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Good-bye To Everything!
For the first half hour on that fateful Thursday, stock prices were steady.
August 1965 | Volume 16, Issue 5
By Monday’s three o’clock gong, values had fallen an estimated fourteen billion dollars—the steepest decline in the history of the market since the New York Times had begun keeping averages in 1911. Steel was at iHO; blue chips such as General Electric were off 47 ½, Allied Chemical 36. The ticker was 167 minutes late. Rut it mattered little to the thinning numbers of watchers in brokers’ offices, where a “curious hush”—similar to the atmosphere of a funeral parlor—prevailed. Most investors had long since been sold out.
At 4:30 P.M. the bankers convened once more at the House of Morgan. They talked for almost two hours—but the statement they gave reporters was not very reassuring. They flatly denied they had ever had any plan to support the market and protect anyone’s profits. All they had ever wanted was an “orderly trading market.” It was the no-bid “air holes” that disturbed them, and they were still determined to plug these whenever they occurred. But they had no intention of maintaining prices in an artificial manner. Organized support had suddenly become organized nonsupport. “They” were quietly admitting that the market was out of control.
But Wall Street simply could not believe it. The papers on Tuesday morning were full of reports that “huge funds” were expected in the market for “bargain buying.” An anonymous banker was quoted as saying the bankers’ group had concluded that “the psychological moment to bring the full force of its buying power to bear upon the market had now arrived.”
The first bids on Tuesday, October 29, exploded these last gasps of optimism. Blocks of stock were flung on the market for whatever they could bring, some 636,000 shares in the first twenty-six offerings. In the first half hour 3,259,800 shares gushed forth. Vast air holes developed, and no bankers appeared to fill them. Prices fell, fell, fell, with massive blocks offered again and again, spelling doom for some millionaire. Oddly, the brokerage houses were relatively deserted. The rich were being wiped out now, and they had facilities for suffering in private.
No longer did brokers attempt to protect favorite customers. The moment a client’s margin became thin, he was sold out. By twelve o’clock eight million shares had been traded, by half past one it was twelve million. Panic was total now. An office boy in a brokerage house offered one dollar for White Sewing Machine, which had once sold for 48. In the total absence of other bids, he got the stock for a dollar a share. On the floor and in the brokerage houses, exhausted clerical help began collapsing over adding machines and typewriters. In one odd-lot house, thirty-four girls fainted. Nineteen toppled in another office. Brokers themselves became hopelessly confused: after trading closed, one of them discovered, in a wastebasket beside his desk, a huge pile of sell orders he had intended to execute.
With organized support gone, and “they” getting hammered like bucket-shop suckers, there was only one thing to do—close the Exchange. Only the governing committee could authorize this; about noon, leaving singly or in small groups to prevent rumors and deeper panic, the forty or so members of the committee made their way to a small office just beneath the trading floor. Some months later, Vice President Whitney described the meeting: “[Most] of the Governors were compelled to stand, or to sit, on tables. As the meeting proceeded, panic was raging overhead on the floor. Every few minutes the latest prices were announced, with quotations moving … irresistibly downwards. The feeling of those present was revealed by their habit of continually lighting cigarettes, taking a puff or two, putting them out and lighting new ones —a practice which soon made the narrow room blue with smoke and extremely stuffy.” The only decision these shaken leaders of the Exchange could reach was to meet again later in the day.
So the slaughter continued. By the 3 P.M. gong, 16,410,030 sales had been recorded—three times what had been considered a fabulous day at the summit of the bull market. In the last fifteen minutes Richard Whitney, jaunty as ever, appeared on the floor and strolled toward the steel trading post. His appearance sparked a brief rally, which sent this bellwether limping from 167 to 174. But Whitney had nothing to offer except his imperturbable manner, and even this—an aghast Wall Street was later to learn—was a mask for a man who was already on the edge of bankruptcy.
Whitney’s sham heroism was typical of the unreality that now pervaded everything. People had lost fortunes so large that the sums were almost meaningless. The Fisher brothers dropped a reported $100,000,000. A public utilities titan was supposedly worth $880,000,000. As things began to slide, one bank president who was intimately involved with him was asked by one of his vice presidents: “What about that $880,000,000 fortune?”
“Well,” said the bank president, “there’s no sense in taking away a man’s whole fortune. Just remove one zero from it. He’ll never miss it.”
On Tuesday, when the bottom fell out of the financial world, the vice president brought the titan’s case before the president again. There was talk that the great man was bankrupt. The president, as beaten and bewildered as everyone else, shrugged: “Take off another zero.”
H. Allen Smith had just come to New York as a cub reporter. His city editor sent him down to interview Frank Vanderlip, another Wall Street wizard. The millionaire scowled when the uneasy young westerner asked: “Mr. Vanderlip, what does all this mean?”