At high noon on Black Thursday, October 24, 1929, all eyes on Wall Street were turned imploringly to the House of Morgan. Inside the massive white building on the corner of Wall and Broad, the "Big Six"-six leading Wall Street bankers-were trying to work out a way to save the great bull market of the twenties. It was crumbling around them: by 11 a.m. that day some $9 billion had been knocked off the value of shares. Reporter Kenneth Campbell described the traders on the floor: "It was as though the bear had become a living, visible thing. Some stood with feet apart and shoulders hunched forward as though to brace themselves against the gusts of selling orders which drove them about the floor like autumn leaves in a gale." Great crowds surged up and down the street. The Stock Exchange gallery was closed to prevent a riot by hysterical investors.
The bankers at the House of Morgan were meeting coincidentally on the twenty-second anniversary of the memorable occasion when J.P. Senior had convened a similar group to stop the 1907 panic. Things looked as hopeful in 1929. When the bankers reemerged, led by a jaunty Charles Mitchell, president of the National City Bank, then the largest in the country, the cry rang out: "It's going to be all right!" A few minutes later Richard Whitney, vice president of the Exchange, walked up to Trading Post Number Two with a broad smile and bought 10,000 shares of U.S. Steel. He went around the floor, and spent $20 million buying 200,000 shares. The Big Six had pooled their assets to save the market. The Exchange rallied in the last two hours of trading, cutting losses on the day to $3 billion.
The next day President Hoover publicly reaffirmed the soundness of the economy and the market held steady on Friday and Saturday.
It was the last hurrah of old-fashioned, laissez-faire capitalism. The stock market, trading in a billion shares by 1929 and wildly overvalued, had moved beyond the control of any small group of bankers. On Monday, stocks plunged from the opening bell and now many of the truly solid investments were among them. General Electric dropped 48 points; Eastman Kodak, 42; Westinghouse and AT&T, each 34; U.S. Steel, 18. An estimated $10 to $14 billion was lost.
Hopes were raised briefly again when Mitchell was seen entering Morgan's at
1 p.m. He came out smiling, and the market staged a brief rally. Actually, Mitchell had been securing a personal loan to cover his own dubious business practices. The Big Six and their friends had decided to sell quietly, and actually made a profit. Tuesday, October 29, was, in the words of John Kenneth Galbraith, "the most devastating day in the history of the New York stock market and it may have been the most devastating day in the history of markets." Some 650,000 shares of U.S. Steel were sold in the first three minutes. Before the day was over more than 16.4 million shares had changed hands, a record that would stand until 1968. Some $32 billion had been lost.
The public turned on the former titans of Wall Street with a wrath that would last throughout the next decade. It was not unfounded. The crash found Charles Mitchell in the midst of trying to drive up his bank's stock by surreptitiously buying large amounts of it. He then tried to recoup by selling stocks he did not own to his wife, then writing it off as a tax loss. It also came out that he had loaned over $2.4 million of stockholders' money to his fellow bank officers without bothering to secure either collateral or interest. He was indicted for tax evasion by an up-and-coming young prosecutor named Thomas Dewey. He beat the rap but agreed to pay over $1 million in back taxes.
Richard Whitney, one of the other "saviors of the market," eventually went to prison for three years. He ran out of money investing in peat humus, mineral colloids and applejack liquor, so he invested about a million dollars by stealing bonds from the New York Yacht Club, Harvard, St. Paul's School-and some $667,000 from the Stock Exchange Gratuity Fund, set up for the widows and families of dead brokers. At Sing-Sing his fellow convicts treated him like a gentleman. They always let him get a hit in prison baseball games.
THE DEATH OF THE BANKER by Ron Chernow
TITAN: The Life of John D. Rockefeller, Sr.
by Ron Chernow