I stayed up late on it last night and hit it again today. I have some good stuff, and wonder if anyone would be interested in a blog post of some points:
- First stewardess was in 1930...they had to be nurses.
- Industrial output measure fell from 126 in 1929 to 56 in 1933.
- Roosevelt was shot at in Miami on February 15, 1933...about a month before the inauguration.
- Many school kids hadn't had milk for months or years by 1933, and Chicago didn't pay teachers for more than a year.
More than 6 million people were 65 or older in 1929, yet no social supports existed for them at all. If they didn’t have family and they couldn’t work, they truly were at the mercy of the elements. Most people were in the same situation, as historian Howard Zinn tells us in The Twentieth Century:
“But prosperity was concentrated at the top. While from 1922 to 1929 real wages in manufacturing went up per capital 1.4 percent a year, the holders of common stocks gained 16.4 percent a year. Six million families (42 percent of the total) made less than $1,000 a year. One-tenth of 1 percent of the families at the top received as much income as 42 percent of the families at the bottom, according to a report of the Brookings Institution. Every year in the 1920s, about 25,000 workers were killed on the job and 100,000 permanently disabled. Two million people in New York City lived in tenements condemned as firetraps.” (p 106)
Only 1% of Americans were buying and selling stocks before the crash. The problem was that beginning in 1928, more and more of those people were buying not because of a company’s value, but because they were speculating, that is, expecting that someone would always be willing to buy that stock, no matter what its value. Worse, people began buying ‘on margin,’ or with borrowed money.
The country’s rich exacerbated problems by going along with the “Mellon Plan” put forth by Secretary of the Treasury Andrew Mellon. This became the Revenue Act of 1924, which by all appearances seemed to reduce income taxes for everyone. In truth, however, the Act lowered the top income bracket’s tax rate from 50% to 25% while the country’s lowest income earners would see their rate fall from 4% to 3%. Congressman William P. Connery of Massachusetts pointed out that Secretary Mellon would see his taxes fall by $600,000 a year under the Act, and voted against it. Many others voted for it, and the bill passed and was signed into law.
Holding companies first arose as a way for larger companies to expand further, and without any fear of government regulation, oversight, or accountability. The real benefit, however, was that they could sell stock while still retaining ownership and control of a company. Electrical utilities were the preferred routes for holding companies, as they allowed the owners to continually expand without suffering any costs to themselves, only profits. It was a true pyramid scheme, and perfectly legal. By 1929, just ten holding companies controlled 72% of the nation’s power-generating capacity. (p 17)
The men that encouraged such irrational exuberance in the market were bankers. One man in particular can get the lion’s share of the blame, and that was Charles Mitchell.
Charles Mitchell was the banker most responsible for ruining the lives of millions, if not billions around the world, during the Great Depression. He’d become president of National City Bank in 1921. It’d boasted four offices that year but by 1924 it had fifty. By 1929 National City distributed more securities throughout the world than any other bank, and had “one branches in twenty-three countries,” according to journalist Nomi Prins in her book All the President’s Bankers. By 1929 Mitchell was chairman of the bank and pulled in $1.2 million in compensation, “two hundred times the average American’s salary of $6,000.” (p 92-3)
Banker Charles Mitchell didn’t like the early tremors in the market that year. “When the market wobbled in early March 1929, the great bamboozler got scared,” Prins writes. On March 26 he injected $25 million of his bank’s money into the market, with the promise that $5 million more would come if need be. “Though not with his personal money,” Prins writes, “Mitchell nearly single-handedly kept the party raging.” (p 94)
Senator Carter Glass of Virginia called for Mitchell to resign, but he shrugged that off. He’d driven the market to new heights, after all, and his bank’s stock as well. Just like J.P. Morgan had done in 1907 when panic was at Wall Street’s door, Mitchell had come in on his white horse and shown everyone that gloom and doom could wait yet another day. Of course, Mitchell had other things on his mind as well, like creating the largest bank the world had ever seen, as Prins explains:
“He sought to merge National City Bank with the Corn Exchange Bank Trust Company and establish the world’s largest bank. In the deal, National City shares would be used to buy Corn Exchange shares, for which Mitchell had to maintain a price of $450 per share.”
It was a house of cards, and built upon speculation and worthless stocks. The real winners of 1929 began to get out on September 3, when “stocks reached an all-time high.” Thursday, September 5, saw a sharp drop, and anyone caught using the word ‘crash’ was frowned upon. ‘Recession’ was much more preferred, and everyone set in for a drop in prices. That drop came, slow and steady all throughout September and into October. By the middle of the month stocks had been falling for seven straight weeks. Then on Thursday, October 24, the piper came to call.
Things started off as they had, with prices falling. It quickly became clear shortly after the opening bell, however, that they were falling faster than they had during the previous seven weeks. By 11:30 AM “panic reigned” and by 12:30 PM “officials closed the visitor’s gallery” to the New York Stock Exchange. A shocked and bemused Winston Churchill stood by, taking it all in, and no doubt hoping the same level of panic wouldn’t spread to his native Britain. As the former British Chancellor of the Exchequer, however, he likely knew that it would.
Most that day knew not a thing, other than that something was going horribly wrong. One who knew that was J.P. Morgan, and like he’d done during the Panic of 1907, he quickly called together the leading bankers for a meeting. It was agreed that these leading bankers would buy shares at above market prices, forestalling the panic, at least for that day. Everyone went home for the weekend, and worry outgrew confidence. That Monday more sell-offs occurred, but this time the leading bankers didn’t step in with their high-priced buys. This time the market was allowed to function normally, and it was disastrous.
The meltdown occurred on Tuesday, October 29 – Black Tuesday. A record 16.4 million shares were traded that day. On October 30 the New York Times estimated that between $8 billion and $9 billion was lost. Westinghouse stock had fallen from 286 points in September to 100 by the end of trading on October 29. Goldman Sachs, a huge friend and benefactor to the trusts, went from 65 to 35 points.
The income tax cuts that President Hoover tried in an effort to stem the economic woes were a complete joke. “A man with an income of $4,000 a year,” Boardman writes, “had his tax cut from $5.36 to $1.88.” Hoover might have given the working man enough money for a few extra meals, but he’d also given the country no reason to get better. (p 24)
Franklin D. Roosevelt had been elected governor of New York in 1928 with 25,000 more votes than his opponent, or 1% of the vote. During his tenure he showed initiative where the federal government showed none, using state funds to stem the tide of misery and discontent. Whereas the feds balked at giving taxpayer handouts, Roosevelt embraced the strategy.
In 1930 he won his second two-year-term as New York governor, this time with 700,000 more votes than his opponent. The writing was on the wall – Americans wanted help and expected it. Those that gave it would be rewarded, those that held back would be punished. For Republicans in America, it appeared as though 1932 would be a punishing year indeed. (p 38)
Boardman, Fon W. Jr. The Thirties: American and the Great Depression. Henry Z. Walck, Inc.: New York, 1967.
Prins, Nomi. All the President’s Bankers: The Hidden Alliances that Drive American Power. Nation Books: New York, 2014.
Zinn, Howard. The Twentieth Century: A People’s History. Harper Perennial: New York, 1980.