Anything Goes_ A Biography of the Roaring Twenties - Lucy Moore [128]
When a Senate committee conducted what became known as the Bear Hunt in 1932, seeking evidence on which to base regulation of the stock market following the 1929 crash, the brash trader Matthew “Bear” Brush was asked if he had known about practices comparable to Al Capone’s in the Wall Street of the late 1920s. “Al Capone is a piker compared to that racket,” Brush replied.
All America seemed caught up in what economist John Galbraith later called a “mass escape into make believe.” Everyone talked stocks and shares: the market had replaced sex as the national conversational obsession. Having grown accustomed to borrowing to finance buying a car or a washing machine, it was a short step to borrowing to invest in stocks that apparently could not lose value. Wall Street investment houses started opening branch offices in small cities—1,192 of them by October 1928—to capitalize on the national mania for buying stock. A traveling salesman told the business writer Edwin Lefèvre that nine-tenths of the people he saw in city nightclubs as he traveled across country were spending uncashed stock-market profits. He was struck by the thought “that these people had acquired the worst habits of the idle rich, without the riches.”
“The basic delusion was that we had entered a fourth dimension economic world,” said the economics journalist Garet Garrett, looking back on the boom years from the perspective of the 1930s. Even the children in John Dos Passos’s Manhattan Transfer played at “stock exchange”: “I’ve got a million dollars in bonds to sell and Maisie can be the bulls an’ Jimmy can be the bears.” Groucho Marx loved stock speculating. He took tips from elevator boys and passed them on to his brothers. As he bustled over to his brokers’ office to organize another transaction he chortled to himself, “What an easy racket.” The psychic Evangeline Adams charged $20 for her financial advice newsletter.
But pundits crying, “Buy! Buy! Buy!” were choosing to ignore warning signs that the economy was slowing down—and in some cases had never been booming. The United States was sustaining the world’s slow post-war economy by investing dollars abroad but purchasing little in return. Farmers, untouched by urban prosperity, had been going bust in unprecedented numbers throughout the 1920s. In ten years Georgia’s bankruptcy rate had gone up 1,000 percent. Florida had never recovered from its property crash in 1926 after the Great Miami Hurricane. Seven hundred thousand people were displaced in the Southwest when the Mississippi River flooded in 1927. The Government had been encouraging people to use mortgages to buy their own homes but by 1926 the housing market was glutted. Mortgage indebtedness, which had more than doubled between 1922 and 1929, stood at $27.1 billion. Residential construction work abated and the automotive industry cooled off. Only the stock market continued to soar; by 1928 it was carrying the whole economy on its inflated shoulders.
Mini price collapses occurred in June 1928, December 1928 and March 1929, but each time the market recovered and carried on rising. Interest rates went up, but bankers defied the Federal Reserve to continue to provide affordable loans to one another, and the stock boom continued. On the first working day after the Labor Day long weekend, market averages reached peaks that would not be bettered for twenty-five years. Evangeline Adams predicted that the Dow could climb all the way to heaven.
But gradually the bears began to outnumber the bulls. As John Galbraith later wrote, panic began to rise “in dozens and then in hundreds and finally in thousands of breasts.” And so the crash came, arriving “with a kind