← History That Doesn't Suck
Loading summary
Transcript1 lines
- [00:01]
Greg Jackson
This episode is brought to you by US Cellular. Don't sacrifice a great experience for a great deal. Now with US Cellular Prepaid, you'll get a new Samsung Galaxy A15.5G free without the hidden fees you get with other prepaid providers so you can use US Cellular's nationwide 5G coverage without sacrificing anything. Terms apply. Visit US Cellular.com for details. Empower your business or digital agency with Bluehost. Trusted by over 5 million WordPress users globally, Bluehost features top hosting optimizations designed specifically for WordPress, giving you 24. 7 access to a team of experts for support, plus thousands of WordPress help articles. So if you want to streamline WordPress website creation with intuitive controls and premium support, choose Bluehost. Powering over 2 million websites worldwide. Hey history fans, if you're listening to this podcast, then you'll love Airwave History Plus. Now available on Apple Podcasts. Airwave History plus is your ticket to ad free listening bonus content and early episodes from dozens of the most popular history podcasts, including the Explorers American Revolution Podcast, the history of World War II, the American plodding through the Presidents, the history of Egypt, the Age of Napoleon, My History can beat up your politics and more. For your free trial, search Airwave History plus on Apple Podcasts and hit subscribe. That's Airwave History plus, available now on Apple Podcasts. Airwave History plus the essential audio destination for history lovers, History that Doesn't Suck is a biweekly podcast delivering a legit, seriously researched, hard hitting survey of American history through entertaining stories. If you'd like to support HTDS or enjoy bonus content, please consider joining our Premium membership at htdspodcast.com membership it's 10:50 in the morning, Thursday, October 24, 1929, and Pat Bologna is but one of an endless mass of people pressing into the overcrowded customers room at the New York Stock Exchange. The market has been struggling all morning, but in the last half hour stocks have simply plummeted. And like so many others, that's got Pat terrified. The young, short and stocky Italian American has $5,000 in the market. 5,000 laboriously earned spit polishing wealthy banker's shoes rushing here from his nearby shoeshine station. He hoped to get some help, but this place is packed with elbowing, consternated people, including a cigar smoking Chinese man who catches his eye. Pat's gaze soon shifts, though, to a woman with her arms stretched above the sea of strangers. Her hat's elaborate and enormous, but the shoeshine can see the wedding ring glimmering in her tight grip, she thrusts it toward the clerks at the glass booth, shouting, you want more margin? You can't have more margin. The crowd's agitation is growing. The young boy working the quotation board is terrified. Pat hears a man grumble, that son of a bitch has sold me out. Taking a deep breath, Pat reflects on what Charlie Mitchell told him once during a shine. A wise man never sells. At the first sign of trouble, that's for the pikers. Surely the National City bank chairman is right. Newly resolved to hold, Pat turns and pushes his way back out of the suffocating room. Okay, timeout. Let's get some brief background on what's going on today at the New York Stock Exchange. Through Most of the 1920s, the American economy has been booming, and investing in the nation's increasingly productive companies made sense up until the last year or two. That's when the market indisputably started to bubble. There's more than one reason for that, and we'll get to those later. But the issue at play today is a call on stock investments bought and I quote, on the margin. This is when an investor buys stocks with only a down payment, typically around 25 to 50% in the 1920s, but sometimes as low as 10%. It's a loan, really, one based on the assumption that the stock's value will quickly rise and cover the difference while enriching the investor. Sounds risky. Yet over half a million people invested in the New York stock market are trusting these on the margin stocks. And to be fair, they've worked like a charm, as the Dow Jones industrial average has effectively doubled in the last two years. In fact, just last month, September 1929, it hit a staggering new high, exceeding 380. But for reasons that again, we'll get to later, things began to cool after that. The decline got sharper about a week ago, and now brokers have to call for cash in under margin investment accounts. Ah, that explains the woman screaming about more margin while holding out her expensive wedding ring, likely indicating that she has nothing more of value for her suddenly upside down account. I wonder if she's as overleveraged as shoeshine pat Bologna, whose $5,000 in life savings is exclusively in on the margin stocks. Good God, how many other Americans are about to go from expectant millionaires to indebted paupers. Something has to be done. It's now early in the afternoon on this overcast, cool and so far cataclysmic Thursday. National Citibank Chairman Charlie Mitchell has just entered America's four story Tennessee marble temple to capitalism. The house of Morgan at 23 Wall street the sound of his Pat Bologna shined shoes echo as the famed banker walks down the hall. Morgan employees note his haggard coatless look. Understandable though for nearly the past hour the market's been in a complete freefall with only sellers, no buyers. Charlie is followed by Chase National Bank's Albert Wigan, the Guaranty Trust Company's William Potter, the Bankers Trust Company's Seward Prosser and the Federal Reserve bank of New York's George Harrison. They all head into the office of Morgan's senior partner Thomas L. Lamont. We don't know what is said, but within 20 minutes the men have a large pool of cash. At least 20 million but rumored to be as much as 240 million. To steady the market and restore confidence. Banking legend JP Morgan and his colleagues did the same exactly 22 years ago to the day. Saving the nation from the worst of the panic of 1907. And now this group of bankers is entrusting Morgan Broeker and stock market Vice president Richard Whitney with their pooled funds, hoping the strategy will work again. It's now 1:30 in the afternoon. We're at 18 Broad street just inside the New York Stock Exchange's famous marble facade on the main trading floor. Over $11 billion in market value has simply evaporated. And despite constantly spitting stock price quoting tape, the overtaxed ticker tape machines are two hours behind real time. The floor's hundreds of brokers appear to use the era's Great War parlance, shell shocked. This is the state of affairs as stock market VP Richard Whitney walks in. It will later be said that he's running. Not true. Richard, or Dick as his friends know him, would never violate the exchange's rules forbidding running. The simple sight of this tall, towering, handsomely husky 41 year old man with flecks of gray in his otherwise jet black hair brings all trading to a halt. As everyone waits to see what the powerful VP will do, Dick walks to post two. That's where US Steel is traded. He asks for the latest bid on this all important stock. It's 195. In his official capacity as a Morgan broker, Dick loudly calls out for everyone to hear 