News & Politics

Black October

Everyone Thought the Bull Market Would Last. Then They Hoped and Hoped.


–Washington Times,

October 29, 1929

The crash had been a long time coming. So long that experts had said it would never happen. We live in a new economy, they argued.

A year earlier Herbert Hoover had been elected president by sounding that theme. There was no reason, he said, that a business-friendly government couldn't sustain the bull market of the 1920s into the '30s and beyond. A self-made millionaire like Hoover was just the man to do it. An engineer by training, he knew how to make things work.

All that would change after the last Tuesday of October 1929.

Every generation has its date to remember: September 11, 2001; November 22, 1963; December 7, 1941; October 29, 1929. Each marked the end of an era.

But where the day now remembered as Black Tuesday differed from the rest was in its immediate impact.

Looking back, October 29 is viewed as the moment when the country stepped into a world of soup kitchens, bread lines, and "Hoovervilles" filled with homeless families. But at the time, few people viewed the stock-market crash as anything more than a temporary setback.

The next day's newspapers would report that in spite of a "dizzy stock plunge" on Wall Street, all was well with the nation's economy.

from the WASHINGTON EVENING STAR, September 30, 1929:

"A note of optimism was heard today amid the echoes of a Wall Street crash in which a tidal wave of 16,410,1130 shares overwhelmed the stock market, breaking all records. . . . The note was struck by John J. Raskob, member of the finance committee of General Motors, who declared that 'the industrial list is now filled with real bargains, and prudent investors who buy stocks in huge quantities will profit handsomely when this hysteria is over.' "

There was no white house spin machine back then. But the President, through his ties to business, knew that a calming word from Washington was needed.

A week earlier, after a mild selling spree had shaken up Wall Street, Hoover had issued a statement expressing his conviction that "the fundamental business of the nation is on a sound basis."

This time, he called in a surrogate. Assistant Commerce secretary Julius Klein–a government economist–was given 30 minutes on CBS radio to explain the administration's position. There's no need to panic, said Klein. Regardless of "speculative uncertainties, the industrial and commercial structure of the country is sound."

Calm, reassuring–and it worked.

On the day following Klein's speech, President Hoover could enjoy his morning coffee while reading headlines: "BUY" IS CRY ON STOCK MARKET (Washington Times) and PRICES BOUNCE BACK AS BARGAIN HUNTERS PLUNGE INTO MARKET (Washington Post).

"Fear was transformed into confidence on Wall Street today," said the upbeat Post, "bringing to an apparently definite conclusion the greatest securities panic in the history of the world."

The reason for the upturn? As the Post story put it, "a rush of 'small fry' bargain hunters" who "regarded the decline as an opportunity rather than a disaster."

October 31, 1929, was Halloween. Readers in Washington that day would learn in the Evening Star about a Rhode Island businessman who had "dropped dead in his broker's office watching the stock ticker."

That businessman turned out to have a better sense of the future than President Hoover. Stock prices went on to fall more than 75 percent, putting a quarter of the work force into unemployment lines and costing Hoover the White House. *