1929: Inside the Greatest Crash in Wall Street History--and How It Shattered a Nation

John Raskob plans a dinner party at his lavish Carlton House apartment for Democratic Party elites, including his friend, the recently defeated presidential candidate, Al Smith. The event is his “Anti-Hoover Banquet,” where he intends to announce he will not resign as DNC chairman despite Smith’s defeat (116). Raskob plans to use his immense personal fortune to underwrite a four-year campaign of relentless attacks on Hoover’s presidency. His opposition is deeply personal, stemming from Smith’s loss to Hoover. Raskob is also considering a covert press campaign to undermine Hoover.

Raskob began his career as a stenographer. He was hired by Pierre du Pont, became DuPont’s treasurer, and led a takeover of General Motors. He amassed additional wealth in the stock market. Smith’s defeat was the first major public setback of his life. In political circles, Raskob is disliked, but he is a business hero and his words can move markets.

In 1926, Raskob befriended fellow Catholic and Prohibition opponent Al Smith in 1926. In March 1928, Raskob gave Smith 1,000 shares of RCA stock and, indebted, Smith asked Raskob to be his campaign chairman and head the DNC. This appointment drew criticism from Carter Glass and Franklin Delano Roosevelt and, after Raskob failed to notify the GM board of this possible conflict of interest, a vote by the GM board removed Raskob as finance chairman, although he remains on the board. Now lacking his previous salary, Raskob sold $20 million in GM stock to finance his political activities. Despite raising significant funds for the Smith campaign, Raskob’s political inexperience has been exposed, especially as his prediction of a landslide victory for Smith proved grossly inaccurate. Privately, Raskob believes anti-Catholic bigotry led to Smith’s loss.

At the dinner Raskob plans to tell his guests he will professionalize the DNC and move its headquarters to Washington. He must also address the party’s $1.3 million debt, primarily owed to County Trust Company, run by his friend James J. Riordan. The loans are guaranteed by wealthy donors and Raskob intends to make the guarantors pay, though many, including Bernard Baruch, believe he should cover the debt himself.

On Sunday evening, April 14, William Durant arrives at Steinway Hall to give a radio address on WABC. He has paid for 15 minutes of airtime on the Columbia Broadcasting System. Having failed to convince Hoover directly, Durant decides to use public pressure.

At 11:00 pm, Durant begins his speech, framing the situation as a “great battle between business interests and the Federal Reserve Board” (127). He accuses the Fed of creating a panic that cost the country hundreds of millions of dollars and, citing a poll of 500 industrial leaders, he claims 97.5% oppose the Fed’s credit restrictions. He blames the March 26 market plunge on the Fed, praises Charles Mitchell for stopping the panic, and criticizes Senator Glass’s threats against Mitchell. Durant closes by declaring his confidence in the country and its markets. His speech makes the front page of The New York Times, and he sends a copy to Hoover. Five days later, William and Catherine Durant sail to Europe for a six-week vacation.

In Washington, Durant’s speech is viewed as a taunt. Senator James Couzens of Michigan, who shares Glass’s disdain for Wall Street, dismisses Durant’s motives as selfish. Glass states that Durant has lured more “amateur gamblers” into the market than any 40 other individuals. While Durant is abroad, Glass and Couzens begin discussing how to rein in the financial industry. They are concerned about the pending Smoot-Hawley tariff bill, which Glass decries as “economic insanity.” Believing the bill will pass, he plans to insert an amendment that would levy a 5% tax on stocks held for less than 60 days, aimed at disincentivizing speculators.

John Raskob moves into his new office at 230 Park Avenue. Following his successful anti-Hoover dinner, Raskob has hired Jouett Shouse as chairman of the DNC, reduced the party’s debt, and is seeking office space in Washington. He has not yet found a publicity “assassin” to run his smear campaign against Hoover.