10,000 at 205. Cheers and applause ring out as Dick swaggers along the floor buying up other crucial stocks. His infectious confidence and millions of dollars in stock purchases stop the plunging market. After having fallen from 305 to 272 the Dow Jones manages to close the day at a mitigated 2% loss of 299. But it's not enough. Some Americans are already ruined. A few suicides and attempted suicides happen that same day. And by early next week, it will become clear that this shot of confidence was merely delaying the inevitable. A crash is coming, and it will mark the beginning of an era of economic devastation unlike any the United States or the world has ever seen. Welcome to history that doesn't suck. I'm your professor, Greg Jackson, and I'd like to tell you a story. Allow me to draw a clear delineation. This is the story of the stock market crash of 1929, not the story of the Great Depression. The crash will open the door to the Depression, true, but it is neither the Depression's single cause nor the reason for its over a decade duration. So today we will not go more than a few days past where this episode began in late October 1929. But in our quest to understand this crash, we will certainly go further back. Our tale begins in the 17th century as we figure out what stock markets are and how they came to the United States. Basically their origins. But we'll hurry past the colonial era to trace two histories from the 1790s back to the 1920s. One, the history of the New York Stock Exchange, and two, the history of US financial institutions, regulations and monetary policy. I promise it's more exciting than that sounds. I mean, who doesn't want to follow the path from Alexander Hamilton to the Fed? That's good times right there. We'll then let that fiscal history simmer in our minds as we meet our next president, Herbert Hoover, or just Bert, as some friends call him. We need to understand why 1920s Americans adore this man and want him to be president. Yes, before he became reviled for his presidency, he was beloved and a hero, known as the Great Humanitarian. And we'll figure out why. But then we return to the crash. We'll get into the nitty gritty on the various causes historians have attributed to this apocalypse on Wall street and see how it destroys the hopes and dreams of average American investors like our soon to be friend, Greek immigrant, Great War vet and restaurateur, George Mahales. And with that, let's begin investing our time in the tale of the crash by getting colonial rewind. So what is a stock exchange? In simplest terms, it's a market for buying and selling securities. There are different types of securities, but we'll just note two here. First, stocks, which are shares of ownership in a company. And second, bonds, which are debt, be that a company's or a government's. The idea to trade and barter shares of ownership and debt starts with the Dutch. In 1611, Amsterdam creates the first stock market and almost immediately introduces tactics that savvy traders will use for centuries. Like short selling, the stock market is a powerful tool for getting a piece of a big enterprise without taking all of the risk. In fact, that's exactly the model. As this market starts selling shares of the Dutch East India Company, the English take a small step in that direction. At the end of the century, as Jonathan's Coffee House in London begins listing the price of stocks as well as commodities that is valuable and tangible or raw goods in 1698, France follows suit with la Bourse de Paris in 1724. So the idea of a stock market is older than 12 of the 13 colonies. But how does it come to America? Not to negate the trading of securities in the colonial era, which is a thing. But more formalized stock markets only emerge after the ratification of the US Constitution. As Treasury Secretary Alexander Hamilton's federally focused financial plan comes into Play. Revisit episode 16 if you want details. But briefly, Congress asks Alex in 1789 what to do about its crushing Revolutionary war debt. And the Caribbean born founding father answers with his report on public credit. In it he proposes that the federal government one, assume the 25 million in debt carried by the various states, thereby bringing the national debt to a total of 79 million. And two pay off foreign loans, but fund the far larger domestic portion with non callable bonds. Ah, bonds that sellable debt we just defined. Yes, Alex wants to sell the federal government's debt, Congress bites and these bonds kick off a new era of trading. Philadelphia's decades old securities market evolves into the nation's first official stock market in 1790. New York isn't far behind. Not that it has much of a choice. Something has to be done to curb the city's shady dealings. It's an unspecified time of day, May 17, 1792. A group of 22 men have gathered at that ancient New York City road, named for the defensive barrier that it displaced. Yes, they're on Wall street, possibly at the Quarries Hotel, Perhaps deep in their pints, but most certainly deep in conversation about two recent financial problems. You know what? Let's grab some pints ourselves and I'll fill you in. The first issue is that their current securities trading system of a twice daily auction, generally held at a coffee house or under The Buttonwood Tree near 68, Wall street is no longer viable. State legislators are so sick of auctioneers rigging prices, they've banned the auctioning of New York securities. Ouch. So they need a new system. The second issue is William Dewars becoming the nation's first insider trader. We touched on his story in episode 19. But in brief, this speculating gambling public servant moved to corner the market on government bonds and shares of the newly created bank of New York and the equally new bank of the United States. In doing so, he landed himself in debtors prison and helped cause an economic panic. Treasury Secretary Alexander Hamilton capably navigated this panic of 1792 by quietly having the treasury buy back underpriced government bonds. But between banned auctions and Williams actions making securities traders look like scoundrels, these traders need a new method. Hence this meeting. Soon they've got it. Rather than auction securities, they'll use fixed commission rates on each sale. They'll also give preferential treatment to traders agreeing to these terms. They write up a contract to this effect which reads in part, we the subscribers, brokers for the purchase and sale of public stocks do hereby solemnly promise that we will not buy or sell at a less rate than 1/4 of 1% commission on the specie value and that we will give preference to each other in our negotiations. All 22 men present sign it. Allegedly they do so at their go to outdoor place of business at 68 Wall Street's shade providing buttonwood tree. Two more brokers add their signatures that November, bringing the total number of signatories to 24. This contract will later be known as the Buttonwood Agreement. This auction ending and commission inaugurating Buttonwood Agreement of 1792 does indeed professionalize New York securities trading a bit. The two dozen gents who sign it also pool funds to buy a lot on the corner of Wall and Water streets where the soon established Tontine Coffee House becomes their new place for trading. This will evolve into the future New York Stock Exchange. Well, according