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The Day The Bubble Burst

A Social History of the Wall Street Crash of 1929

OPEN ROAD INTEGRATED MEDIA

THE RAMPAGING BULL

One whang of his hand-tooled gavel against the fluted gong would stop everything.

It would end the action at Post Two, one of the stockade-shaped trading counters that had been under siege by brokers since early afternoon as U. S. Steel continued its giddy climb; it would quieten the harassed clerks inside Post Nine, where Standard Oil of New Jersey, after a slow start, had suddenly outpaced the trading in Sears Roebuck, another of the post's lively stocks; it would still the flashing numbers on the black annunciator boards which called traders to their posts for urgent messages from their offices.

The gong would herald a pause for 1,145 telephonists. It would ease the pressure on 500 page boys, 280 tube attendants and quotation clerks, 80 bond clerks, and 200 specialists' clerks, essential support troops for the delicate financial maneuvers performed every minute in and around the trading posts.

Walking steadily, watchful, freezing with a glare any overactive page, nodding to the famous, proud of all he could see, William R. Crawford, superintendent of the mechanical department of the New York Stock Exchange, was acutely aware of the power embodied in his gavel. His progress across the 16,000 square feet of recently felt-padded floor—insulation that effectively reduced the noise level in the cavernous room—had all the quality of a ritual. It once led a reporter to describe Crawford as "Mammon's Lord Chamberlain." The superintendent had not been amused.

But he still liked to believe that the moment he used his gavel, thebusiness of America would be fixed and frozen until the following morning.

Now, as he made his measured way across the more than quarter acre of sacrosanct floor, his experienced eyes could see that it had been another highly satisfactory day for the elite in the room—the nine hundred brokers, each a member of the Exchange and the only persons on the floor permitted to trade.

At Post One, United Aircraft was up a few points—a sign of the growing public enthusiasm for air travel. Chrysler and General Motors were trading strongly at Posts Two and Four. Shares in the railroads—Pennsylvania, Rock Island, New York Central, New Haven, and Union Pacific—were being bought and sold briskly, as they had been for months now, every sale marking a heady profit for some investor.

As usual, the biggest crowd was gathered around Post Twelve, the "Radio Post" where the whiz kid of Wall Street, Michael J. Meehan, presided over the wheeling and dealing in RCA shares.

Crawford was fond of saying that anybody wishing to check the pulse, or the mood, of America need only walk among the eighteen posts. Each with its group of designated stocks reflected the unprecedented boom sweeping the nation. He believed that "seeing these posts would reassure anybody that the millennium's arrived."

Stocks in Woolworth, Macy, Montgomery Ward, Safeway Stores, and General Foods were up, reflecting the mass-marketing techniques sweeping the United States. The very name of some of the shares indicated America's belief in her global destiny: International Nickel, International Tel and Tel, International Match, International Harvester.

Crawford and many others who spent their working days on the Exchange floor were firmly convinced that the world outside their heavily draped sanctum depended for its prosperity on the financial juggling performed there Monday through Friday from 10 A.M. to 3 P.M., and on Saturdays until noon.

This Monday at 2:59 P.M., exactly on schedule, the superintendent reached a small rostrum, projecting in midair from the south wall. Above him an annunciator board continued flashing up white numbers. Flanking the board were the Stars and Stripes and the blue banner of New York State. Similar flags hung at the other end of the room. Limp and lifeless, collecting dust, the emblems were unruffled by the ebb and flow of groups of traders forming and re-forming, scurrying, even at this late stage, from one post to another, buying and selling at a nod, on trust.

From his pulpit, Crawford could see the strategically placed stock tickers. Recently he had supervised the installation of ingenious reflecting devices which threw the magnified quotations from the paper tape onto large screens visible to everyone. It was the latest in a long series of improvements that had made the New York Stock Exchange the most modern in the world.

His gavel would not immediately silence the tickers; they would continue to run for some minutes afterward—how long would depend on the volume of trading in these closing seconds.

Each ticker, like thousands of others linking the New York Exchange with other exchanges and brokerage offices throughout America, was under a round glass dome, not unlike the one that used to encase the wax flowers on the parlor table of Crawford's grandmother.

Her grandson was responsible for the maintenance of the small brass mechanism under the glass. It was a simple enough device: two little rollers pausing as they passed through printer's ink before beating a light tattoo on the narrow strip of white tape running through a slot in the side of the dome. All over America eager eyes perused the identical spirals of paper falling to the floor which spelled out new highs in railways, oils, and metals. Five hundred miles of tape, Crawford would recite to visitors, ran over the spindles of the tickers for every million shares traded.

From time to time this past year, the tickers had given news of setbacks in the market, to be swiftly followed by an even greater upsurge in value, sometimes as a result of "the pools"—syndicates of powerful investors—putting their huge financial resources behind a stock, spiraling it to new and dizzy heights.

