1929 Crash and Bankers

An anonymous emailer asks: "You’re pretty harsh on these execs, What should they have done?"

Fair enough question. When in doubt, I like to look to the past to find analogous situations. One can let history be your guide.

Here’s how in past crisises, certain men, now knwon as patriots, have behaved:

"Thursday Oct. 24, 1929: For so many months so many people had saved money and borrowed money and
borrowed on their borrowings to possess themselves of the little pieces of paper
by virtue of which they became partners in U. S. Industry. Now they were trying
to get rid of them even more frantically than they had tried to get them. Stocks
bought without reference to their earnings were being sold without reference to
their dividends. At around noon there came the no-bid menace. Even in a
panic-market, someone must buy the "dumped" shares, but stocks were dropping
from 2 to 10 points between sales—losing from 2 to 10 points before a buyer
could be found for them. Sound stocks at shrunk prices—and nobody to buy them.
It looked as if U. S. Industries’ little partners were in a fair way to bankrupt
the firm.

Then at 1:30 p. m., a popular broker and huntsman named Richard F. Whitney
strode through the mob of desperate traders, made swiftly for Post No. 2 where,
under the supervision of specialists like that doughty warrior, General Oliver
C. Bridgeman, the stock of the United States Steel Corp., most pivotal of all U.
S. stocks, is traded in. Steel too, had been sinking fast. Having broken down
through 200, it was now at 190. If it should sink further, Panic with its most
awful leer, might surely take command. Loudly, confidently at Post No. 2, Broker
Whitney made known that he offered $205 per share for 25,000 shares of Steel—an
order for $5,000,000 worth of stock at 15 points above the market. Soon tickers
were flashing the news: "Steel, 205 bid.” More and more steel was bought, until
200,000 shares had been purchased against constantly rising quotations. Other
buyers bought other pivotal stocks. In an hour General Electric was up 21
points, Montgomery Ward up 23, Radio up 16, A. T. & T. up 22. How far the
market would have gone downward on its unchecked momentum is difficult to say.
But brokers and traders alike agreed that the man who bid 205 for 25,000 shares
of Steel had made himself a hero of a financially historic moment.

That hero, Richard Whitney, head of Richard Whitney & Co., was brother of
George Whitney, Morgan Partner. Back of his action lay a noontime meeting held
at No. 23 Wall St., Home of the House of Morgan. Although an excited Hearst
reporter would have it that the Head of the House was present, actually, John
Pierpont Morgan was in Europe. It was Partner Thomas W. Lament with whom
conferred Charles E. Mitchell, National City Bank; William C. Potter, Guaranty
Trust; Albert H. Wiggin, Chase National Bank; Seward Prosser, Bankers Trust.
These men controlled resources of more than $6,000,000,000. They met briefly;
they issued no formal statement.
But to newsmen, Mr. Lamont remarked that
brokerage houses were in excellent condition, that the liquidation appeared
technical rather than fundamental. He also conveyed, without specifically
committing himself, the impression that the banks were ready to support the
And the meeting was hardly over before Hero Whitney had become Heroic.

Traders, talking over the Morgan meeting, failed to remember any previous
occasion on which a stock market conference had been called while a trading
session was still in progress. They did recall, however, that in 1907, with call
money at 125%. Secretary of the Treasury Cortelyou conferred with J. P. Morgan,
put $25,000,000 of Government funds into Manhattan banks, halted the Panic. They
remembered too the Northern Pacific crash of 1901. when, after Northern Pacific
stock had gone overnight from $150 to $1,000 a share, the House of Morgan,
representing the late great James J. Hill and the House of Kuhn, Loeb,
representing the late great Edward H. Harriman, compromised at $150 a share,
saved from ruin many a short. Then there was the U. S.-England war scare of 1895
when, with money at 80%, J. P. Morgan offered money at 6%, averted a threatened

Thus bankers have for a long time recognized their responsibilities as
panic-preventers, and when the glass house of speculation has cracked and
splintered, it has most often been the strong House of Morgan that has assumed
the responsibility of fame and brought order out of confusion."
(emphasis added)


Note that was $6 billion dollars — in 1929. I can’t even figure out what it is adjusted for inflation.