to legend and lore, it will. But is that really the case? Historian Peter Eisenstadt rejects this claim, pointing out that New York's stock and Exchange board publications date the exchange to 1817. Hmm, sounds like the New Yorkers of yester century felt their stock market really began with the stock and exchange boards founding on March 8, 1817. This is after all, the organization that renames itself the New York stock Exchange, or NYSE for short in 1863. That's right, NYSE, not nicey. So which origin claim is right? I guess you'll just have to decide that one for yourself. More important than the New York Stock Exchange's birthday, though, is the unsavory reputation and secrecy of the Big Apple's early traders. The Buttonwood Agreement illustrates this as the contract is drawn up in the wake of scandal. As for the secrecy bit, that's baked into the Buttonwood Agreement too, as it creates a select group privy to the agreement's commission rate and promised a first crack at deals. In other words, it's made an in group. Ill reputations and secrecy followed the New York Stock Exchange into the next century. Many early 19th century Americans consider securities trading little more than gambling. Brokers fire back brilliantly saying it's no worse than gambling on horses. Ah, and as we know from episode 167, Americans of this generation wouldn't dream of messing with horse racing. But given that reputation, it's little wonder that board members are reclusive and maintain the privacy of the city's small group of traders, which only numbers about 100 by the start of the Civil War. Indeed, historian Henry Hammond describes the mid 19th century New York Stock Exchange as a time when its sessions were invariably secret and its members regarded it as a point of honor not to reveal the names of buyers and sellers, the transactions not being recognized by law. But this small scale, highly selective exchange is thrust into the spotlight in the 1860s as the railroad industry explodes under Civil war needs to illustrate this, let's point out that in the 1840s New York traders exchanged about 1.2 million shares per year, while in 1865 alone they exchanged 9 million shares. Meanwhile, that pre war trader headcount of 100 has blown past 1000. In 1886, New York exchanges over a million shares in a single day for the first time, while names like Vanderbilt, Roosevelt, Gould and Morgan are now emblazoned on New York City's financial scene. Yeah, we are well past trading and coffee houses, and on April 22, 1903, big shots like John Pierpont Morgan celebrate the dedication of the exchange's new colonnaded marble home at 18 Broad Street. Future expansions soon stretched the NYSE's structure north to Wall street, thus making it officially kiddie corner to Federal hall. And when JP's House of Morgan appears on the opposite corner at 23 Wall street in 1914, we have our third and final of the iconic buildings, all facing each other at the intersection of Broad and Wall streets. This will remain the NYSE's home through the 20th and right into the 21st century. Okay, so we defined the stock market and followed the NYSE from its humble genesis to its powerful place in the early 20th century. But for all the exchange's bullish expansion and the robust growth it brings, the bear still frequently claws down on the nation's economy. From the Revolution to the Great Depression, the United states sees about 40 economic downturns or recessions, or better still, panics, to use the lingo of many a past generation. A few dozen. Too many to detail here, and it would be repetitive since we've covered the big ones in past episodes. Side note, if you're looking for your holiday travel HTDS economic panics playlist, that would be episodes 19, 27, 29, 30, 91, 97, 98, and 127. But these busts between the booms also drive the development of the nation's fiscal policies as the government tries to fix and prevent economic problems. And that is some valuable context for today's tale. So let's explore these developments from the early Republic to the eve of our 1929 stock market crash, the first fiscal crisis we actually touched on just a moment ago. Congress's question in 1789 of how to handle its Revolutionary War debt with great restraint. I will not get into the sordid details of how this launches one of the nation's nastiest political battles between Secretary of the Treasury Alexander Hamilton and Secretary of State Thomas Jefferson. Beyond saying this, while Tom doesn't love Alex's debt assumption idea, he really loses it after the Treasury Secretary delivers his second fiscally advising report to Congress, which calls for a national bank. From a deep seated agrarian distrust of bankers to states rights beliefs, Tom loathes everything about it. He soon emerges as the leader of a political party, the Democratic Republicans, in a fight to take down Alex and his supporters, the Federalists. Well, despite Tom's lamentations, Congress does charter the bank of the United States in 1791. Only 20% owned by the government, it serves government and commercial interests and weathers the panic of 1792 quite well. It isn't technically a central bank, as it is not tasked with managing a national monetary policy, but its actions effectively do so anyhow, cramping the style and power of state banks. Oh, the Democratic Republicans do not like that. Soon coming to dominate Congress, they choose not to re charter the bank of the United States in 1811, but the financial woes of the War of 1812 soon convinced Congress that was a bad idea, and in 1816 the august body backpedals to charter a second bank of the United States. It too becomes a sizable force on the nation's economy, regulating the notes issued by the nation's now 464 state banks. Ah, but it also bears some responsibility for the Panic of 1819 as its western branches extend credit a little too easily. Distrust from this panic, as well as the state's rights arguments against a national bank all contribute to President Andrew Jackson vetoing Congress recharter. Meaning that like Its predecessor, the Second bank of the US is gone after 20 years. The bank's government role ends in 1836. Its disappearance plays a significant role in the panic of 1837 and inaugurates the nation's free banking era of only state banks. But the crisis of war has a way of forcing fiscal measures and the Civil War brings the federal government back into the banking game. The 1863 and 1864 National Bank Acts do not create a third national bank, but invite state banks to apply for federal charters. These federal banks then buy government bonds and receive treasury notes, thereby creating a national currency soon nicknamed for its color as greenbacks. Further national bank acts imposed taxes on state banks to incentivize federalization. But even then, state banks continue to outnumber national banks in the years ahead. Meanwhile, ceilings and limitations on total notes in circulation limit the ability of national banks to pivot amid financial crises like the infamous panics of 1873 and 1893. But the failures of this government bond, tethered and therefore artificially inelastic national currency, become most apparent in the panic of 1907. Why is that? Because the inelasticity and shortage of US dollars is effectively the cause of the panic. Ah, that being the case, no wonder JP Morgan Morgan and his fellow Finance Bros. Are able to save the