Margin Debt and the 1929 Crash: $8.5 Billion in Loans and Black Tuesday

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By the fall of 1929, brokers had lent more than $8.5 billion to ordinary investors buying stocks on margin, more than all the physical currency circulating in the United States. The Dow had risen tenfold over nine years and peaked in early September, as economist Irving Fisher spoke of a permanently high plateau and Roger Babson warned of a terrific crash. Beneath the boom, farmers sat on huge wheat surpluses, goods piled up unsold, and brokers were lending two thirds of a stock's price. The slide began on the afternoon of October 23 with a 4.5 percent drop, and on Black Thursday the market lost 11 percent at the opening bell as ticker tapes fell hours behind.

Thomas Lamont, Albert Wiggin and Charles Mitchell pooled money and sent Richard Whitney onto the floor to buy U.S. Steel above market, which steadied prices only briefly. Margin calls on Black Monday produced a 12.82 percent drop, and on Black Tuesday, October 29, more than 16.4 million shares traded and $14 billion vanished. The market fell nearly 90 percent by July 1932, banks that had lent deposits to brokers failed by the thousands, and the Fed raised rates to stop a run on gold. The aftermath produced the SEC, Glass-Steagall, circuit breakers and the uptick rule.

Nearly three million shares changed hands in the first three minutes of Black Thursday.
Some stocks on Black Tuesday had no buyers at any price, and the ticker ran until almost 8 p.m.
The Dow did not regain its 1929 peak until November 1954.
More than 2,000 U.S. banks failed in 1931 alone.
In Britain, inspectors under the Means Test assessed families' furniture before granting unemployment aid, sparking strikes.

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