BUSINESS & FINANCE

Bankers v. Panic

In Grand Central, Manhattan, Sydney Zollicoffer Mitchell dismounted from the Twentieth Century with a bad cold, went quickly to his office in the 2 Rector St. building. He telephoned a large Stock Exchange house, said he thought there would be trouble but "just call on me for anything you want." A few hours later stock of his gigantic Electric Bond & Share which had recently reached a high of 189 sold for 91. A few days later, it sold at 50.

Promptly at 10 a. m. on Thursday Oct. 24, sounded the gong of the New York Stock Exchange and 6,000 shares of Montgomery Ward changed hands at 83--its 1929 high having been 156.

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 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, un til 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. Head of the House 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 market. And the meeting was hardly over before Hero Whitney had become Heroic.

Despite the rapid Thursday afternoon recovery, the low point of the swinging pendulum cut off many a speculative head. Roaring was the business done by downtown speakeasies. Wild were the rumors of ruin and suicide. In Manhattan, one Abraham Germansky, realtor, was last seen tearing ticker tape. In Seattle, one Arthur Bathstein, finance company secretary, shot himself. Estimates of the number of margineers closed out varies from 20% to 70%. During the first three hours of Thursday stock valuations shrank about $11,250,000,000, recovered all but $3,000,000,000 before trading closed. Brokers met at Hornblower & Weeks, counseled against witless selling, thought the decline had spent itself in a day's volume of trading far exceeding anything ever known. On the Stock Exchange 12,894,650 shares changed hands.

Market "Lesson"

Why then, did a Market which had broken on Oct. 23 demonstrate with a continued crash on Oct. 24 that the end of the Great Bull Market had really arrived? Apt appeared the analogy between the break on the market and a run on a bank. The Bank was U. S. Industry. Assets of the bank were the real assets of U. S. Industry. Stocks were the paper money which the bank had issued. Now all banks, even the Federal Reserve System, issue more money in paper than they have gold in their vaults. Every bank would be broken if all its depositors simultaneously attempted to exchange paper for gold.

Why the crash came on Oct. 23, 1929, is as mysterious as why the World War chanced to begin on Aug. 4, 1914. Vital point is the undermining of popular confidence that ended in the crash. The September slump was of tremendous importance in its indication that a Market which could survive only by constant rises had reached the limits of its climb. Slowly the Market began to realize that 1929 might be an abnormal year, a high-water year instead of one more level in a still-rising tide. If this fear were well founded, what then of 1930, or 1931, of even more distant times? This file is automatically generated by a robot program, so viewer discretion is required.