The Great Depression

Another of the books I did for Rosen Publishing’s young adult school library series was Critical Perspectives on The Great Depression, part of a series called “Critical Anthologies of Nonfiction Writing.” It was a collection of contemporary writings tracing the arc of the Great Depression, from the stock market crash of 1929 through to the death of FDR in 1945. I selected the articles for the book and wrote the introductory material.

Critical Perspectives on The Great Depression: Introduction

“The only thing we have to fear is fear itself.”

President Franklin D. Roosevelt, first inaugural address, March 4, 1933

Social Security. The federal income tax. Unemployment insurance. Welfare. The Federal Bank Deposit Insurance Corporation. The Tennessee Valley Authority. The National Labor Relations Board. The Securities and Exchange Commission. The Federal Housing Authority.

These are just some of the federal institutions and agencies that we today either take for granted or resent for their intrusions into our lives and business. Before October 29, 1929, most of these federal institutions (and dozens more just like them) would have been unthinkable to the citizens of the United States, accustomed as they were to a laissez-faire, or hands-off, style of government. Yet after 1929, these programs resurrected the United States from the depths of the greatest economic disaster to ever strike this country, the crash and near-decade long recovery that came to be known as the Great Depression.

It seemed was as though no one wanted to see it coming. Ever since 1919 and the end of the first World War, the United States had been on what appeared to be an ever-cresting tide of economic growth, with no end in sight. Gone were the restraints of the staid, pre-War Edwardian era, shoved roughly aside by returning veterans with a reckless disregard for what lay ahead. Here were the Roaring Twenties, the swinging Jazz Age, a decade of exuberance, of excess, of wild abandon. While the Eighteenth Amendment had outlawed the transportation and sale of alcoholic beverages (1919), anyone wanting a drink knew where to find the nearest speakeasy for a shot of illegal whiskey, accompanied by the hot sounds of the popular new jazz music.

The nation was fairly exploding with prosperity, innovation, and creativity. With only a little money down, and little government regulation or interference, anyone could invest in the booming stock market and find themselves—on paper, at least—instantly wealthy. Air travel went from being a novelty craze to commercial viability with Charles Lindbergh’s successful 1927 solo flight across the Atlantic Ocean, even as Americans bought millions of Henry Ford’s new Model A automobiles to create the most mobile society in the history of the world. F. Scott Fitzgerald, Theodore Dreiser, and Ernest Hemingway brought literature into the modern age with such works as “The Great Gatsby,” “An American Tragedy,” and “A Farewell to Arms,” while motion pictures learned to talk, starting with “The Jazz Singer.”

There seemed no stopping America. “The chief business of the American people is business,” President Calvin Coolidge told the press in 1925 and no one could argue with that assessment. For most of its first century, the U.S. had been a largely agrarian society, but by the end of the first third of the Twentieth Century, the country had turned decidedly urban and industrialized, with a majority of its population living, for the first time, in cities rather than on farms. Washington, D.C., the nation’s capital, was still considered a sleepy little Southern town, “A strange city, set up in the first place to be the center of government and, like government itself at that time, a city moving slowly and doing little,” according to reporter David Brinkley in his book, “Washington Goes to War.” Government was kept small, operating with a bureaucracy that can only be called miniscule compared to the hundreds of thousands of federal workers that today keeps the monolithic machine of government humming.

Herbert Hoover, who in 1922 spoke of “American individualism” over governmental regulation and interference in the lives of its citizens, was elected president in 1928. President Hoover, former head of the American Relief Administration (which organized shipments of food for an estimated one billion starving people in fifty-seven countries in post-World War I Europe) and Secretary of Commerce under Presidents Warren G. Harding and Calvin Coolidge, was a believer in balancing responsibility for the welfare of the people with a faith in free enterprise. During his 1929 campaign, Hoover proclaimed “We in America are nearer to the final triumph over poverty than ever before in the history of any land.”

Between May 1928 and September 1929, the average price of stocks rose forty per cent, with trading exploding from two to three million shares per day to over five million. Those interested in investing in the stock market could do so “on margin,” that is, for a small cash down payment, using the stock itself as collateral for its purchase; full payment came due when the stock was sold…usually, in those heady days, for a significant profit that would more than cover the purchase price. The market, once the playground of the wealthy, was suddenly open to Everyman. The railroad tycoon and the shoeshine boy stood side-by-side, watching the rise and fall (but mostly rise) of the Wall Street stock ticker.