For those who had a hard time seeing this difference between Great Americans and assclowns, I hope this clarifies matters somewhat.

The full Time magazine is linked below . . .



Update: July 19, 2006 12:45pm

Yes, as a commenter pointed out, Whitney’s life ended badly — scandal and embezzlement, and fighting against the Securities Exchange Act and the establishment of the SEC — but the reference was to the bankers — JPMorgan and others, and not merely the one man executing the order.

You can read more about Whitney in the book Once in Golconda.


Update 2: July 19, 2006 1:52pm

A reader provides the following political angle on this mess:

The Tom Lamont partner from Morgan (mentioned in para 3, above), by the way, is the grandfather of the Ned Lamont who’s running against Senator Lieberman in the Democratic Senate primary here in Connecticut. Tom Lamont was JPM’s #2 guy. His mother was my mother’s roommate in college. We always got Christmas cards from them when I was growing up, with photos from Caneel Bay, Oyster Bay—always some very nice bay. There’s also a Lamont Library at Harvard. My parents always told me how wealthy they were, and somehow that translated (in my 14 year old mind) into maybe $15, $20 million. Ned L gave a net worth range in his filings, which went from $90-$300 million. 


Bankers v. Panic
Business & Finance
Nov. 4, 1929

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What's been said:

Discussions found on the web:
  1. scorpio commented on Jul 18

    barry, barry. nice try but as i’m sure u know, there are few Great Americans among the Wall St crowd. after the Crash, Richard Whitney was charged w embezzlement and served time in Sing Sing. he was a Blue Blood (bro’ was head of Morgan at the time) but lost on his speculations and basically borrowed and effectively stole money from friends, family and those who wanted to be associated w such an august name. more like Ken Lay. WW2 bailed this country out of Depression, not FDR and certainly not Wall St or captains of industry. we’re probly staring down the same gun a couple years hence.

  2. qw commented on Jul 18

    A few other differences is that the people stepping in in 1929 had as you say, 6 billion in assets. To offer 5 million to buy a stock a stop a panic is rather small and serves the buyers interest by preventing the remaining assets he owns from being devalued. Did he perhaps later liquidate some of his other holdings at higher prices? If not, what is the purpose of buying into a market that is ultamately going to go down 90% as the 29 market did by 33?

    And while some of the execs that received backdated options were probably plenty wealthy and most were probably atleast reasonably wealthy. Hardly any were on the order of the gentlemen enumerated from 1929. A few extra million when you are worth a few million actually makes a pretty big difference. When you are worth a billion, not so much.

    Also in 1929 a few very rich barrons could actually affect the market. Could anyone have bought the market on sept 18th, 2001 and curtailed the slide? I don’t think so.

    These assclowns as you call them are indeed that. While the “heros” of 1929 may not be performing the dispicable actions of the assclowns of 2001, they were not simply performing some kind of altruistic duty to the markets.

  3. Michael C. commented on Jul 18

    Today’s price action in the market just feels like total retail apathy. As if the retail investors are just pounding the market with small lots because they are sick of their miserable holdings. Not pain nor panic selling.

    Perhaps that is better? They say the opposite of love is not hate but apathy, so maybe the action today is saying something.

  4. Barry Ritholtz commented on Jul 18

    Embezzlement, and fighting against the Securities Exchange Act and the establishment of the SEC.

    But don’t focus just on the man who executed the orders — look at the behavior fo the bankers collectively.

    If you act to save Wall Street and the Nation from turmoil, yes, you are indirectly acting in some measure of self interest.

    But don’t miss the key differences: One group stepped up, and provided a temporary bottom. The other group cared not a whit for the nation, the exchanges, wall street or their shareholders.

    Are these the people you want in your life raft? Do you want them overseeing your capital at the companies they are now running?

    I am electing not to give them my dollars.

  5. ms commented on Jul 18

    “What cost $6000000000 in 1929 would cost $64828217946.49 in 2005”

  6. Mike M commented on Jul 18

    Barry, I think you are way off here. The main difference between then and now are:

    1. Back then agents (corporate managers, asset managers) used to believe in and live by a fiduciary responsibility.

    2. Our money was real (backed by gold). People understood the moral value of money. Not so today.

    3. Today we have a Federal Reserve, who creates an enormous moral hazard. Back then people felt it was real money at risk. Individuals had to do something, not leave it up to the government.