Raskob is annoyed that a newspaper has prematurely reported on his new business venture, the Equities Security Company. He had delayed the launch because he felt the market was frothy. Deciding to speak to the press to correct the record. Raskob calls reporters to his new, opulent office and unveils his plan “to help others make money” (133). He presents his ambition as being to help working people invest in the stock market. The new company will offer professionally chosen stocks and allow customers to buy on an installment plan. Raskob argues that utilizing credit helps develop character. When asked about timing, he says he is unsure, acknowledging that the market may be too high at present.

In a conversation with Jouett Shouse about the anti-Hoover campaign, Raskob is introduced to the name Charley Michelson. Shouse recommends Michelson for Raskob’s smear campaign, a journalist known for his aggressive style. They agree Michelson will be hired as Raskob’s publicity director, with a $25,000 salary; Raskob delegates the hiring to Shouse to create plausible deniability. After one brief meeting, Raskob steps aside, and Michelson begins his work.

On June 4, Thomas Lamont records in his Paris diary that a deal on Germany’s war debts has been struck. The agreement is called the Young Plan after Owen Young, one of the American businessmen involved. The plan schedules reparations payments of about $6 billion over 59 years.

Negotiations had been stalled by the intransigence of German negotiator Dr. Hjalmar Schacht. Lamont and a weary Young were ready to give up, but David Sarnoff, a member of the reparations committee, convinced them to stay. Young, impressed with Sarnoff’s skills, suggested Sarnoff tackle Schacht himself. Lamont agreed.

On May 1, Sarnoff and Schacht had their first meeting, which lasted 18 hours and resulted in an outline for a settlement. Sarnoff was promoted to lead the direct negotiations. During negotiations, Schacht was incensed after a French family was pressured to withdraw a dinner invitation to him because he is Jewish. Sarnoff calms Schacht by relating his own experiences with anti-Jewish prejudice. After Schacht denies prejudice exists in Germany, Sarnoff cites the burgeoning Nazi movement. Schacht reveals he speaks Hebrew, having earned his doctorate on the language, and recites Genesis, deepening their mutual respect.

In late May, Jack Morgan promises Sarnoff in a telegram that, if he secures a signed agreement, he can have anything he asks for. Sarnoff returns the next morning with the signed deal and asks for a white meerschaum pipe like Morgan’s, which is promptly delivered.

On the voyage home, Lamont declines an offer from New York Mayor Jimmy Walker for a ticker-tape parade. Turning to the markets, he grows troubled, although he continues with public boosterism. In a letter to his son, Tom, he shares his private anxiety and instructs him to liquidate about $4 million of the bank’s holdings in stocks, noting that “cash is a good asset” to hold (146).

On June 29, Charles Mitchell and William Durant have lunch at The Plaza Hotel. The stock market is at an all-time high. Mitchell has just received a $660,000 half-year dividend.

In the dining room, they see astrologist Evangeline Adams, whose clients include Charlie Chaplin and J. Pierpont Morgan. John Raskob, Al Smith, and others enter. The men, all of whom participate in stock pools, greet each other and exchange news. A recent Anaconda Copper pool lost money for investors like Durant and Raskob. Mitchell has recently directed National City to buy 300,000 shares of Anaconda, a client company of which he is now a director. Raskob has co-authored an article for Ladies’ Home Journal titled “Everybody Ought to Be Rich,” promoting his plan for a small-investor trust. The article promises wealth by investing just $15 per month for 20 years. Raskob plans to launch his Equities Security Company in the fall, as he privately worries the market is overvalued and wants to cash in before this. Mitchell and Durant are concerned about Carter Glass’s proposed amendment to the Smoot-Hawley tariff bill, which would impose a 5% tax on stocks held less than 60 days.

By mid-July, famed bear Jesse Livermore gives in to the bull market. On August 12, Charles Mitchell is greeted by applauding crowds on his walk to work. He is unconcerned by his rival, Albert Wiggin’s Chase National Bank, as he is secretly plotting a takeover of the Corn Exchange Bank to make National City the world’s largest bank.

Throughout August, Carter Glass continues his public attacks on speculators, and Mitchell in particular. On August 17, Michael Meehan launches the first oceangoing stock brokerage on the liner Leviathan. Jack Morgan is having the world’s largest private yacht built. On August 29, Al Smith announces his new job as president of a company that will build the Empire State Building, keeping secret that the project is John Raskob’s brainchild.