day by funding the situation. The generally healthy economy just needed a little liquidity to wash things down. This and other post panic of 1907 epiphanies help nudge the Progressive era United States to create a central bank or rather a uniquely semi decentralized central banking system. As federalism loving Americans will never except a full on central bank. But with a hand on monetary policy, this one is decidedly more of a central bank than either the first or second banks of the United States and most certainly makes Andrew Jackson roll over in his grave. Naturally I'm referring to the Federal Reserve System or the Fed, which enters the scene in 1913. We covered the Fed's origins in episode 127, but let's note highlights pertinent to today's tale. The Fed has a seven member president appointed board called the Board of Governors. The system itself consists of 12 banks, each serving one of 12 districts, whose territory generally includes a couple of states. Meanwhile, local banks must deposit 6% of their assets in their region's Federal Reserve Bank. The reason? So that the Federal Reserve bank can lend it back to them in a pinch, thereby making the Fed's new currency, the Federal Reserve Note, far more elastic than greenbacks were. Now there are wrinkles to iron out, like the nature of the relationship between the board, the banks and the less than enthusiastic world of finance. You'll want to remember those issues. Ahem. Foreshadowing. But notwithstanding the power struggles to come, the nation hopes this new Federal Reserve banking system means more boom and less bust. And it seems that way. Despite panics at the outbreak of and right after the Great War, the United States roars into the 20s with the strongest economy in the world. It's a decade in which the Fed's wagging finger toward the rampant unchecked growth of Wall street is met with a different finger from investors. And that gets us back to the eve of the 1929 crash. But before we go deep on these blackest of NYSE days, we need to get to know the man who will be the president during the disaster and the aftermath that follows. Is he Nero fiddling while Rome burns? Or is he the great humanitarian? Perhaps all we can say for sure is that he's Herbert Hoover and his story begins a few decades back. Rewind this episode is brought to you by LifeLock. The holidays mean more travel, more shopping, more time online and more personal info in places that could expose you to identity theft. That's why LifeLock monitors millions of data points every second. If your identity is stolen, their US based restoration specialist will fix it, guaranteed or your money back. Give more holiday fun and less holiday worry with LifeLock. Save up to 40% your first year. Visit LifeLock.com podcast terms apply what if you could hear your favorite song for the first time again? Introducing the all new reimagine Nissan Kicks with an available Bose Personal plus sound system that uses speakers in the headrest to create a 360 degree listening experience. You've never heard anything like this. Reimagine your music and your drive. Experience the all new reimagined Nissan Kicks for yourself@nissanusa.com today available feature Bose is a registered trademark of the Bose Corporation. The middle child of a Canadian born homemaker and a farmer slash blacksmith, equipment salesman, Herbert Hoover is born on August 10, 1874. In West Branch, Iowa, the young Quaker grows up learning the value of hard work and the pains of loss and loneliness. At just six years old, little Herbert, or Bertie, or Bert, as the child is also called, loses his father, Jesse Hoover, a heart attack. His near penniless mother, Hulda, does what she can for the three kids, but she too dies three years later. Pneumonia. The kids are passed around to relatives. Burt ends up with a less than loving uncle in Oregon who puts him at hard labor for the next six years. The growing boy becomes shy, suspicious and a complete introvert. Though an average poor student in all but men math, Bert really wants to attend the university recently founded by Leland Stanford in Palo Alto, California. He studies hard and squeaks by on the entrance exam. Once there, the newly minted geology major throws himself into college life, earning his tuition by working in the registration office, starting a student laundry, and using his math skills to manage the school's baseball and football teams. So introverted Burt is doing sports, just in more of a moneyball, not on the field sort of way. Most importantly, he meets a young lady in the geology lab whom one classmate describes as, quote, slim and supple as a reed with a wealth of brown hair. This is Lou Henry. The two fall in love, but this young man of trauma and poverty won't start a family until he knows he can provide so more hard work. Before graduating, he spends his summers on geological surveys in Arkansas, California and Nevada. After graduation, he pushes mine carts in a Nevada City, California gold mine. He then works in the office of a San Francisco mine consulting firm. That last one is the ticket. His boss, Lewis Janin, recommends Burt to a British mining firm to evaluate mines in Australia. That's right. The future president is heading to the Land down under. In 1897, Bert Hoover begins examining gold fields in Western Australia's great Victoria Desert, which he calls a country of black flies, red dust and white heat. Yeah, Burt doesn't love it here, but he's making a pretty penny doing it. He even begins anonymously providing scholarships to Stanford students. The expat Stanford man keeps in touch with friends and family, but most especially that beautiful brunette from his lab class, his fellow native Iowan, outdoors enthusiast and lover of geology, Lou Henry. When Herbert gets word that he's being promoted and sent to China, the now fiscally sound geologist sends her a telegram asking, going to China via San Francisco, will you go with me? Lou answers with an enthusiastic one word reply, yes. The Quaker Episcopalian wedding officiated by a Catholic priest takes place in Lou's Family living room on February 10, 1899. The adventures are only just beginning for the Hoovers. Upon arriving in China, they find themselves in the midst of an uprising as the Society of Righteous Harmonious Fists, or the Boxers as they're called in English, carry out a nationalist anti imperialist uprising seeking to push out the heavy influence of the Japanese and Western empires. As bullets fly around the besieged city of Tianjin, Burt builds barricades, attends to food distribution and water purification. Liu works at the hospital. The Boxer Rebellion is crushed by 1901, and over the next six years the Hoovers grow their family and their fortunes as Burt travels the world fixing failing minds and acquiring the nickname the Doctor of Sick Minds. He starts his own firm in 1908 and soon is able to legitimately call himself a millionaire. Bert's come a long way from the hungry, shy, overworked orphan that failed English in Oregon. But all the same, even with a loving wife, children and millions of dollars, Herbert is still looking for his life's work. Maybe he can find it as the world collapses into war. It's the afternoon of August 4, 1914. Herbert Hoover is in his office in London's financial district. But his mind isn't on finances. Rather, as the now world famous millionaire will later recall, his