Cold Open

It’s Thursday, October 24th, 1929 in the Financial District of Manhattan.

A young man hurries along Wall Street, his bowler hat tipped against the early morning sun. William Harvey is a successful stockbroker. He helps his clients invest in the market - and makes good money in the process.

But this morning, William looks strung out. Yesterday, a wave of panicky selling on the Stock Exchange drove down the share price of several major companies’ stocks. If the market doesn’t recover today, the US economy could go into a tailspin.

William passes between the columns of the New York Stock Exchange and pushes open the heavy wooden doors.

As he crosses the busy trading floor, William notices the worried expressions of his fellow brokers. There’s an atmosphere of nervous tension in the room as if everybody is bracing for the worst. William positions himself next to a telephone and waits.

At 10:00 AM, the bell rings, and the day’s trading starts.

Immediately, pandemonium erupts.

Telephones ring off the hook as panicky investors tell their brokers to sell and cash out of the market. Down on the floor, the clerks gesticulate madly at the traders, frantically signaling the dramatic falling prices…

William is on the phone, desperately trying to calm down one of his clients. But he’s distracted by the numbers on the ticker board. Dow Jones Industrial Average stock index is falling faster than William has ever seen before

William is nearly paralyzed as the numbers on the ticker board plummet. Gradually, he lowers the receiver, until the frantic voice of his client is drowned out by the fearful voices of the traders, as everyone on Wall Street tries to comprehend the scale of the catastrophe unfolding before their eyes… 

Up until this event, the Roaring Twenties was a time of enormous growth and prosperity in the United States. Unemployment was down; wages were up; and ordinary folks were investing in the stock market and getting rich quick. But much of that wealth is an illusion - a bubble created by speculation and unscrupulous lending. And, in October 1929, the bubble burst causing investors to panic and sell their shares. The resulting meltdown will plunge the United States into the Great Depression, and the entire world would feel the ripple effects of a crisis that begins when the stock market crashes on October 24th, 1929.

Intro

From Noiser and Airship, I’m Lindsay Graham and this is History Daily.

History is made every day. On this podcast—every day—we tell the true stories of the people and events that shaped our world.

Today is October 24th, 1929: The 1929 Wall Street Crash.

Act One: Sunshine Charlie

It’s September 5th, 1929; just over a month before the great Wall Street Crash.

Roger Babson stands before a packed room of entrepreneurs and investors at the National Business Conference in Massachusetts. Tall and thin, with mournful eyes and a silver goatee, Roger is a highly respected economist, known for his accurate predictions about the stock market.

Today, he is the keynote speaker at this conference, where businessmen from across America have eagerly come to hear his predictions. The mood in the room is optimistic - and with good reason; the 1920s has been a decade of unprecedented growth. Just two days ago, the Dow Jones Industrial Average reached an all-time high, reflecting the overall strength of the economy. The eyes of the businessmen in the room flash with anticipation of more good news to come.

But Roger isn’t feeling as optimistic. Over the past few months, the economist has grown increasingly worried by the seemingly unstoppable rise of share prices. Roger knows this growth is unsustainable. Millions of ordinary people are investing their savings in the stock market to share in the wealth; but that prosperity is largely just on paper, created by banks and brokerage firms offering speculative loans to investors. Roger is keenly aware of the old adage that what goes up, must come down - and he believes the US economy is hurtling toward disaster.

Still, Roger also knows that few people share his gloomy prophecy. After ten years of sustained growth, it’s hard to imagine that everything could evaporate in the blink of an eye. But Roger understands how the markets work better than most, and he feels obligated to warn the American people before it’s too late.

Roger clears his throat and addresses the room, declaring: “Gentlemen, the time is coming when the market will begin to slide off. Sellers will exceed buyers and profits will begin to disappear.” There’s a mass intake of breath, as the audience recoils in shocked dismay. But Roger continues, raising his voice to announce that: “Sooner or later a crash is coming…”

Roger’s prediction sends a shockwave through the economy. Just hours after his speech, the stock market falls by five percent. But in the country’s brokerage firms and investment banks, the attitude remains bullish. Small fluctuations in share prices aren’t uncommon. And by the end of each day’s trading, the market always bounces back.

Very soon after, in lower Manhattan, Charles E. Mitchell sits in his office, staring angrily at the front page of the day’s financial news. The headline screams: Roger Babson Predicts Market Slump! Charles furrows his brow. This is exactly the kind of pessimistic thinking that spooks investors and holds back growth. Charles tosses the paper in the trash and strides to the window, gazing out over the hustle and bustle of Wall Street.

