Everyman’s Financial Meltdown

By RON CHERNOW
NYT

FOR connoisseurs of financial mayhem, the stock market crash of October 1929, which started 80 years ago this week, still holds pride of place. Like a tautly directed drama, it unfolded with graphic horror at the corner of Broad and Wall Streets, captured in grainy black-and-white newsreels. It capped a stylish era in which well-tailored men and chic flappers set a racy tone for stock investing. To the delight of historians, it possessed clear-cut villains, a riveting story line and plenty of palpable abuses for reformers to correct.

In retrospect, the evils of the 1920s seem almost quaint in their simplicity. Finance today is far more esoteric, marked by complex securities sure to baffle reformers as they seek solutions to the problems exposed by last year’s crash.

Before the ’20s, common stocks were deemed unsuitable for ordinary investors. That stigma began to fade during World War I, when Liberty Loan drives encouraged Americans to own government bonds, feeding a taste for securities that persisted into the ’20s. To capitalize on this trend, commercial banks on Wall Street created securities affiliates and hired thousands of young stockbrokers who were untroubled by memories of past panics. Charles Mitchell, the head of National City Bank, prodded his recruits with pep talks and office contests to sell stocks with razzmatazz. The stock market quickly grew fashionable, with brokerage offices installed even on trans-Atlantic liners.

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