mind is ruminating over the impossible nature of things. Close quote. Understandable. It's been just over a month since Archduke Ferdinand's assassination and somehow that's translated to a cascade of war declarations in the last week. Surely Burt would prefer to focus on his son's 11th birthday, which is today. Or reflect on his own milestone birthday of 40, which is only days away. Or even turn his attention to his fast approaching month long working vacation in California. So much is going so right for this orphan turned famous millionaire. And yet at the same time, so much is going so wrong in the world. The telephone rings, ripping Burt from his ruminations. He answers to hear the voice of the new American Consul General, Robert Skinner. At least that's Burt's version. Robert will never remember making this phone call. Nonetheless, Burt recollects the Consul making it clear that things are desperate at the nearby consulate. There's a mob of a thousand American tourists, all penniless because they cannot raise money on travelers checks and they cannot even get food or lodgings. Can you think of anything to do? Well, forget California. Herbert immediately heads over to the consulate to see what he can do. It's pandemonium. Countless Americans hungry and shelterless because warp panicked banks have them off from their own funds, pound their fists on the counters and demand to know what the US Government is doing to make this right. Observing that the weary Consul General Robert Skinner is, and I quote, a mess, Burt leaps into action. He amasses cash from his office, from business associates. His wife Lou brings £100 from their London home and with all of it the cool under pressure expat opens an office in the consulate that same afternoon where he hands out no interest loans to over 300Americans to get them through the panic filled days ahead. In the next few days, Burt finds room aboard ships bound for the States and convinces London hotels to extend credit to Americans. Meanwhile, Lou forms a women's committee to assist single women and children in distress. The Hoovers and their newly organized teams find solutions to every problem that comes their way. Be that entitled wealthy Americans who learned the hard way that sometimes first class travel isn't available during war, or convincing terrified expats it's safe to go home. For instance, when one elderly woman demands a guarantee that the Germans won't sink her ship, Burt writes her a guarantee. It works. As Burt later tells it, if she came through all right, she'd say, I kept my word. If she was sunk, she'd never have time to blame me. By October, Herbert's committee has registered for 42,000American travelers, provided financial assistance to 9,600 of them, and distributed more than $400,000 in aid. Herbert is enormously proud of his work. He's got no plans to go anywhere soon, and as Hill later put it, I did not realize it at the moment, but my engineering career was forever over. I was on the slippery road of public life. A slippery road indeed. Herbert's attention is soon turned to Belgium, where 9 million people trapped between the British naval blockade and the German army are starving. The intrepid businessman turned humanitarian founds the Commission for Relief in Belgium, or crb. And after weeks of negotiations with the British, French and Germans, he gets all of them to recognize his organization as a neutral entry entity permitted to ship foodstuffs to these desperate, starving millions of civilians. Burt displays impeccable managerial skills as he relies on over 40,000 Belgian volunteers. The Belgian people love him. Bert's a world renowned hero. No surprise then that when the United States enters the Great War in 1917, President Woodrow Wilson appoints the hero to, quote, immediately place in operation his plans for food control in the United States. As the head of the U.S. food Administration, Burt calls on Americans to support the troops by eating less. With meatless Mondays, wheatless Wednesdays and banners declaring food is Ammunition. Don't waste it. Bert's forceful and given to exceeding his authority, as reflected in his nicknames as the food czar or the food dictator and the autocrat of the breakfast table. These appellations are more tongue in cheek than accusatory, though, as many appreciate his work. Indeed, Herbert Hoover is so successful that his name becomes a verb meaning to get BY with less, that is to Hooverize. The war ends in 1918, but Bert's humanitarian work continues now with the American Relief Administration, or the ARA, which provides relief to war torn and hungry European children in newly independent Poland. It's said that the name Woodrow Wilson spelled freedom, while, quote, the name Herbert Hoover spelled life. The organization's work spreads to newly Soviet Russia. Soon the ARA is employing 120,000 Russians to operate 19,000 kitchens to help feed almost 11 million people daily. When some critics in the US government claim that his efforts are only aiding the bolsheviks, Burt responds, 20 million people are starving. Whatever their politics, they shall be fed. And criticisms aside, Bert is a hero. Back in the states before the 1920 election, both Democrats and Republicans seek to nominate him for president. Even though he sides with the Republicans, his future rival, Franklin D. Roosevelt writes, he is certainly a wonder, and I wish we could make him president. There could not be a better one. Well, Burke doesn't seek the nomination in 1920, but he does find himself a cabinet member in the Harding and Coolidge administrations as the Secretary of Commerce. You might remember from episode 156 that President Calvin Coolidge calls on Burke to provide relief after the 1927 Mississippi flood because, as famous humorist Will Rogers puts it, when a man is sick, he calls a doctor. But when the United States of America is sick, they call for Herbert Hoover. Though not without controversy over the disparity of loss between white and black homes, Herbert organizes local efforts by the Red Cross to provide for families who lose everything when the levee breaks. In the end, Burke comes out maintaining his nicknames as the Great Humanitarian and Master of Emergencies. Meanwhile, President Calvin Coolidge declares in South Dakota that he won't be seeking a second term as president. Ah, yes, we heard that speech in episode 156. Well, after a lifetime of working for the livelihood of Americans and the little guy and proving himself a successful businessman, it's hard to disagree with FDR's assessment that there could not be a better president than Bert. Yet facing off against Democratic New York Governor Al Smith, the great humanitarian can't help but worry. He's never held elected office and is so shy he prefers to give his speeches via the radio. Whereas Al is a four term governor opposed to unpopular prohibition but orphaned. Bert has become Uncle Sam's golden child. I mean, prosperity just follows him wherever he goes. Though he doesn't personally say it, the Republican Party's promise of a chicken in every pot and a car in every girl barrage feels doable under a Burt Hoover presidency. And Bert does express a similar idea while accepting the GOP's nomination, proclaiming that, quote, we in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poor house is vanishing from among us. But is that enough? Well, let's see how