Charles is the chairman of National City Bank, one of America’s largest financial institutions. And he believes that investing shouldn’t be reserved for the wealthy. If ordinary, middle-class Americans can’t afford to buy stock, Charles’ team of salesmen will allow them to take out loans. When the share prices rise - as they always do - the customers can simply pay off their debts with the profits.

Some economists believe this kind of speculative lending is risky, but Charles doesn’t see it that way. The stock market never fails, so there’s no reason to worry. It’s this optimistic outlook that has made National City Bank the biggest driver of growth in the United States. It’s also earned Charles a nickname: “Sunshine Charlie.”

And Charles is not alone in his optimism. Many Americans believe their country has arrived at a permanent state of prosperity. Technological advances have led to an industrial boom, and national wealth has more than doubled in the past decade. During his inaugural address earlier this year, President Herbert Hoover captured the spirit of the age, saying: “I have no fears for the future of our country. It is bright with hope.”

And sure enough, despite the slump caused by Roger Babson’s warning, the stock market quickly bounces back. And Charles feels vindicated. He hopes that’ll teach doomsayers like Roger not to fill investors’ minds with baseless rumors.

And on October 15th, Yale economist Irving Fisher will join Charles in his sunny optimism, proclaiming "The stock prices have reached a permanently high plateau!” But his words will prove untimely. Nine days later, on October 24th, panic will break out among the investors, triggering the largest sell-off of shares in Wall Street history, proving Roger’s prediction correct, and plunging the US economy into chaos.

Act Two: Black Tuesday

It’s October 24th, 1929, a bright sunny morning in Manhattan.

Charles E. Mitchell sets off from his midtown mansion to make the five-mile walk to Wall Street. The chairman of National City Bank owns several cars and a fleet of first-rate chauffeurs – but he prefers to make the trek on foot. His doctor advised him it’s good for his health, and he enjoys the peace and quiet before another busy day in the office.

But as he approaches Wall Street, Charles is shaken from his quiet reflection by a commotion of raised voices. An agitated crowd swarms the sidewalk outside the Stock Exchange. Charles pulls one man aside and asks what’s going on. The man replies in a frightened whisper: “The market’s crashing. The Dow’s dropped six points already…”

Charles staggers across Wall Street and into the House of Morgan, another large bank. There, he consults with fellow financiers J.P. Morgan Jr. and Thomas Lamont. Soon, they come up with a plan: they’re going to halt the slide by buying stock themselves - injecting the market with capital and restoring investors’ confidence. And to their relief, the tactic works. Share prices soon stabilize, and by the time the market closes that evening, Charles is feeling optimistic that this was nothing but a scare.

But the panic from Thursday will accelerate over the weekend. On Monday, the stock market will be in a freefall, and by Tuesday, panic will turn to bedlam, as the Dow drops by twenty-five percent, wiping out the savings of millions of investors and plunging America into a full-blown economic meltdown.

***

It's Tuesday, October 29th. And on Wall Street, stockbroker William Harvey sits slumped at his desk, his eyelids drooping. He’s entering the sixteenth hour of a twenty-four-hour shift, and he’s starting to go delirious with fatigue. The last six days have felt like some kind of nightmare. The frenzy of selling is so crazed, the Dow Jones index can’t keep up with the falling prices.

The losses have been staggering. More than fourteen billion dollars have been wiped out already, and the Dow has dropped seventy-five points, making this the worst 24 hours in Wall Street history, a day that will become known as “Black Tuesday.”

William is jolted alert by a dull clunk and a waft of steam as his secretary places a mug of coffee on his desk. William sits up and rubs his bleary eyes. Back to work, he thinks miserably. Then he takes a swig of coffee and loosens his tie.

When the market started crashing, the scale of the crisis quickly became clear to William. Part of the problem was the millions of investors who purchased shares with loans from brokerage firms, a practice known as “buying on margin”. When the price of the stock falls below the cost of the loan, the broker issues a “margin call”, demanding their money back in full. William hates making margin calls because they can leave investors bankrupt. Fortunately, given the recent stability of the stock market, he’s only had to make one or two margin calls over the past ten years. But today, he’s been forced to make several hundred, decimating the savings of ordinary, hard-working Americans.

As he works into the early hours, it dawns on William that the strength of the financial sector was merely an illusion. Unscrupulous lending from brokers and bankers inflated the value of shares, propping up the stock market with unrestrained speculation. And William knows the carnage of Black Tuesday is just the beginning.