Stock prices spiraled upwards, speculation ran rampant, and investors kept jumping on board the money-making wagon. But that wagon could support only so many before it collapsed under the weight and, on Tuesday, October 29, 1929, that’s exactly what happened, dumping the United States and the rest of the world into the throes of the Great Depression. In a single day, billions of dollars were lost (it is estimated that on the New York Stock Exchange alone, losses exceeded $8,000,000,000; this at a time when the average per capita urban household income was $750 a year and $273 for farming households) as more than 16,000,000 shares were frantically traded in a futile attempt to staunch the financial bloodletting. Small investors who had made their paper-profits on stocks purchased at ten per cent of face value were suddenly forced to pay the balance due on their stocks. But with prices plummeting so low, a majority of these small-timers had no profits to cover them and lost everything.

Jazz Age exuberance and excess turned almost immediately to desperation and deprivation. Banks and businesses failed, the money supply shrank, and, by 1932, the unemployment rate would reach a staggering 23.6 per cent (and continue on up, peaking at 24.9 per cent) as over thirteen million Americans lost their jobs. Relief efforts were organized across the country as families with no source of income were forced to stand in the infamous bread lines and soup kitchens, which were, for many, their only source of food.

Hundreds of thousands took to the road seeking work at any wage; entire families begin a westward migration from the southern and northern Plain states (Kansas, Oklahoma, Texas, New Mexico, Nevada, and Arkansas), which suffered the added tragedy of one of the worst droughts in history that turned a large section of the nation into a Dust Bowl. President Hoover took a number of steps to stem the tide of desperation, including the Reconstruction Finance Corporation (RFC), the Federal Home Loan Bank Act, and the banking regulatory Glass-Steagall Act of 1932, but it wasn’t until newly elected President Franklin D. Roosevelt took office in 1933 that the government’s response was equal to the magnitude of the crisis. As the Democratic nominee for president, Roosevelt had promised “I pledge you, I pledge myself, to a new deal for the American people.”

Roosevelt was as good as his word. In the first one hundred days of his administration, his “New Deal” instituted a concentrated program of legislative activity, sending recovery bill after recovery bill to a Congress that, unsure how to respond, had not done nearly enough to help their constituents through this unprecedented financial catastrophe. Under the president’s guidance, Congress created, in swift succession, the Agricultural Adjustment Administration (AAA), the Civilian Conservation Corps (CCC), the Farm Credit Administration (FCA), the Federal Deposit Insurance Corporation (FDIC), the Federal Emergency Relief Administration (FERA), the National Recovery Act (NRA), the Public Works Administration (PWA), and the Tennessee Valley Authority (TVA), to name a few. This alphabet soup of federal agencies—along with a rash of banking, securities, and credit acts that followed—were all aimed at getting Americans back to work and the floundering economy back on track.

But for all the efforts of FDR (whose popularity as leader would lead him to being reelected an unprecedented three times) and his dedicated administration, it would be more than a decade before the nation, and the world, would truly recover from the events of that single, terrible day.

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Introduction to “Stocks Collapse in 16,410,030-Share Day, but Rally at Close Cheers Brokers; Bankers Optimistic, to Continue Aid”

It is difficult to point to any single cause of the Crash of 1929, but an editorial in The New York Times just days before the calamitous events of October 29 pointed to the “orgy of speculation” that had driven stock prices so high as the main culprit.

In “Looking Back at the Crash of 1929,” (October 29, 1999), The New York Times wrote, “’Playing the stock market has become a major American pastime,’ reported The Times in a magazine article published on March 24, 1929. ‘It is quite true that the people who know the least about the stock market have made the most money out of it in the last few months. Fools who rushed in where wise men feared to tread ran up high gains.’”

Fools continued rushing in and, following two days in which the Stock Market lost nearly one-quarter of its value, the bottom gave way and there was no where else to go but down. By the time the plunge had been checked, the Dow would drop eighty-nine percent from its 1929 peak.

“Stocks Collapse in 16,410,030-Share Day, but Rally at Close Cheers Brokers; Bankers Optimistic, to Continue Aid”

by The New York Times

Originally published in The New York Times (October 30, 1929)

Stock prices virtually collapsed yesterday, swept downward with gigantic losses in the most disastrous trading day in the stock market’s history. Billions of dollars in open market values were wiped out as prices crumbled under the pressure of liquidation of securities which had to be sold at any price.

