deceit. It failed to mention political risks, prior lapses in repayments, or anything else that might be interpreted as rendering the investment hazardous. And when the literature finally proved to be a tissue of lies and investors lost their shirts, those losses were not disclosed lest the news affect the bank’s share price. For instance, National City bit its lip after the collapse of $30 million in loans to Cuban sugar companies. As a direct and intended consequence of this deliberately opaque policy, the bank’s stock rose stupendously. Issued at a par value of $100, the shares were worth the equivalent of $2925 in mid-1929 – and that was after a five for one split.

There were many gullible investors like Edgar J. Brown who borrowed money to invest. The result was that by mid-1929 the sharemarkets were riding a debt-fuelled boom. It was common for brokers to lend even small investors more than two thirds of the face value of shares, as though they were buying houses. Why wouldn’t they? As General Motors’ John Raskob had written, prosperity was pouring all over America and the sharemarket was its fount. Most of this debt was ‘call money’ — payable on demand — and their lenders did not hesitate to call it on those few occasions when the sharemarket, or individual stocks, declined in value, albeit briefly, before staging a rally. And if the value of a borrower’s investments fell below agreed levels relative to the amount of money on loan, he was subject to a margin call that generally required him to borrow more money to restore the agreed ratios.

As the amount of debt grew, one of the most nervous categories of people in America were bank managers. The song ‘A Tale of a Ticker’ said it all:

We’ll have to have more margin now,

There isn’t any doubt.

So you better dash with a load of cash

Or we’ll have to sell you out.

The lyrics were hardly an exaggeration. In 1929 alone, Americans borrowed on margin some $9 billion. In favourable circumstances, borrowing on margin could prove highly profitable. If the stock rose in value, the investor did better than those who had not used debt to make the investment. For example, if a $100 stock doubled in value to $200 over a period of, say, eighteen months — which was by no means unusual — anybody who had bought it for $25 cash and $75 debt would have increased their original investment by five times. That is, $125 before brokerage fees and interest payments. Of course, the reverse applied too. If the stock halved in value, the original investment was wiped out and the shareholder still owed $75. (The brokers who loaned the money were not as reckless as their clients. Most of them limited the loans to half of the stock price, not the 90 per cent that is routinely cited. All the major brokerage firms would survive the Crash.)

By the autumn of 1929, just like Walter Chrysler’s skyscraper which was rising at the tremendous rate of four storeys a week, the stockmarket was heading for the clouds.