The Wall Street Crash Begins

During the late 1920s, economic expansion in the United States fostered widespread financial speculation. Many citizens entered equity markets as low bank deposit rates made shares seem more attractive, while brokers extended substantial leverage. By August 1929, brokers were lending small investors over two-thirds of the purchase price of their equities, pushing outstanding broker loans above 8 billion dollars. Concurrently, agricultural overproduction depressed crop values, and consumer industries struggled with unsold goods because wage growth lagged behind factory output. Although industrial barometers such as automobile sales, steel manufacturing, and home construction turned downward by mid-1929, the Dow Jones Industrial Average reached a record high of 381.17 on September 3, 1929.

Instability surfaced throughout September and early October. A market dip dubbed the Babson Break occurred following warnings from financial analyst Roger Babson, though many market participants initially treated the drop as a routine correction. European financial developments, such as the arrest of British financier Clarence Hatry for fraud, further shook investor sentiment. In the American political sphere, congressional debates regarding the Smoot-Hawley Tariff Act and proposed regulatory scrutinies of public utilities contributed to market nervousness. After fluctuating through the middle of the month, equity prices experienced an intense sell-off late in the afternoon on October 23, setting the stage for panic on the New York Stock Exchange.