From Scotland, Bernard Baruch cables Mitchell for his market opinion. The Dow is at a new high. Mitchell replies that the situation is exceptionally sound. Jesse Livermore remains skeptical and reverts to his bearish stance.

On Labor Day, September 2, Evangeline Adams tells a reporter the Dow could rise indefinitely. The next day, the Dow hits an all-time high of 381. At a business conference, economist Roger Babson warns a crash is coming. Babson’s warning spreads via the ticker, causing a 3% market drop known as the “Babson Break.” The economy shows signs of softening. Walter Sachs of Goldman Sachs returns from Europe to find his partner making increasingly risky investments.

The market shakes off the Babson Break, and Yale economist Irving Fisher asserts that stock prices are justified. Brokers’ margin loans now total $8.5 billion. President Hoover is unnerved by the market and blames the Federal Reserve’s inaction. He is reluctant to criticize his predecessor, Coolidge, or Treasury Secretary Andrew Mellon. The White House is forced to deny reports of a rift between Hoover and Mellon.

On September 18, Thomas Lamont meets with Hoover at the White House. On September 20, Mitchell and his wife Elizabeth board the liner Olympic for a four-week vacation in Europe. Before departing, Mitchell tells the press there is nothing to worry about. Days earlier, he had finalized a deal to merge National City with the Corn Exchange Bank, contingent on its stock price remaining above $450 a share. While in Berlin, Mitchell celebrates his 52nd birthday.

On September 22, Jesse Livermore works on a book about his investment philosophy, having made $1 million by shorting the market during the Babson Break. His wife, Dorothy, listens to his notes and gives him advice. She asks about secret messages from a source in London regarding the imminent collapse of British financier Clarence Hatry and a plan by the Bank of England to raise interest rates. This intelligence has prompted Livermore to short several stocks, netting him a significant profit. He and his staff are at their “battle stations” in preparation for a fall (176).

John Raskob hosts a lunch at his Carlton House apartment for financiers including William Durant, to discuss the volatile market. The Dow has fallen 10% since Labor Day. An architect, William Lamb, is also a guest. Raskob, who has been reducing his own market exposure, tells the group they must project confidence. Raskob and Lamb unveil a large model of the Empire State Building. Having previously stayed in the background, Raskob now publicly claims authorship of the project. He presents the building as his personal stake in America’s future.

The narrative describes the skyscraper boom, with the Chrysler Building set to become the world’s tallest. Raskob is a new type of builder, with money and ego, but no construction experience. His motivations include helping his friend Al Smith and competing with Walter Chrysler. Raskob urges his guests to keep buying stocks and talking up the market to prevent a crash.

On October 6, the ex-Prime Minister of the UK, Winston Churchill, arrives in New York, checking into The Plaza Hotel. His friend Bernard Baruch is covering his expenses. After eight weeks of touring North America, Churchill has become swept up in stock market fever. Baruch has arranged the trip to help Churchill, who was in debt and out of a government position, shore up his finances through a lecture tour in America.

Churchill’s private secretary notes that Churchill knows nothing about investing and treats it like roulette. They have toured Canada in a luxury rail car provided by Charles Schwab. Inspired by the prosperity, Churchill has wired for an advance to buy Canadian oil stocks. Touring to San Simeon, California, to visit William Randolph Hearst, Churchill agrees to write for Hearst’s newspaper syndicate. At Hearst’s home, he meets an E. F. Hutton partner and opens a new trading account. In Hollywood, Hearst hosts a party for Churchill attended by Charlie Chaplin and Marion Davies. On October 5, Baruch meets Churchill in Chicago and escorts him to New York. Inspired, Churchill begins trading heavily on margin.

The Churchills attend a lavish party at the Park Avenue penthouse of publisher Condé Nast. Churchill observes that in America, unlike Europe, the masses aspire to be millionaires. He travels to Washington, DC, to meet President Hoover, whom he dislikes. Baruch has promised a farewell dinner for Churchill with Wall Street’s most influential figures at the end of October.