There was an impressive rally just at the close, which brought many leading stocks back from four to fourteen points from their lowest points of the day.

Trading on the New York Stock Exchange aggregated 16,410,030 shares; on the Curb, 7,096,300 shares were dealt in. Both totals far exceeded any previous day’s dealings.

From every point of view, in the extent of losses sustained, in total turnover, in the number of speculators wiped out, the day was the most disastrous in Wall Street’s history. Hysteria swept the country and stocks went overboard for just what they would bring at forced sale.

Efforts to estimate yesterday’s market losses in dollars are futile because of the vast number of securities quoted over the counter and on out-of-town exchanges on which no calculations are possible. However, it was estimated that 880 issues, on the New York Stock Exchange, lost between $8,000,000,000 and $9,000,000,000 yesterday. Added to that loss is to be reckoned the depreciation on issues on the Curb Market, in the over the counter market and on other exchanges.

Two Extra Dividends Declared

There were two cheerful notes, however, which sounded through the pall of gloom which overhung the financial centers of the country. One was the brisk rally of stocks at the close, on tremendous buying by those who believe that prices have sunk too low. The other was that the liquidation has been so violent, as well as widespread, that many bankers, brokers and industrial leaders expressed the belief last night that it now has run its course.

A further note of optimism in the soundness of fundamentals was sounded by the directors of the United States Steel Corporation and the American Can Company, each of which declared an extra dividend of $1 a share at their late afternoon meetings.

Banking support, which would have been impressive and successful under ordinary circumstances, was swept violently aside, as block after block of stock, tremendous in proportions, deluged the market. Bid prices placed by bankers, industrial leaders and brokers trying to halt the decline were crashed through violently, their orders were filled, and quotations plunged downward in a day of disorganization, confusion and financial impotence.

Change Is Expected Today

That there will be a change today seemed likely from statements made last night by financial and business leaders. Organized support will be accorded to the market from the start, it is believed, but those who are staking their all on the country’s leading securities are placing a great deal of confidence, too, in the expectation that there will be an overnight change in sentiment; that the counsel of cool heads will prevail and that the mob psychology which has been so largely responsible for the market’s debacle will be broken.

The fact that the leading stocks were able to rally in the final fifteen minutes of trading yesterday was considered a good omen, especially as the weakest period of the day had developed just prior to that time and the minimum prices for the day had then been established. It was a quick run-up which followed the announcement that the American Can directors had declared an extra dividend of $1. The advances in leading stocks in this last fifteen minutes represented a measurable snapback from the lows. American Can gained 10; United States Steel common, 7 1/2, General Electric, 12; New York Central, 14 1/2, Anaconda Copper, 9 1/2; Chrysler Motors 5 1/4; Montgomery Ward, 4 1/4 and Johns Manville, 8. Even with these recoveries the losses of these particular stocks, and practically all others, were staggering.

Yesterday’s market crash was one which largely affected rich men, institutions, investment trusts and others who participate in the stock market on a broad and intelligent scale. It was not the margin traders who were caught in the rush to sell, but the rich men of the country who are able to swing blocks of 5,000, 10,000 up to 100,000 shares of high-priced stocks. They went overboard with no more consideration than the little trader who was swept out on the first day of the market’s upheaval, whose prices, even at their lowest of last Thursday, now look high in comparison.

The market on the rampage is no respecter of persons. It washed fortune after fortune away yesterday and financially crippled thousands of individuals in all parts of the world. It was not until after the market had closed that the financial district began to realize that a good-sized rally had taken place and that there was a stopping place on the downgrade for good stocks.

Third Day of Collapse

The market has now passed through three days of collapse, and so violent has it been that most authorities believe that the end is not far away. It started last Thursday, when 12,800,000 shares were dealt in on the Exchange, and holders of stocks commenced to learn just what a decline in the market means. This was followed by a moderate rally on Friday and entirely normal conditions on Saturday, with fluctuations on a comparatively narrow scale and with the efforts of the leading bankers to stabilize the market evidently successful. But the storm broke anew on Monday, with prices slaughtered in every direction, to be followed by yesterday’s tremendous trading of 16,410,030 shares.

