The Great Depression in United States History (3 page)

Not everyone shared the stock enthusiasm. Behind the scenes, financier Bernard Baruch sold his stocks and encouraged friends such as Will Rogers to do likewise.

Herbert Hoover, as secretary of commerce, tried to warn Coolidge of a possible economic crisis. But once Hoover assumed office as president, he did virtually nothing. Big businesses were his most generous campaign supporters, and businesspeople did not want the government tampering with the economy.

Stock Tumble

On September 3, the Dow Jones average reached 381.17. Investors and brokers rejoiced at this new all-time high. Not everyone cheered. Economist Roger Babson predicted, “Sooner or later a crash is coming.”
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Chase Bank president Alfred Wiggin quietly began selling his bank’s stock a few days later. On October 16, a committee of the Investment Bankers’ Association reported that speculation “has reached the danger point and many stocks are selling above their values.”
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The market started slipping on Monday, October 21. Without warning came an onslaught of orders. Brokers received the message: sell, sell, sell. Heavy sales volume caused delays that led to panic. Two days later, 2.6 million shares changed hands. Most transactions involved people selling stock. It was the second busiest trading day ever. Total losses across the stock exchange were in excess of $4 billion. This stock tumble convinced many investors that the Wall Street boom was over.

Black Thursday

“I heard it—and I can still hear it—the sound of running feet, the sound of fear,” recalled news reporter Mathew Josephson.
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Trading on October 24 started slowly, with few shares changing hands. Then stock prices dived like an out-of-control airplane.

Panicked phone calls were being placed throughout the nation. These were margin calls, or demands that a stock buyer repay the money he or she had borrowed. Bankers called brokers, seeking the remainder of the margin money they had loaned for stock purchases. Brokers in turn called their customers, trying to get their loans repaid. If the customers could not be reached, the brokers sold their stocks without their permission. Then they used that money to pay off their own debts. Many brokers’ customers were small investors who lost all their stocks—and life savings—in one morning.

By noon, a cloud of terror had swept the market. Something had to be done to stop the stocks’ downslide. Five of the nation’s most important bankers called an emergency meeting. Those present were Charles Mitchell of National City Bank, Albert Wiggin of Chase Bank, William C. Potter of Guaranty Trust Company, Seward Prosser of Bankers Trust Company, and Thomas Lamont of J.P. Morgan and Company. They met for twenty minutes, then faced the stock exchange members.

“There seems to be some distress selling on the Stock Exchange, so far as we can see,” said Lamont. It was a major understatement.
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The five bankers took a bold gamble. They pooled money to purchase stocks in major companies. This show of confidence might lure other customers into buying.

Richard Whitney, vice president of the New York Stock Exchange, walked onto the trading floor with the bankers’ money. He bought ten thousand shares of U.S. Steel at $205, which was $10 above the market’s price. He did the same with other large-company stocks.

The gamble worked. A late-afternoon rally nearly put prices back to the day’s starting level. Wealthy investors, who still had money, could buy stocks at low prices. But for hundreds of thousands of amateur investors who lost everything, their stock market game was over for good.

President Hoover and bankers made optimistic statements the following day. The Dow Jones index rose on Friday. Yet fear rather than hope dominated investors’ minds. Many feared what the new week would bring.

On Monday, October 28, prices started plummeting and never stopped. This time, no bankers dipped into emergency funds to halt the selling binge. American Telephone and Telegraph stock lost 34 points and $448 million in value. General Electric plunged 47 points and lost $342.5 million in its value. U.S. Steel dropped 17 points and $142 million.

Shopkeepers and nurses were not the only losers on October 28. Major banks and investment firms reeled from the losses. Weary stock market investors went to bed worried on October 28. The most unhappy day of all awaited them

Chapter 3

“BROTHER, CAN YOU SPARE A DIME?”

Black Tuesday, October 29, was disastrous, but it was not the end of the stock market tumble—the market continued falling. It was November 13 before the market closed the day with a gain. By that time many stocks were worth only half of the value they had been worth just two months earlier.

Even during the height of the stock market boom, only 4 million Americans actually invested. But after the October 1929 Crash, the stock market breakdown affected millions of others.

Hundreds of banks had invested enormous sums of money in the stock market. Most of that money came from investors’ savings. Some banks literally went bankrupt right away. When investors saw a neighbor’s bank going out of business, they rushed to withdraw their own savings. These massive withdrawals forced other banks to fold. More than one thousand banks closed in 1930 alone. The Bank of the United States, with fifty-nine branches and in excess of four hundred thousand investors, was one of them.

Occasionally an investor got lucky. Former Nebraska schoolteacher Inez Warren recalled:

I got my monthly paycheck on Good Friday. I didn’t get to the bank until Saturday, and the cashier asked if I wanted to deposit the check or just take the cash. I said for no particular reason, I would take the cash. I was lucky to have a month’s pay in my hands, because the banks closed that Monday.
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Thousands of Americans were not as fortunate. Small businesses that had invested their money in the banks were forced to close. When those businesses folded, the employees were out of work. Most larger businesses stayed open, but many laid off workers. They cut production drastically, because fewer people could afford their products.

For some people, the Crash came all at once. Neil Schaffner, owner of a dramatic touring company, recalled July 6, 1930, as his day of doom:

We ended up our usual big week on the Fourth of July at Ollie, Iowa. We moved down to Fairfield, where we had always had big crowds. On the night of July 6, we played to about $30 gross business. That week, we took in $200 with a show costing us $1,500. We couldn’t understand.… All of a sudden, the plug was pulled out of the bathtub.
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Others saw the Depression hit more gradually. Author Studs Terkel wrote a book,
Hard Times,
which captured people’s memories of the Depression. His own memories were vivid. Terkel’s mother owned a small hotel in downtown Chicago. Before the stock market crash, the hotel was always full of working people.