the election goes. It's almost 11 o'clock at night, November 6, 1928. We're at the Hoover's elaborate international architecture style home in Stanford, California, where Burt, Lou and their friends and family are excitedly tracking the election's results. Burt puffs his pipe and scratches chalk numbers on a blackboard in his study as one state after another comes in. But as he does, Burt can hardly believe what he's seeing. He's not just winning. This is a landslide. He's received over 21 million votes, while Democrat Al Smith's barely clearing 15 million. As for the real determining factor, the Electoral College, that translates to an overwhelming 444 electoral votes for Herbert and only 87 for Al. 40 states, including some soldiers, Southern Democratic strongholds like Tennessee and Florida, and even Al Smith's home state of New York have cast their Electoral College votes for the one and only great humanitarian, Herbert Hoover. Still stunned, Burt hears something outside. Is that music? He and Lou go to the balcony to discover that 74 year old legendary march composer John Philip Sousa is leading a 70 piece band, followed by a crowd of thousands of Stanford students and supporters. As the loving couple takes all of this in, an airplane flies overhead releasing fireworks. It's just too much for the reserved businessman and humanitarian. Despite his best efforts, the sight of thousands celebrating his election leads the man to cry. Wiping away tears, he shouts down to the crowd. I thank you for this expression and appreciate your coming up to greet me. I thank you from the bottom of my heart. This episode is brought to you by Etsy. Oh, hear that? Okay, thank you. Etsy knows these aren't the sounds of holiday gifting. Well, not the ones you're hoping for. You want squeals of delight? Happy tears? How did you. And spontaneously written songs of joy. I am so happy. Oh yeah. Oh yeah. Oh yeah. Um, okay, the song needs a bit of work, but Anyway, to get those reactions, make sure everyone on your list feels heard with handmade, handpicked and designed gifts from small shops on Etsy. Gifts like personalized jewelry, custom artwork, cozy style items, vintage pieces and home decor. To celebrate. Celebrate all of your favorite people and their specific kind of special. For original gifts that say I get you, Etsy has it way to eat a tea. You're listening to an app at PC Game Pass. Want new games on day one like Indiana Jones and the Great Circle? How about living out your Sims life with EA Play? We Talking high quality PC games all for one low monthly price? We got you. Learn more at Xbox.com PCGame Pass or click the banner Indiana Jones and the Great Circle. Available December 9, 2020. Game catalog varies by region and over time okay, that's the ad. You can go back to doing whatever you were doing now pausing to take stock of what we've covered today. Yes, pun intended. We now know what a stock market is. We've followed the evolution of New York stock market, specifically explored the United States less than direct path to a central ish banking system, the Federal Reserve System. And finally, we know that it's against this financial background that Americans enthusiastically send the impoverished orphan turned millionaire and great humanitarian Herbert Hoover to the White House. He takes the oath of office on March 4, 1929, just a little over six months before the stock market crashes. And with all of that background, I'd say we're ready to turn our attention to the various possible causes of the 1929 crash. Although historians will undoubtedly argue over the details of the crash's caused until the end of time, there's a general consensus that the 1920s rise in the stock market makes sense at first, but not past early 1928. By this point, a number of investments stop reflecting realistic value. Why is that? To start, we have overinvestment in companies behind the era's exciting and still growing technologies like radio cars and the telephone. We also have more middle and working class Americans in the market too, an unspecified number. But across all the various investment opportunities available to this nation, trained by the previous decade's war bonds to put their money in securities, it's possibly as high as several million average American families. Not that that is a bad thing in and of itself. The problem is unethical brokers. Now that is not to disparage all brokers, but all professions have their bad eggs. And here in the 1920s, some are offering less than honest investment trusts. Broker turned writer Matthew Josephson describes these trusts as the means by which artful financiers passed on to the public the bulk of their much mortgaged and pyramided holdings while keeping voting control in their own hands. Close quote. Yikes. But the most famous invisible contribution to the crash are stocks bought on the margin. Now, without minimizing this, let's note that we often carry an inflated sense of both the number of Americans buying on the margin and the degree to which they do so. Of the NYSE's total 1,549,000 accounts in 1929, 560,000 are margin accounts if we assume each account represents one American family in this era of 4.11 people per US household, which isn't perfect, but it's something this suggests that only 2.3 million Americans out of the nation's 125 million inhabitants, or less than 2%, are directly tied to a margin account. And what is that margin? We often hear a meager 10% when discussing this history, but that is in fact quite rare even without government regulation. And that is indeed the case with pre 29 margin bought stocks. Most brokers want at least 25% and are typically requiring 50%. That sounds a little less crazy than the scintillating 10% sound bite that we often get with a surface level treatment of this history. But again, let's not minimize it either. On the margin buys are still plenty risky. Riskier still, as some speculative investments are made with bank borrowed money. Money that the banks in turn borrowed from their local Federal Reserve banks. Furthermore, you don't have to have one of these accounts to feel the impact. If you work for a small company whose owner is playing on the margin and goes bust, you might be out of a job. And so the dominoes fall. As for the stockbrokers overseeing these accounts, most aren't worried. If you ask them about the possible catastrophe awaiting an over leveraged on the margin account holder, they'd likely answer that even with fluctuations, stock values rise so fast it's not a worry. But some financial gurus see a bubble forming by early 1929. This includes members of the Federal Reserve's board of governors, leadership at the Federal Reserve bank of New York, and even some on Wall Street. They all think something should be done, but disagree on what. First, the Federal Reserve Board doesn't want to increase the discount rate. Oh, what's that? The discount rate is the rate of interest that a Federal Reserve bank charges when making a loan to a bank. By raising it, the Fed can make credit more expensive, creating a little borrowing domino effect that in Theory will disincentivize banks and citizens from taking risky loans. But the Fed has already done this over the past year or so, and thus far, raising the discount rate to 5% has only punished Main street farmers, construction and so forth. It's slowing business, but not speculation as