The Stock Market: Effects of the Crash

THE STOCK MARKET: EFFECTS OF THE CRASH

Improvements

The weeks following the crash were surprisingly quiet. After the tumult died down, brokers directed their efforts to cleaning up the debris and bringing records up to date. To their surprise things looked better in many ways than they had expected. Although huge blocks of stock had been thrown onto the market willy-nilly, much of this stock was perfectly sound. It had been driven upward to artificially high levels by the bull market, and now it was artificially depressed by panic selling. When John D. Rockefeller Sr. announced that he and his sons were buying good common stocks, there were shouts of derision, and comedian Eddie Cantor responded, "Sure, who else has any money?"

Bargains and Wariness

But Rockefeller was right. Bargains were available, and although it might take weeks or months, the sound issues would rise. GM, RCA, U.S. Steel, and Pennsylvania Railroad, for example, were all still in business and their plants intact. Knowledgeable traders who had cash—Joseph P. Kennedy and Bernard Baruch, for example—were back in the market shopping carefully and picking up bargains. Yet they were in the minority. Many small speculators were not in any position to buy much at this point. Many were demoralized and for the rest of their lives refrained from any speculative activity or even credit transactions, such as borrowing money or taking out a mortgage on real estate.

Other Americans

Yet in the wake of the crash, the world west of the Hudson River was still there and still working. As strange as it may have seemed to the Wall Streeters, there were millions of Americans who cared not a whit for the stock market, who had never owned stocks and had no intention of ever doing so. Most of them had no market contacts and knew no one who had, and since most of them had incomes of less than $1,200 per year, they barely made ends meet, much less had funds to invest.

Apparent Calm

So far as they could see the crash of the market had no impact on them at all. They still had jobs. In most cases their bank accounts were sound, though there were exceptions. Some Michigan banks failed through overinvolvement in the auto industry, and some southern banks had suffered terrible losses in the call-money market, but relatively few banks closed their doors. Bank closings would not escalate until 1932. Moreover, stores and factories were still open and functioning. The big fuss seemed to involve only some rich folks in the East. In coffee shops and barbershops across the land, conversations were more apt to center around the snappy new 1929 Chevrolet, GM's answer to the Ford Model A, and speculation about what Plymouth would think up in response.

IMMORTALITY FOR SALE

Joseph Duveen (1869-1939), who has been called the greatest salesman of his day, was an emblematic figure of the 1920s. Born in London to a large family of art dealers, Duveen (later Lord Duveen) was sent as a young man to New York to serve under his uncle, who headed the U.S. office of Duveen Brothers. For the next fifty years Joseph Duveen dominated the U.S. art market and had as his customers such tycoons as E. T. Stotesbury, William Randolph Hearst, S. H. Kress, Henry Goldman, Henry E. Huntington, and Andrew Mellon.

Duveen convinced the American millionaires that through the accumulation of fine art they could rise from the grubby world of trade and gain immortality by passing on their collections to posterity. He also convinced most of them that great art was available only from his firm and took it upon himself to tutor them in the more esoteric aspects of art collecting. He was a master salesman. Leaders of finance and industry lined up for the privilege of being his customers and, incidentally, for the right to pay the highest prices in the art world.

Duveen was instrumental in helping Huntington build his art collection for the world-famous Huntington Gallery and Library and was a principal influence on Mellon as he established the National Gallery of Art, to which Kress, under Duveen's counsel, added his own huge collection. As his biographer said, Duveen spent his career moving great art to the United States and American millionaires' fortunes to Europe.

Source:

S. N. Behrman, Duveen (New York: Random House, 1952).

Hoover

For the most part, ordinary Americans looked forward to the new decade with confidence in the economy. Herbert Hoover had been elected in 1928 by a margin of seven million votes, and so far things looked very good, indeed. Hoover was an engineer. He enjoyed a good reputation as an administrator and, since he had been food administrator under President Wilson, as a humanitarian. He was not a professional politician. He seemed to belong to the industrial scene of the decade: the spotless plants of the Ford Motor Company and the modern technology of the radio and aircraft industries. Hoover had lived in London for years and knew all about international finance; he was wealthy by his own efforts. Born on the Iowa frontier in the 1870s, he was a Stanford graduate. The stock market aside, the decade had been good for the business community. Farmers were still not prosperous, but that was nothing new.

Transition

With the war a decade behind them, most Americans seemed to regard the 1920s as a transition period from war to full peace. Perhaps the 1930s would be a bit more organized and the new industries that had come on the scene fully integrated into the social and economic fabric.

Building and Industrial Expansion

Prosperity was still the order of the day. Hoover had taken office some eight months earlier, and so far the collapse of the market had almost no impact on building and on the future plans for industrial expansion. Hotels and office buildings were still under construction or on the drawing board. The Empire State Building, then the tallest structure in the world at 102 stories, was well underway. The aircraft, motor carrier, and radio industries were under development, and magazines were already speculating about something called television.

Transportation

Pullman traffic was at a high level, much of it business-related. In 1926 the New York Central had refurbished the Twentieth-Century Limited and assigned the famous Hudson-type locomotives to the train running on a sixteen-hour schedule between Chicago and New York. In 1926 the Central had transported more Pullman passengers than any other railroad, and the Century had grossed $10 million. Its archrival, the Pennsylvania Railroad, had achieved similar results with the Broadway Limited.

Deluxe Cars

High-priced automobiles were in great demand. Packard was doing well, as were Cadillac and Lincoln. Even more expensive makes—the Duesenberg, the Stutz, and the Pierce-Arrow—sold in respectable numbers. In fact, some new high-priced cars—the Willys Saint Claire and the Stearns-Knight—had recently been put on the market. The dealerships that sold these cars were palatial, the showrooms resembling lobbies in expensive hotels, with marble floors, mirrors, and potted palms. Except for Florida, where the bubble had burst in 1926, real estate was doing generally well. California—Los Angeles in particular—was booming.

A Rosy Future

Despite some isolated setbacks, the future of the economy seemed secure. The stock-market crash had been widely publicized—far too much, most people felt. Surely the new decade would be better. Certainly everyone said so.

Sources:

Karl Brunner, ed., The Great Depression Revisited (Boston: Martinus Nijhoff, 1981);

George Soule, Prosperity Decade: From War to Depression, 1917-1929 (New York: Rinehart, 1947).