1929: The Great Crash Page #6

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our building, 44 floors, right past our window.

I saw her body lying in the street and the

sight was so harrowing, that I became half sick.

The effects of the catastrophic Crash on

Wall Street rippled out across America.

Even

those who'd never owned shares...

and who'd never benefited

from the stock-market boom...

became victims too.

The Crash had undermined Americans' faith in their

fragile banking system, made up of thousands of

small town banks that lacked the size or reputation

to convince customers that their money was safe.

As confidence in the economy sank

further, a domino effect began.

In 1931, over 2,000 banks failed.

After the Crash. The banks closed.

That I think affected us

a little more seriously,

us, meaning

us the people of my stature.

Many people had money in the bank, little

bit of money, couple of hundred dollars,

you know, 1,000 maybe.

There was no infrastructure then, there

was no Federal Deposit Insurance Corporation

to guarantee people's deposits,

there was no way to back up

the banks,

so if the banks had made

bad choices,

you as a depositor paid for it,

your money wasn't there.

And then people would hear that

the bank down the street wasn't good

and they worried about their own bank and that'd cause

a run on their bank and it was a terrible vicious cycle.

And something like 3,000 banks closed

in the following

couple of years after that, and the

whole financial system then seemed,

not just unstable, but worthless.

After that, when people saved money they were very

leery of banks and money went under the mattress.

The stock market crash in 1929

did not create the Great Depression,

but it did start a sequence

of events

that eventually culminated

with the Great Depression.

Some of this is

going to sound sort of familiar.

The banks were loaning money for the stock

market, the company's were loaning money,

the brokerages were loaning money and when those

prices fell, all that money just disappeared.

Almost immediately company's began

to feel the pinch of not having

the capital and of having lost money,

and they began to lay off people, to

let people go, to shut down production.

There were mass bankruptcies there

was a liquidity crisis of exactly

the same kind we have today, that is to say

all kinds of businesses could no longer get

loans to keep themselves afloat even if those businesses

were entirely solvent, they couldn't get the kind

of short term commercial credit to pay their

workers, to buy new inventory, to pay their suppliers.

And so they began going bankrupt and

as they went bankrupt they laid

people off and as they

laid people off demand fell.

And this is what does traumatic damage

to the whole society, so traumatic that

it's second only to the Civil War in American

memory as a tragic moment in American history.

My father had a modest-sized

insurance brokerage agency.

One night at dinner, my father

said that he had to fire an employee

and I very cavalierly said, "Well,

he'll be able to get a job, won't he?"

And my father said,

"No, he's an older man who isn't very

capable and I don't think he can. "

And at that point,

my father burst into tears.

It was the first time I

had ever seen my father cry.

There was such a change in our lives

and all the people around me

after the Crash.

Many of my girlfriends' fathers

lost their jobs

and they couldn't

pay the rent, they were evicted.

The poverty was really all

around us. Men had no clothing.

They were in rags, really rags.

They used to wrap their feet up in

newspaper and put them in cardboard,

makeshift shoes to

walk around the street.

And then if you took a walk over to

Central Park you saw this big area,

a deserted reservoir that had been

drained and they made little

huts of cardboard boxes,

and they

would sleep there overnight.

And they called

it Hooverville, because that was

the name of our President at the

time and, of course, all this...

stock market crash and all this

poverty was, of course, put in his lap.

It was really, really pitiful.

Like many others, the photographer,

Alice Austen struggled to keep up

mortgage payments

as the Great Depression took hold.

A few years into the Depression,

Alice Austen runs out of money.

There is nothing left.

She is out of her house.

They take her to a poor house, and it's

a poor house out of a Dickens' novel

and she lingers there for a

couple of years.

Miraculously, her photographs

are discovered.

A few of her photos

are sold to Time and Life Magazine

and that earns her enough money to move out of

the poor house and into a decent retirement home.

In a sense, her photographs

come to her rescue and take

her out of poverty and

into a year or two of decent living.

Paul Warburg, who so accurately

predicted the Crash and the Depression,

saved the bank he ran from disaster

by getting out of the market in time.

But it was of little

consolation to him.

My great-grandfather probably never

really recovered

his own personal

equilibrium after the Crash.

To be

called the Cassandra of Wall Street,

I think was very painful for him and

if we all remember Cassandra,

she couldn't just see the future,

she was also doomed to be disregarded.

And I think it caused him to

go into a depression of his own.

I'm not sure that he ever

would have said I told you so,

I think he felt that it was

really tragic

that this worldwide depression

could have been averted or headed off

or at least it didn't have to crash

so hard and, and I think...

it probably led to his early death.

When he died, it was the last

year of Hoover's presidency

and there was no end in sight.

But in 1932, 12 years of

Republican rule came to an end.

I, Franklin Delano Roosevelt,

do solemnly swear...

that I will faithfully execute the office

of the President of the United States.

Democrat, Franklin Roosevelt was

elected President in a landslide victory.

His first task

was to restore confidence.

ROOSEVELT:
The only thing

we have to fear, is fear itself.

Seen as a saviour, Roosevelt promised

a New Deal for the American people,

and to regulate the

financial system.

There must be a strict supervision of

all banking and credit and investment.

There must be an end to speculation

with other people's money.

The new President acted quickly.

He guaranteed bank deposits

and introduced laws forcing bankers

to operate under strict

government supervision.

An investigation into the Crash was

launched by the Senate Banking Committee.

It would last more than three years,

and the 10,000 pages of testimony

blackened the

reputation of Wall Street.

The committee's ambitious lawyer,

Ferdinand Pecora,

challenged the banking elite

to account for their behaviour.

He calls these bankers to testify

and what does he learn?

He learns that Charlie Mitchell of National City

Corp had sold stock to his wife to avoid taxes.

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