Afterward, the hotel was not always full. Fewer and fewer of the guests were working. Many now hung around the lobby most of the day. “The decks of cards were wearing out more quickly. The black and red squares of the checkerboard were becoming indistinguishable,” Terkel wrote.
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Soup Lines, Bread Lines, and Apple Sellers

Economic downturns had occurred in America every twenty years or so. But nothing matched the severity of the 1930s. During previous depressions, most Americans lived on farms. If nothing else, they could feed themselves. Now, more Americans earned a living from industry than agriculture. The economy was interdependent. If one segment suffered, everyone suffered.

The fortunate people kept their jobs. If they did, their working conditions usually worsened. Most companies lowered their workers’ pay. Hourly wages declined 60 percent from 1929 to 1932.

Some no longer paid their workers in cash. Mine companies gave their miners paper called scrip, which they could use in place of money. This paper was good only at expensive company stores. Chicago teachers were also paid in scrip. Banks accepted their scrip, but not at its full value.

At the Depression’s height, a quarter of the population was out of a job. The unemployed scrambled for whatever work was available. Ed Paulsen sought a sugar refinery job in San Francisco in 1931. “A thousand men would fight like a pack of Alaskan dogs to get (the job). Only four of us would get through,” he recalled.
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When joblessness hit, families did all they could to fight the crisis. If there was a savings account, they withdrew it. If there was an insurance policy, it was cashed in. They sold anything they considered a luxury, for whatever price they could get. They borrowed from friends and avoided paying bills.

Men, in particular, took the Depression hard. They held the traditional role of breadwinner. When they no longer brought home money, most felt disgraced and shamed. Some of their neighbors pitied them. Others tried to ignore them.

At first, the unemployed went job-hunting every day. After a while, those searches became less and less frequent. Unemployed people left home, but went to the park instead of looking for work. Their clothes and appearance got dirtier. They did not want to be dirty. Their money was used to buy food for their children instead of soap for themselves.

Some swallowed their pride and begged for change. These were proud people, whose hard work had helped build the nation. The most popular song of the time described one man’s plea: “Brother, Can You Spare a Dime?”

That dime, if obtained, could go a long way. “For ten cents you could buy soup greens and you’d get a soup bone,” said Chicago resident Carl Lundell. “That would be soup for four people.”
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Charitable groups worked to help the poor. Some started bread lines. In big cities, these lines would extend for several blocks. Soup kitchens opened throughout the nation. Service agencies and private individuals alike served hot meals. Chicago gangster Al Capone operated one of the largest kitchens.

In 1930, the International Apple Growers Association peddled surplus apples to unemployed men on credit. Suddenly six thousand vendors appeared on New York street corners, selling apples for a nickel apiece. The dreary-looking apple vendor became one of the lasting images of the Depression.

Businesses adjusted to the new American poverty. Even Popsicles changed. The fruit-flavored ice now came in two parts with two sticks. The new Popsicle made it easier for hungry poor kids to share the treat with a brother, sister, or friend.

Despite the hardships, many people kept their good nature. “No one was envious of anyone else, because we were all in the same boat,” said Alice Swanson of Chicago.
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“Some people were especially kind,” remembered Omaha resident Ora Glass. “I had small children, so the milkman said, ‘You need this; you’ve always paid and that’s the way it’s gonna be.’ He went to the company, and it said, ‘Fine.’ So we always had milk.”
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Tens of thousands of Americans lost their homes. Often they drifted to makeshift settlements on the outskirts of towns. These settlements always had the same name.

Hooverville

Charles R. Walker wrote in 1932:

I visited the incinerator and public dump at Youngstown, Ohio. Back of the garbage house there are at least three acres of waste land. The place is indeed a shanty town, or rather a collection of shanty hamlets. . . . [It] is called by its inhabitants—Hooverville. . . .

The inhabitants were not, as one might expect, outcasts or “untouchables”, or even hoboes in the American sense; they were men without jobs. . . . This pitiable village would be of little significance if it existed only in Youngstown, but nearly every town in the United States has its shanty town for the unemployed, and the same instinct has named them all “Hooverville.”
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Settlements appeared everywhere. Some of them had enough people to be considered small cities. Oklahoma City’s Hooverville covered approximately one hundred square miles.

There were no rules to Hooverville housing. People lived inside anything that provided shelter. Many of these homes were no larger than doghouses or chicken coops. Rusted out cars provided one type of housing. A house could also be a packing carton, an orange crate, or a piano box. Building materials included anything that could be scrounged from a garbage dump or the street—pieces of wood, tin cans, tar paper, cardboard. The materials were free and not fancy.

President Herbert Hoover was the subject of ridicule. Anything bad about the Depression gained a Hoover nickname. There were “Hoover blankets” (old newspapers which served as cover for homeless sleepers), “Hoover flags” (empty pocket linings turned inside out), “Hoover hogs” (jackrabbits caught for food), and “Hoover wagons” (broken down cars pulled by mules).
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“In Hoover We Trusted”

Less than two months after the October 29 market crash, President Hoover addressed Congress. There is no cause for alarm, he said during the State of the Union address. “We have reestablished confidence.”
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Over the next two years, he would issue many such statements. Signs showed that “the nation was turning the corner,” he claimed in January 1930. “The worst effects of the crash will have passed in the next sixty days,” he stated two months later. In May 1930, Hoover promised, “We have now passed the worst . . . we shall rapidly recover.”
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He missed few opportunities to call the economy “fundamentally sound.”
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On June 30, he declared, “We have now passed the worst.”
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