  7. mtzion commented on Jul 18

    regarding the brave exploits of the stock optioneers, those captains of industry, those titans of commerce…..we should move them to north korea so they can live in a system that is truly fixed and manipulated. there they will gain much wisdom by continually gazing upon the face of their dear and gentle leader.

  8. RW commented on Jul 18

    Despite the fulsome tone of the article I don’t think anyone was accusing the house of Morgan of altruism, but a duty they did perform none the less. The problem with the ‘assclowns’ is they rejected duty: to the market, to the corporation (and shareholders) they presumably served, to honor, to everything other than their individual greed. Whether one believes in a common good or not, whether one accepts any value other than selfishness or not, this not only displayed an unwillingness to accept responsibility but an extraordinary lack of vision. Any way one slices it, investing in companies controlled by such individuals would not seem prudent.

  9. David Silb commented on Jul 18

    Speaking of Assclowns one of ’em is now promising to teach people how to make money in a down market.

    Does anyone know of whom I refer?

    Great post Barry. Though the ultimate outcome in the 1929 crash was mixed. This highlights the fact that large brokerage/investment banks are responsible for the wins and losses associated with market actions.

    Panics are real and everpresent in times of uncertainty. It is why those who justify they’re existence by claiming to have “institutional knowledge” must step up or be cast out.

    If the leading Banking Houses do not step in when markets faulter then why do we need them.

    I move that if they are to big and bloated to act that they be smashed and the partners banned from, let’s say any more then three, able to form new houses. In this way we create market competition among the former partners who will in turn work to smooth out markets just by their very existence and self preservation instincts.

  10. Michael C. commented on Jul 18

    >>>Note that was $6 billion dollars — in 1929. I can’t even figure out what it is adjusted for inflation.<<< I don't know if this thing is accurate or not but this inflation calculator has it at 11.5x, or $65B. http://www.austintxgensoc.org/calculatecpi.php

  11. qw commented on Jul 18

    I agree with Barry and RW’s response.

    Perhaps I misunderstood, and perhaps no suggestion of altruism was implied.

    I think it was prudent and overall beneficial to the market and to others what they did. It does seem that we have some serious scum in the corporate world these last few decades. I just know its easy to make some kind of heros or angels of people upon whom the pages of history have turned and they may not be the heroic figures they sometimes appear when looking back.

    I do agree that with the little I do know of them, I would take them over the current execs in a heart beat though.

  12. sdrone commented on Jul 18

    Fyi, that JP Morgan was not THE JP Morgan. In 1929 it was Jack Morgan, the son. In 1901 and 1907, it would have been the one and only JP Morgan.

    $6 billion sounds awfully high for Morgan bank assets, though it’s been a while since I read House of Morgan.

  13. Bynocerus commented on Jul 18

    Speaking of putting your money where your mouth is, I’m shutting down the shorts and going back to cash towards the close today. What’s everyone else doing?

  14. Michael C. commented on Jul 18

    From the looks of it, people have been going to cash all day today.

    I wonder what crude is saying now that it is trading below $74, seems like the speculators were leaning too heavy on the ME news and are also probably starting to price in slowing demand from our economy.

  15. Francois commented on Jul 18

    What is the most remarkable thing about this 9/11 “affair”?

    The absolute silence of the so-called mainstream press. Where are the NYT, WP, WT and tutti quanti? Heard anything from CNN, MSNBC, NPR?…

    On a more practical level, how can one evaluate the value of a given option with all this BS going on?

    Any suggestions?

  16. Alaskan Pete commented on Jul 18

    Byno: Just put a toe in the water long on a fave coal play (very short time horizon on this one, just looking for a couple % bounce from oversold conditions in the next day or two), and closed the long DIA/short Qs pair about five minutes ago. I’m not willing to commit much to this market on either side. Cash position is up to 80% now.

  17. Michael C. commented on Jul 18

    The other side (short DIA, long QQQQ) of the trade you just mentioned is extremely compelling, and one I’ve been eyeing for almost a week.