Day after day a vast, and growing, public continued to register its faith that what goes up need not come down. The clicking of tickers had shown Americans a quick and easy road to wealth.

Now, at precisely 3 P.M. this Monday, December 31, 1928, William Crawford temporarily halted their progress down that road with a single strike of his gavel against the Stock Exchange gong.

Another market day had ended.

But this afternoon, instead of going back to their offices or to their homes, the great mass began to move purposefully across the floor, treading through thousands of canceled calculation slips and miles of discarded tape. Eagerly anticipating what lay ahead, some of the younger men broke a strict rule of the Exchange. They began to run toward the doors leading to the visitors' gallery.

For the past three hundred minutes—the five hours of trading—the gallery, running along the Broad Street side of the Exchange, had received a steady stream of visitors. In spite of the bitterly cold and damp weather, hundreds of people, native New Yorkers and visitors to the city, came to peer down on the trading floor, to witness for themselves the most extraordinary economic happening in the history of America—the bull market at full rampage.

Throughout 1928 the double sensations of the stock market—unprecedented volume and soaring prices—had been front-page news. There had been two major breaks, in June and December, but they were quickly forgotten. Day after day, month after month, the market had surged upward, carrying favorite stocks into the empyrean. Radio Corporation of America had gone from 85 to an incredible 420 during the year; soon it would be due for a split-up. An obscure company called Western Warehouses had leaped in similar fashion. They, and the shares of a hundred companies like them, rose mainly because, in Crawford's opinion, "the titans of the market wished them to rise."

It was to catch a glimpse of those titans at work that most of the spectators in the gallery had come to the Exchange.

On this last day of the year they stared down on the floor, trying to spot the men whose boldness and daring had turned them into new authentic American heroes. The gray uniformed guides had patiently pointed out Michael Meehan by the Radio Post where the trading in RCA shares had made men, including Meehan, millions overnight, or Frank Bliss, known for his sudden unexpected forays into the market and immortalized by the media as "the silver fox of Wall Street." And everyone wanted to learn whether the infamous Jesse Livermore was playing the market that day; for years the taciturn, chain-smoking New Englander, dubbed the "boy plunger" by the media, had been a living legend because of his reputation for single-handed attacks on certain stocks, pushing their price down.

All day the gallery buzzed with informed gossip. Spectators, who a year ago did not know the difference between a bear and a bull, now talked knowledgeably of selling short* as practiced by the great Livermore himself. They endlessly analyzed the latest moves made by other market giants—Arthur W. Cutten, Charles Topping, the Fisher brothers. Every word these operators uttered in public was slavishly reported in the press and on the radio.

The Stock Exchange guides were used to dealing with the blandishments of attractive female investors anxious to meet famous traders; a woman's magazine had recently reported that stockbrokers equaled movie stars in sex appeal. To avoid the risk of a "sexy siren" waylaying a trader, on this last day of the year the guides had cleared the gallery well before William Crawford's gong ended trading.

When 3 P.M. was announced, a five-piece orchestra began to play at one end of the gallery. The guides opened burlap bags of confetti, ticker tape, paper hats, and noisemakers.

From the Stock Exchange Luncheon Club on the seventh floor, waiters filed out of the kitchen, carrying silver tureens. The club was one of the most exclusive in New York; few nonmembers had ever been inside the spacious room to admire its collection of early American prints, let alone to dine off one of the most sumptuous menus in the city. An outsider needed eight favorable votes to be admitted; two blackballs meant exclusion. The credit limit was one hundred dollars, even for members like Percy Rockefeller and Jack Morgan who were individually worth millions.

In solemn procession the waiters marched into the gallery with tureens of clam-juice cocktail that for the past twenty years had been a favorite beverage among brokers. The cocktail's fame had spread across America. This afternoon it would serve as the official aperitif at the Stock Exchange's traditional New Year's Eve party.

The members, their staff, wives, and mistresses had all been invited. Nevertheless, there would be some notable absentees. The elder John D. Rockefeller, who still owned a seat on the Exchange, had not visited the building for years. Jack Morgan, son of the legendary J.P., was a member, but had never entered the Exchange to do business—let alone sip clam juice with clerks in a drab public gallery. Many of the senior members—veterans who had traded for fifty years and who still talked mistily of the great stock market panic of 1893—had slipped away before the end of trading to reminisce in one of the speakeasies tucked away in side streets around the Exchange. Several of the affluent younger brokers decided to miss the party because there were more promising celebrations to attend uptown. Mindful of their mystique and social position, they knew it would be easy for them to pick up glamorous flappers at one of those parties.

Some of the biggest market manipulators would be absent because they were not members of the Exchange, preferring to mastermind their financial operations from outside. They were, therefore, not eligible to be invited to what was in essence a glorified office party.