such. The Federal Reserve Board wants to leave the discount rate alone and asks its Federal Reserve banks to stop loaning money to banks if that loan is going to fund speculation. But the Federal Reserve bank of New York and those on Wall street disagree with this categorical approach, calling instead for the discount rate to go up from 5% to 6%. Ah, this would be the power struggle we foreshadowed earlier. In February 1929, the Federal Reserve Board moves forward with this plan. It doesn't touch the discount rate and starts pressuring Federal Reserve banks not to give loans ultimately intended for speculation. The impact is that call money, that is money banks loaned to brokers, that is payable on demand, hence callable, starts to dry up. Stocks dip in March. As a result, a panic looms. This is when National City bank chairman and as of January, one of the directors of the Federal Reserve bank of New York, Sunshine Charlie Mitchell, steps in. Yes, we met this boisterous banker at the Morgan bank meeting in this episode's opening. Whether a villain selfishly guarding his own portfolio or a hero hoping to spare the nation a panic, and both narratives exist. Sunshine Charlie announces that National Citibank will put up $25 million to cover broker loans and encourage the public not to stop their margin investments. Huh. So much for the Federal Reserve Board winning the power struggle. The market stabilizes, but it's still just a band aid, one that the head of the bank of Manhattan Company, Paul M. Warburg warns won't hold. President Herbert Hoover has concerns but firmly believes, like his predecessor Calvin Coolidge, that the President shouldn't directly interfere with American business. Andrew Mellon, who's now serving the third President in a row as Secretary of the treasury, advises investors to focus on stable stocks. In August, the frustrated Federal Reserve Board decides it will try raising the discount rate to 6% after all. Yeah, it only hurts business. Even as the summer brings the red flags of lower factory output and declining railway freight traffic, stocks only go up, up and up, all the way up to Labor Day 1929. No one taking their well earned day off knows it, but that's the last day of the roaring twenties. From there on, the stock exchange's cracks only become increasingly visible. And does late September's arrest of fraud committing English businessman Clarence Hatchery and the subsequent freezing of his enormous holdings on the London Stock Market, which are said to cause a withdrawal of call loans in New York, also play a role in pushing the NYSE toward a crash. Well, it didn't help and historians will argue about how much it hurt. The New York Stock Exchange continues down on October 4th. The New York Times reports that quote, fear is in the saddle. Close quote. The bubble is unstable and indisputably that includes overvalued utility stocks as the public is about to realize, thanks in part to one honoring Massachusetts man. It's Friday afternoon, October 11, 1929. The Massachusetts Public Utilities Commission is just getting seated for a meeting at the brand new three tower art deco style skyscraper on Battery March street in Boston known as the Public Service Building. Sounds pretty run of the mill, but under his pince ne eyeglasses and bushy but well trimmed mustache commissioned Chairman Henry Atwell's seething. Today, the Edison Electric Illuminating Co. Of Boston is seeking permission to split its stock, quadrupling shares to take its current price of $100 per share down to 25. It's a great way to get more small time investors and honestly, pretty routine, but Henry doesn't like it. The representative steps forward and takes the floor. He states simply that by vote of the stockholders to change the par value of its stock, the Edison Electric Illuminating Co. Of Boston now seeks the approval of this department as Provided in section 8 of chapter 164 of the General Laws. Henry asks why the rep is surprised splitting stocks so ordinary. He didn't come expecting a challenge. Confused, he simply answers it is the fashion and says that Boston Edison is about the only company that has not done it in Massachusetts. That's not sufficient for Henry today. The bespectacled mustachioed chairman chastises the Edison rep. There are serious objections it seems to us, to making the change at this time. Due to the action of speculators, the price of the stock has risen to such a point that no one would find it to his advantage to buy it. Wow. Henry isn't just saying no. He's saying that the Edison Company stock is overvalued substantially. He continues, no public interest will be served. On the other hand, it is likely to encourage the belief in the minds of many innocent people that it is the fore runner of substantial increases in dividends without their hopes being realized. As a consequence, it is ordered that the change is disapproved and the petition denied. Let me be clear. Henry is not to blame for the crash in two weeks. As we've seen, the bubble has been growing for at least two years, aided by pyramided and mortgage filled investment trusts, unregulated margin accounts, maybe Britain's dishonest investor and businessman Clarence Hatree, and of course, overvalued stocks, none of which the uncertain Fed appears able to rein in. But while we've addressed those overvalued tech stocks, we're now adding utilities to that category. And it's only a matter of time until all of these factors, each playing their major and minor roles, explode like a ticking time bomb. Amid the market's recent decline. Word of Henry's commission turning down a stock split spreads fear, especially as investment trusts such as those held at Sunshine Charlie's National City bank are heavily invested in such public utilities as Boston's Edison. Stock plummets following this revelation, it's hard not to wonder what else is overvalued. On Wednesday, October 16, the New York Times quotes Yale University professor and economist Irving Fisher, who reassures that stock markets appear to be at, quote, a permanently high plateau and that he expects to continue quoting to see the stock market a good deal higher than it is today within a few months. Yet that same day, a federal report shows a continued decline in steel, automobiles and freight loads. Small time investors, from mechanics to hotel clerks are getting calls from their brokers saying that it's time to cover that margin. On Monday, October 21st, the market drops again, seeing this great war. General of the Army's Blackjack Pershing telegraphs his broker confidential, what do you think of the general situation? Would you hold, sell or buy Anaconda? Prices bounce back on the 20. But on Wednesday the 23rd, they drop again. In a single day, the Dow Jones falls by 6% from 326 to 305. And that brings us back to where we started this episode. October 24, Black Thursday. Brokers are calling for cash on those margin accounts. Stocks hit a freefall as a visiting Winston Churchill observes the NYSE trading floor from the visitors gallery. Anxious investors fill the streets between the Stock Exchange, the House of Morgan and the steps of Federal Hall. Manhattan traffic freezes amid fears that a man 400ft up on a skyscraper is about to jump to his death. It's actually a workman taking a smoke break, but the mistake captures the forlorn city's disposition. Then Sunshine Charlie and his banker