    Check out that 2 year on the comparison. The disparity is quite large.

  18. Ned commented on Jul 18

    Michael C. guess that means Pete’s timing is dead on then.

  19. BDG123 commented on Jul 18

    My recollection is rather hazy as I was a mere 40 years old in 1929. That said, Richard Whitney was a crook. And, his selfless act of trying to restore investor confidence was a ruse so that the pig-nominious banks could get out at higher prices and gladly hand the shares to Ma and Pa America so they could take the shaft. Of course, my memory could be hazy. Oh, let’s see. The History Channel might also be wrong.


    Banks helped cause the crash and that was the reason the SEC was formed against the wishes of those same bankers. And, that is why Glass Steagall became law. Those same selfless bankers and Wall Street titans only cared about themselves as opposed to their investors. That is why Wall Street and the banks vigorously opposed Glass Steagall.

    That’s ok. The banks got their wishes against the vote of Paul Volcker and Glass Steagall was repealed just before the 2000 crash. So, who lost all of that money post 2000? Ma and Pa America. Who made money? Wall Street made hundreds of billions by telling you to buy and hold so they could earn fees on your money even though they knew a collapse was coming. Oh, then their trading arms shorted the market to fill their trading coffers as well.


    And, isn’t it funny that Wall Street has again remade itself. As Paul Farrell writes, “Now most of Wall Street’s money comes from trading in derivatives and other private deals, often for its own accounts or in concert with hedge funds and other private traders.”


    Isn’t that ironic. Wall Street is right back to where they were in 1929. Self serving, trading arms of large banks and financial institutions making money at the expense of the individual investor. Prime example is oil and commodities. As private fund managers and Wall Street drive the prices up and cripple the average American with resulting higher interest rates across the board and higher costs to live, Wall Street once again basks in its trading profits.

    Oh, the selflessness of Mr. Whitney and those like him. We should all be thankful for his efforts.

  20. Jimcos commented on Jul 18

    For an up-to-the-minute example, just read the text that accompanies Merrill’s earnings report today and draw your own conclusions. The beat goes on.

  21. McSwiggen commented on Jul 18

    On Black Thursday of the Wall Street Crash of 1929, Albert Wiggin joined with other senior Wall Street bankers in an attempt to save the collapsing stock market. On behalf of Chase National Bank, Wiggin, along with other bankers, committed substantial funds for an investment pool. They had Richard Whitney, vice president of the New York Stock Exchange, go onto the floor of the Exchange and with great fanfare purchase large blocks of shares in major U.S. corporations at prices above the current market. The action halted the slide that day and returned stability to the market. While the market slide continued on Monday, Wiggin was lauded as a hero for his actions. However, what came out in the Pecora Commission investigation into the Wall Street crash, was that beginning in September of 1929, Wiggin had begun selling short shares in Chase National Bank. His short selling, done secretly through several companies owned by himself and family members, helped drive down his own bank’s stock price and he made a multi-million dollar profit. Wiggin was not alone, other greedy executives in powerful positions did the same thing, and although not illegal, Wiggin eventually retired under pressure from the bank….http://www.answers.com/topic/albert-h-wiggin
    When it comes to money “you can make the devil eat flys”

  22. David Sternfeld commented on Jul 19

    Is it too obvious to mention that by creating credit faster than the supply of goods and assets that could be purchased, the FED guaranteed the subsequent debt service failure that went hand in glove with the crash to cause deflation and depression.

    Is it too obvious to note the current parallels?

  23. DavidB commented on Jul 19

    Here is a little peice that explains why they had so much cash to spare at the time. It was because they had already pre-arranged to be out of the market while the fed triggered the crash so they could buy at the bottom. Great read! You can click on my name to go to the article.


  24. Dave commented on Jul 19



    Part 1 of 6 on “The History of the Stock Market” a little documentary by the history chan.

    The links of the other 5 videos are with in. I haven’t watched this in a while, but I do believe it highlights the events your Time article was referring to.

    Its an interesting watch for anyone whos ever invested in this or any other market.

  25. Dave commented on Jul 19

    Whitney is talked about in part 4 / 6.

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