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Rainbow’s End: The Crash of 1929 by Maury Klein




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Pots of Fool’s Gold

Historian Maury Klein presents a breezy and informative perspective on the stock market crash of 1929 in his new book, Rainbow’s End. Readers come to know some of the heroes and villains of that era, and the context in which they were able to take the actions they did. Less boring than an economic treatise, Rainbow’s End gives readers a complete flavor of the mood throughout America during the 1920’s, which bears striking parallels to life in the 1990’s.

Here’s an excerpt from the beginning of Chapter 9, “The Fall Follies”:

“It had become America’s market, the rainbow that dreamers even in remote corners of the nation hoped to ride to the pot of gold waiting at the end of its long and beguiling arc. By August the stock market had moved to the center of American culture, displacing almost everything else in conversations at dinner tables, meetings, social gatherings, even dates. No longer was it considered boorish for brokers and others to talk shop off duty even with women. The market replaced chatter about sex among the sharp set, about books among the literati, and about baseball in cheap restaurants. ‘Wherever one went,’ declared a broker, ‘one met people who told of their stock market winnings. At dinner tables, at bridge, on golf links, on trolley cars, in country post offices, in barber shops, in factories and shops of all kinds.’ As David Kennedy observed, ‘Its sustaining oxygen was a matter not only of recondite market mechanisms and traders’ technicalities but also of simple atmospherics – specifically, the mood of speculative expectation that hung feverishly in the air and induced fantasies of effortless wealth that surpassed the dreams of avarice.”

One of my favorite characters was Charley Mitchell of National City Bank. Here’s an excerpt that compares his actions with those of the head of Chase:

“While Charley Mitchell labored to repair the damage to his bank and his own reputation, Albert Wiggin followed an artfully designed and superbly executed path of deceit through these turbulent months. Where Mitchell borrowed heavily in a vain effort to shore up the price of National City Bank, Wiggin saw a rare opportunity for profit in selling short the shares of Chase National Bank. That he was chief executive of the institution in which he was dealing seemed to bother him not at all. He began going short in Chase as early as September 23 and continued right through the crash. By November 4 his Shermar Corporation had sold 42, 506 shares of the bank’s stock for nearly $10.6 million. During November and December he borrowed $8 million from the Chase to help cover these short sales even though he and his family owned enough shares to have served that purpose.
By the time Wiggin closed out this operation on December 11, he had amassed profits exceeding $4 million. Through an elaborate series of transactions utilizing his Canadian as well as American companies, he managed to avoid paying any income tax on this windfall. Some of his sales had been to the bank itself, which had obligingly loaned him both stock to cover his short sales and then funds to buy the stock. Asked later whether he thought such dealings were sound or ethical, he replied in his wonderfully cryptic way, ‘I think it is highly desirable that the officers of the bank should be interested in the stock of the bank.’ Compared to this venality, concluded Ferdinand Pecora, ‘Mr. Mitchell looms up as an heroic and laudable figure.”

You’ll also find the politicians in this book, and Bernard Baruch, the Marx Brothers, and that famous shoeshine kid of Joseph Kennedy lore. After you’ve read this history, you’ll come away with a better understanding of the players and the events, but may not have any real insight into the economic reasons for the crash.

Steve Hopkins, January 16, 2002


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