Sentiment had been generally unsettled since the first of September. Market prices had then reached peak levels, and, try as they would, pool operators and other friends of the market could not get them higher. It was a gradual downward sag, gaining momentum as it went on, then to break out into an open market smash in which the good, the bad, and indifferent stocks went down alike. Thousands of traders were able to weather the first storm and answered their margin calls; thousands fell by the wayside Monday and again yesterday, unable to meet the demands of their brokers that their accounts be protected.

There was no quibbling at all between customer and broker yesterday. In any case where margin became thin a peremptory call went out. If there was no immediate answer the stock was sold out “at the market” for just what it would bring. Thousands, sold out on the decline and amid the confusion, found themselves in debt to their brokers last night.

Three Factors in Market

Three factors stood out most prominently last night after the market’s close. They were:

Wall Street has been able to weather the storm with but a single Curb failure, small in size, and no member of the New York Stock Exchange has announced himself unable to meet commitments.

The smashing decline has brought stocks down to a level where, in the opinion of leading bankers and industrialists, they are a buy on their merits and prospects, and brokers have so advised their customers.

The very violence of the liquidation, which has cleaned up many hundreds of sore spots which honeycombed the market, and the expected ability of the market to right itself, since millions of shares of stock have passed to strong hands from weak ones.

Bids Provided Where Needed

One of the factors which Wall Street failed to take into consideration throughout the entire debacle was that the banking consortium has no idea of putting stocks up or to save any individuals from loss, but that its sole purpose was to alleviate the wave of financial hysteria sweeping the country and provide bids, at some price, where needed. It was pointed out in many quarters that no broad liquidating movement in the stock market has ever been stopped by so-called good buying. This is helpful, of course, but it never stops an avalanche of liquidation, as was this one.

There is only one factor, it was pointed out, which can and always does stop a down swing–that is, the actual cessation of forced liquidation. It is usually the case, too, that when the last of the forced selling has been completed the stock market always faces a wide-open gap in which there are practically no offerings of securities at all. When that point is reached, buying springs up from everywhere and always accounts for a sharp, almost perpendicular recovery in the best stocks. The opinion was widely expressed in Wall Street last night that that point has been reached, or at least very nearly reached.

Huge Blocks Offered at Opening

The opening bell on the Stock Exchange released such a flood of selling as has never before been witnessed in this country. The failure of the market to rally consistently on the previous day, the tremendous shrinkage of open market values and the wave of hysteria which appeared to sweep the country brought an avalanche of stock to the market to be sold at whatever price it would bring.

From the very first quotation until thirty minutes after 10 o’clock it was evident that the day’s market would be an unprecedented one. In that first thirty-minutes of trading stocks were poured out in 5,000, 10,000, 20,000 and 50,000 share blocks at tremendous sacrifices as compared with the previous closing. The declines ranged from a point or so to as much as 29 1/2 points, and the reports of opening prices brought selling into the market in confused volume that has never before been equaled.

In this first half hour of trading on the Stock Exchange a total of 3,250,800 shares were dealt in. The volume of the first twenty-six blocks of stock dealt in at the opening totaled more than 630,000 shares.

There was simply no near-by demand for even the country’s leading industrial and railroad shares, and many millions of dollars in values were lost in the first quotations tapped out. All considerations other than to get rid of the stock at any price were brushed aside.

Brokerage Offices Crowded

Wall Street was a street of vanished hopes, of curiously silent apprehension and of a sort of paralyzed hypnosis yesterday. Men and women crowded the brokerage offices, even those who have been long since wiped out, and followed the figures on the tape. Little groups gathered here and there to discuss the fall in prices in hushed and awed tones. They were participating in the making of financial history. It was the consensus of bankers and brokers alike that no such scenes ever again will be witnessed by this generation. To most of those who have been in the market it is all the more awe-inspiring because their financial history is limited to bull markets.

The machinery of the New York Stock Exchange and the Curb market were unable to handle the tremendous volume of trading which went over them. Early in the day they kept up well, because most of the trading was in big blocks, but as the day progressed the tickers fell further and further behind, and as on the previous big days of this week and last it was only by printing late quotations of stocks on the bond tickers and by the ten-minute flashes on stock prices put out by Dow, Jones & Co. and the Wall Street News Bureau that the financial district could get any idea of what was happening in the wild mob of brokers on the Exchange and the Curb.

Peaks Reached in September

The bull market, the most extensive in the history of the country, started in the Coolidge Administration and reached its height with a tremendous burst of speculation in the public utility issues, the flames of speculation being fed by mergers, new groupings, combinations and good earnings.

