In Paris a banker announces that America, because it controls the world’s wealth, must become the center of world culture, its opulent patron. In Texas, an oil man, recouping $25,000,000 that Wall Street took away from him five years ago, serves notice he is through with the market forever. And one of my friends, a bond salesman with an income of $4, 000 a year, buys a new straight eight with the profits he makes in common stocks.

The invariably oblique-minded Bishop Cannon, in pleasing contrast to his prohibition peccadilloes, produces a masterful apologia in defense of buying on margin, as singular a document as has ever come from one of the cloth, one which, historically, must be to Wall Street what Newman’s Apologia pro vita sua was to Catholicism.

And hard upon the Cannon tract, though hardly inspired by it, the Federal Reserve Board, after repeatedly yelling “wolf,” lifted the rediscount rate from 5 per cent to 6. The move was to choke off speculation—to deflect credit’s center of gravity from the red-hot crucible of speculation to Mr. Hoover’s poor farmers. In the previous two years, brokers’ borrowings had doubled, and boosted, by the end of July, to $7, 473, 000, 000.

The punitive measure succeeded for a day. Stocks dumped in a hurry, in a frenzy were repurchased again two days later. Bears took flight. In the third week of August, brokers’ loans advanced from $133, 000, 000 to $6, 085, 000, 000, well above old highs. And stocks rebounded to new altitudes.

Did the nation applaud this spank-ing of profligate Wall Street? Hardly. From one end of the country to the other roared the perhaps reasonable cry that the Federal Reserve was a silly reactionary playing politics; that the Stock Exchange had as much right to the nation’s credit reserves as Peoria. There was a popular ring to the cry. The boosted rates hadn’t hit the financiers alone. They had hit about one in six of us. Twenty million people, with Bishop Cannon with them, heart and soul, can’t always be wrong.

Source: The Outlook, 18 September 1929

Related posts:

1. Wall Street 1929 Part 2
2. Wall Street 1929 Part 12
3. Wall Street 1929 Part 3
4. Wall Street 1929 Part 5
5. Wall Street 1929 Part 1

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