buddies Pool Resources Stock market VP Richard Dick Whitney uses their funds to restore confidence in the market, which closes the day stabilized at a 2% loss the next morning, it looks like the worst has passed. President Herbert Hoover issues a statement declaring, the fundamental business of the country, that is the production and distribution of commodities, is on a sound and prosperous basis. Wall street agrees. It ran rallies, but the rally doesn't look so good during Saturday's brief trading window. Blue chip stocks, the best of the best, head downward. That means that the big investors are losing faith. But that's nothing compared to what follows. October 28, 1929, is devastating, to quote historian William Klingemann. Shaken by the events of the previous week, the public simply refused to buy and those who still held stocks refused to keep them any longer. Close quote. And this time, the team of super bankers aren't coming to the rescue. It would be impossible to pool such funds. The market drops like a rock. The Dow Jones falls 38 points, closing at 261 for a loss of 13%. In a single day dubbed Black Monday, $14 billion in securities have vanished into thin air. The next day, October 29, 1929, a record obliterating 16 million plus shares change hands on the NYSE as the Dow closes at nearly a 12% loss of 230. We're far beyond margin accounts as another 10 billion vaporizes and companies like General Electric, Chrysler and others go for pennies on the dollar. To put that another way, between Black Monday and Black Tuesday alone, the stock market lost about 80% of the total cost for the US to fight World War I. And this deadly one two combo from the bear has simply slaughtered the bull. Around the country, stories of suicides fill the papers. Some are real, but respectfully, also exaggerated. Of the 100Americans who attempt or do take their lives between Black Thursday and the end of 1929, it's just half 50% who do so as a result of the crash. And only two of those jump to their deaths on Wall Street. Still, every life lost is precious. And among those investors who do hang in there are those who nonetheless feel as though their lives are lost. It's a late October day, 1929. George Mihales is in his Spartanburg, South Carolina, restaurant, the Dixie Lunch. And oh, does it smell good. I trust that George is making some authentic Greek food from his upbringing in Athens. But if that's not your thing, don't worry. This limping veteran cooked his way through the Great War. I'm sure his burgers are every bit as good as his gyros. But in truth, George's mind isn't on his restaurant. See, last month, a smiling customer came in showing off how much money he'd made investing in the stock market. As George puts it, I bit with what you folks call hook, line and sinker. He invested and it went so well so fast. He took a loan from his brother to buy more. And on the margin, why not? His stocks are only going up. It's just like his mother told him. You'll get rich in America someday. And it looks like Mama was right. So you'll have to forgive George if he's American daydreaming more than minding his grill. The phone rings, snapping George back to the present. Wouldn't you know it's his broker. But the war vet quickly realizes that this is not a friendly call. He says that George must put up more cash. George cleans out his bank account. He's still short, so he goes to his brother, who fronts him another thousand dollars. Then on October 29, Black Tuesday, there's another call for more money. The only thing left that George can do is sell the cafe he's ruined to let George tell the story from here. I guess disappointment comes mighty hard to some people. But that'll almost killed me. I considered killing myself because I had nothing left. I found out what a fool I had been. I learned a lesson then. It taught me that you've got to pay your debts to get along. Unsavory trusts, overvalued tech and utility stocks, maybe a Londoner's illegal shenanigans, and of course, those unregulated on the margin stocks. It all proved a cocktail that neither the Fed nor speakeasy saturated New York could choke down. As for which leaders get blamed, this includes Wall street types like National Citibank chairman Charles Mitchell. But not President Herbert Hoover. Not yet. After all, Americans don't know that this crash marks the start of the Great Depression. And as I said before, this crash is neither the singular cause of the Depression, nor does it explain this bleak economic period lasting for over a decade. But speaking of the President, the eyes of 125 million Americans will soon look to Bert the Great Humanitarian, as the crash does indeed give way to an era far afield from his prediction of poverty's eradication amid failing crops, rampant unemployment, deported U.S. citizens and an army of Doughboy veterans march marching to claim a promised bonus. What will the Master of Emergencies do? It's your move, President Hoover. History that Doesn't Suck is created and hosted by me, Greg Jackson Episode researched and written by Greg Jackson and recently engaged Will King More Margin Wedding Ring Woman read by Riley Neubauer Special thanks to the Massachusetts State Archives for access to the October 11, 1929 Massachusetts Public Utilities Commission meeting minutes Production by Airship sound design by Molly Bach theme music composed by Greg Jackson arrangement and additional composition by Lindsey Graham of Airship For a bibliography of all primary and secondary sources consulted in writing this episode, visit htbspodcast.com HTDS is supported by Premium membership fans. You can join by clicking the link in the episode Description My gratitude to you kind souls providing additional funding to help us keep going and a special thanks to our members whose monthly gift puts them at producer status. Andy Thompson, Anthony Pizzullo, Art Lane, Beth Chris Jansen, Bob Drazevich, Brian Goodson, Bronwyn Cohen, Carrie Beggle, Charles and Shirley Clendendon, Charlie Magus, Chloe Tripp, Christopher Merchant, Christopher Pullman, David DeFazio, David Rifkin, Denke Durante Spencer Donald Moore, Donna Marie Jeffcoat, Ellen Stewart, Ernie Lowe, George Sherwood, Gerwith Griffin, Henry Brunges, Jake Gilbreth, James g. Bledsoe, Janie McCreary, Jeff Marks, Jennifer Moots, Jennifer Magnolia, Jeremy Wells, Jessica Poppick, Joe Dobus, John Frugaldougal, John Boovie, John Keller, John Oliveros, John Ridlevich, John Schaeffer, John Scheff, Jordan Corbett, Joshua Steiner, Justin M. Spriggs, Justin May, Kristen Pratt, Karen Bartholomew, Cassie Coneco, Kim R. Kyle Decker, Lawrence Neubauer, Linda Cunningham, Mark Ellis, Matthew Mitchell, Matthew Simmons, Melanie Jan, Nick Secender, Nick Caffrell, Noah Hoff, Owen Sedlak, Paul Goringer, Randy Guthrie, Reese Humphries, Wadsworth, Rick Brown, Sarah Trawick, Samuel Lagasse, Sharon Theizen, Sean Baines, Steve Williams, Creepy Girl, Tisha Black and Zack Jackson if you know your party's extension, press or say 1 to leave a message in our company mailbox. Press or say too. Spoiler alert. It will be full representative. Would you speak to your mother in that tone? Speak to a real human being. You shouldn't need to shout into the void to get your health insurance questions answered. Pacific Source Health Plans this is a real person. How can I help you? Human service, not automated phone trees. Pacific Source Health Plans.