Soon, there will be a rush on the banks, as people withdraw their savings for fear of losing more money. Thousands of financial institutions will likely close, and millions of investors in businesses will declare bankruptcy. Unemployment and homelessness will soar as America enters a severe depression. The poorest in society will suffer the most, and William feels partially responsible. The unrestrained greed of Wall Street men like himself caused this crisis.

As the guilt gnaws at him, William’s breathing becomes shallow. The numbers on the page swim before his eyes. Sensing the onset of a panic attack, William leaves his desk, mumbling to his secretary that he’s going outside for some air. But when he steps inside the elevator, he doesn’t head down to street level. Instead, he presses the “up” button.

Moments later, William emerges onto the roof. He approaches the edge and looks down. The howling wind drowns out the sound of the traffic thirty-eight stories below. At the start of this crisis, panic gripped Wall Street. That panic turned to fear, and now all that’s left is despair. William has already heard rumors of stockbrokers hurling themselves from buildings, and he can understand why; the situation seems hopeless.

But as William inches closer to the edge, a thought stops him and causes him to step. Soon, federal authorities will launch an investigation into the crash. And when that happens, the feds will need testimony from people like him - stockbrokers who witnessed the worst excesses of the financial world. He can help prosecute the people at the top, the ones truly responsible for this disaster. He can help ensure nothing of this magnitude ever happens again.

Act Three: The Pecora Commission

It’s May 1933 in Washington DC; four years after the stock market crashed.

Ferdinand Pecora smokes a cigar on the steps of the United States Capitol. He gazes at the spire of the Washington Monument across the park, piercing the bright blue sky.

Ferdinand is chief counsel for the Senate Committee on Banking and Currency. Since his appointment in January, it’s been Ferdinand’s job to interrogate the country’s most powerful investment bankers, to help determine the factors that led to the Wall Street Crash of 1929.

Ferdinand pulls deeply on his cigar before tossing away the stub. Though born in Sicily, Ferdinand is a New Yorker through and through. He grew up in lower Manhattan, a stone’s throw from the financial district. And over the years, he developed a dislike for Wall Street types, those brash men in pin-stripe suits whose wingtips he used to shine when he was a kid. Now those very bankers are sitting across from him in the Senate hearing room – and Ferdinand intends to make them sweat.

A few hours later, Ferdinand prepares for his next cross-examination. He’s been looking forward to this particular hearing because he’ll be interrogating the most powerful banker in America. Charles E. Mitchell is the chairman of National City Bank. He’s been labeled in the press as “the banker of bankers”. But it's his track record of selling risky securities to inexperienced investors that has Ferdinand's interest. Ferdinand knows that if Mitchell gets convicted, it would send a message to banking executives across the country that wealth and power cannot obstruct the gears of justice.

So when Charles Mitchell arrives in the hot seat, Ferdinand bombards him with questions about his bank’s dubious lending practices. But Charles remains tight-lipped. He answers Ferdinand’s questions with monosyllabic disinterest, scoffing and rolling his eyes. So Ferdinand changes his approach, asking Charles about his personal finances. Despite his million-dollar bonuses, Charles paid no tax in 1929, due to losses created by a sale of his bank’s stock. But Ferdinand has made other inquiries. And it turns out, the buyer of that stock was Charles's wife. The color slowly drains from Charles's face as he realizes that he will likely be arrested and indicted for tax evasion.

The hearings of the so-called Pecora Commission will come at the height of the Great Depression, when unemployment is at nearly 25%, and breadlines stretch around every corner. The nation will follow the events of the hearings with rapt interest, eager to know what punishments will be meted out to those responsible for the Crash.

But ultimately, none of these prosecutions will be successful against any Wall Street financiers. But the findings of the Pecora Commission will go on to influence financial regulatory legislation for years to come, implementing safeguards against the same kind of speculative excess that sparked panic on Wall Street, starting October 24th, 1929.

Outro

Next on History Daily. October 25th, 1415: English king Henry V defeats a larger French army with the help of longbow archers at the Battle of Agincourt.

From Noiser and Airship, this is History Daily, hosted, edited, and executive produced by me, Lindsay Graham.

Audio editing by Mollie Baack.

Sound design by Derek Behrens.

Music by Lindsay Graham.

This episode is written and researched by Joe Viner.

Executive Producers are Steven Walters for Airship, and Pascal Hughes for Noiser.