The Capital Of Capitalism

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Thirty billion dollars’ worth of wealth was erased almost overnight in the crash. A decline of forty-seven billions of national income ensued in 1930-31 and the unemployment of over twelve million Americans. The dream of permanent prosperity was down the drain. The suddenness and the unexpectedness of it all had a profound psychological effect on the country. Great financial leaders were demoted from heroes to villains as government investigations began to expose stock-market practice. The public had only dimly realized the extent of insider profits or pool manipulations; short selling during the decline looked positively immoral.

Blame that was liberally distributed around among tycoons and bankers rubbed off on the system itself. The New York Stock Exchange found itself regarded as the evil genie of the whole affair. A stiff dose of legislative castor oil was prescribed.

The Securities Act of 1933—the “Truth in Securities Act”—required companies issuing stock to disclose all sorts of information about control, salaries, and connections so that the buyer would know what he was getting into. That was not regarded as too radical. The Exchange itself had rules of a similar nature, although it didn’t want to see the rules translated into laws. The control over traditional trading practices embodied in the Securities Exchange Act of 1934, which seemed to put the Exchange on a leash to the Securities and Exchange Commission, was quite another thing. The Exchange fought it, feeling that it could regulate itself.

Some reforms were made, but the Securities and Exchange Commission was still prodding for more when the Exchange itself uncovered the fact that Richard Whitney, five times its president, had committed grand larceny over a period of years. The Exchange went into a state of shock. More reforms and more legislation were not long in coming forth.

After the Great Crash and the Great Reform, some said the stock market was dead. Everything on Wall Street would be tame and dull. Grass would grow in the streets.

Things didn’t work out quite that way. There were years of relative quiescence, but in the post-World War n bull market twenty-two million individuals came to own shares, and institutions—pension funds and the like—came to account for onethird of the trading. American ingenuity adapted to the new set of rules. Imaginative frauds were and are still possible, though rare. War scares, peace scares, tax scares, Presidential health, and national elections can still bring the excitement of sudden ups and downs.

It isn’t quite as good form today to break a paper bag full of water over another broker’s head, but the floor of the Exchange is still lively. It purrs, buzzes, or roars. Every once in a while, disgruntled by New York City taxes, the Exchange threatens to move somewhere else. Since most of the business comes in by phone and is processed by computers, there is no reason why its members couldn’t set up shop in Dubuque, where little old ladies are said to be hoarding blue chips. But the prevailing opinion still is that New York City and the New York Stock Exchange were made for each other.