Like all such gatherings, shop talk predominated. Almost everybody had a story to tell of a spectacular killing. An actor had made $40,000 from Vanadium Steel, Schulte Cigar Stores, Public Utilities of New Jersey, and Wright Aero. A waiter at the Exchange's Luncheon Club had resigned, $90,000 better off, as a result of tips passed on by his customers; he had successfully plunged into the market with $5,000 saved from ten- and twenty-five-cent tips. A stenographer was $15,000 richer through selling General Motors stock she had only had for two days; the girl promptly bought a fur coat and reinvested the balance in Anaconda Copper, a stock widely tipped to rise spectacularly in early 1929.

Everybody in the gallery knew what a tip could do. Only last March, John J. Raskob, a director of General Motors, had uttered a few sentences of optimism about the automobile industry, and his company's stock had driven upward twelve points. Raskob was a man to watch. So was Arthur Cutten. Six months earlier Cutten had moved his operations from Chicago to Wall Street. He was dealing in 200,000 shares a day—Armour & Co., Radio, Montana Power, United States Cast Iron Pipe. His takings so far were put at $100 million.

It was this sort of talk that made an otherwise dull party hum. An impromptu cabaret spot by a group of page boys caught the mood, their piping voices summing up a national attitude:

O hush thee, my babe, granny's bought some more shares,
Daddy's gone to play with the bulls and the bears,
Mother's buying on tips and she simply can't lose,
And baby shall have some expensive new shoes.

In a corner of the gallery, a group of young traders stiffened their clam cocktails with shots of potent homemade whiskey and listened eagerly to the words of Michael J. Meehan.

Just fifteen years before, Meehan was selling theater tickets at 71 Broadway and making about $5,000 a year. Now he was possibly the best known broker in America and president of his own firm, with eight Stock Exchange seats, the largest number ever held by a commission house. In 1920, when he had bought his first seat, he had two employees; now he had some 400, with an annual payroll of around $600,000.

When Meehan had become a broker, he had made only $18 profit his first month; he fell back to selling theater tickets to augment his income. Two years later he had saved enough to lay out the $90,000 needed to buy his first seat on the Exchange; his latest had cost him close to $500,000. He hadn't blinked when he'd written his check; money, Meehan was fond of telling newspapermen, was "there for the spending and making."

Short, with the first hint of a potbelly, he wore steel-rimmed spectacles that made him look older than his thirty-eight years. He worked hard to maintain his casual, off-beat image; he loved it when the media called him "one of the boys," when they reported he still wore soft shirts and did not "care a whoop whether his tie is the latest thing from London or whether it is knotted at just the proper point under his Adam's apple."

That sort of publicity helped to divert interest from his tough, ruthless style of operating, typified by the way he had speculated in, and made a fortune from, one of the most glamorous of all new stocks—RCA.

Mike Meehan was the Exchange's specialist in Radio; most buy or sell orders of the stock had to be made through him or members of his firm at Post Twelve. During 1928 he had helped engineer Radio's meteoric rise and made for himself an estimated $25 million.

Now he was preparing for a fresh foray—on the conservative Anaconda Copper stock.

In great secrecy, Meehan was planning to organize a pool with funds from such financial giants as Percy Rockefeller, the Fisher brothers, and John J. Raskob. He expected he would have no difficulty in finding other participants whose money would swell that available to over $30 million. Then they would act.

There were still weeks of careful groundwork to be laid before the first moves in the market would be made. But now Meehan was able to relax, sip a drink, and be glad that this New Year's Eve the orchestra had not singled him out by playing an Irish melody. He hated "all that ethnic nonsense."

Down on the Stock Exchange floor, there was now a milling crowd of men and women, some of them dancing, many of them fortified from hip flasks, the fashionable answer to Prohibition, now in its eighth year.

Two men moved ostentatiously and ceremoniously among the guests. Each was aware of his own importance.

The elder was Edward Henry Harriman Simmons, president of the New York Stock Exchange these past five years. The spiteful said that Simmons would really have preferred canonization, election to the papacy, or the role of lord mayor of London; that he had accepted only as a poor alternative the most important electoral office in the financial world. His few friends said that he was born for his exalted and unsalaried post. For them he epitomized the puritanism of those twenty-four brokers who in May 1792 gathered under a buttonwood tree and drew up a written agreement to deal only with each other on a common commission basis, so forming the Exchange Simmons now presided over.

His few public pronouncements on the market were predictable and ponderous. The press preferred to quote his companion.

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Excerpted from The Day The Bubble Burst by Gordon Thomas, Max Morgan-Witts. Copyright © 1979 Gordon Thomas and Max Morgan-Witts. Excerpted by permission of OPEN ROAD INTEGRATED MEDIA.
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