The highest prices were reached in early September. At that time the market had a quick break and an equally rapid recovery. Then started a slow sag. Two developments, not considered important at the time, served to start the ball rolling downhill. The first of these was the refusal of the Massachusetts Public Service Commission to permit the Boston Edison Company to split its shares; the second was the collapse of a pool in International Combustion Engineering shares on the Stock Exchange, an over-exploited industrial which had been pushed across 100 by a pool and which crashed when the corporation passed its dividend.

In the meanwhile, the Hatry failure abroad had diverted a tremendous volume of selling to the United States, and under these influences the market continued to sag until it literally crumpled of its own weight.

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Introduction to “James Agee On the Death of FDR”

“Zest for living is one of his most conspicuous characteristics, and he has enjoyed to the full a job that ruined and broke so many other men…. He rises to an emergency as a trout to the fly…. In Franklin Roosevelt there is fireman’s blood, and he responds to the three-alarm bell like a veteran.”

—Marquis W. Childs, “Mr. Roosevelt,” Survey Graphic (May 1, 1940)

In many ways, the story of the Great Depression is also FDR’s story. His election in 1932 marked the renewal of America’s hope and the first steps towards recovery. By the time of his death, on April 12, 1945—four months before the war’s end—the country had emerged from the dark days of the Depression. The post-War boon would carry the country into the 1960s.

Franklin Roosevelt’s death was a shock to the national psyche. But it is testament to his leadership that the country, freed from the burden of the Depression and soon to be done with war, would have the strength to endure whatever was to come….

James Agee on the Death of FDR

Originally published in Time Magazine, April 12, 1945

In Chungking the spring dawn was milky when an MP on the graveyard shift picked up the ringing phone in U.S. Army Headquarters. At first he heard no voice on the other end; then a San Francisco broadcast coming over the phone line made clear to him why his informant could find no words. A colonel came in. The MP just stared at him. The colonel stared back. After the moment the MP blurted two words. The colonel’s jaw dropped; he hesitated; then without a word he walked away.

It was fresh daylight on Okinawa. Officers and men of the amphibious fleet were at breakfast when the broadcast told them. By noon the news was known to the men at the front, at the far sharp edge of the world’s struggle. With no time for grief, they went on with their work; but there, while they worked, many a soldier wept.

At home, the news came to people in the hot soft light of the afternoon, in taxicabs, along the streets, in offices and bars and factories. In a Cleveland barbershop, 60 year old Sam Katz was giving a customer a shave when the radio stabbed out the news. Sam Katz walked over to the water cooler, took a long, slow drink, sat down and stared into space for nearly ten minutes. Finally he got up and painted a sign on his window, “Roosevelt is Dead.” Then he finished the shave. In an Omaha poolhall, men racked up their cues without finishing their games, walked out. In a Manhattan taxicab, a fare told the driver, who pulled over to the curb, sat with his head bowed, and after two minutes resumed his driving.

Everywhere, to almost everyone, the news came with the force of a personal shock. The realization was expressed in the messages of the eminent; it was expressed in the stammering and wordlessness of the humble. A woman in Detroit said: “It doesn’t seem possible. It seems to me that he will be back on the radio tomorrow, reassuring us all that it was just a mistake.”

It was the same through that evening, and the next day, and the next: the darkened restaurants, the shuttered nightclubs, the hand lettered signs in the windows of stores: “Closed out of Reverence for F.D.R.”; the unbroken, 85 hour dirge of the nation’s radio; the typical tributes of typical Americans in the death notice columns of their newspapers (said one signed by Samuel and Al Gordon: “A Soldier Died Today”)

It was the same on the cotton fields and in the stunned cities between Warm Springs and Washington, while the train, at funeral pace, bore the coffin up April’s glowing South in reenactment of Whitman’s great threnody.

It was the same in Washington, in the thousands on thousands of grief wrung faces which walled the caisson’s grim progression with prayers and with tears. It was the same on Sunday morning in the gentle landscape at Hyde Park, when the burial service of the Episcopal Church spoke its old, strong, quiet words of farewell; and it was the same at that later moment when all save the gravemen were withdrawn and reporters, in awe felt hiding, saw how a brave woman, a widow, returned, and watched over the grave alone, until the grave was filled.

Tags: Critical Perspectives on the Great Depression, FDR, Great Depression, nonfiction, Rosen Publishing, World War II