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TOP STORY: Economic disaster affected millions

Jan. 15, 2009 @ 08:17 AM

The stock market crash of 1929 and the Great Depression ranked high in The Herald-Dispatch’s “100 Years of History” readers’ poll.

Of the 51 events that garnered votes, the crash and Great Depression came in sixth place.

The years leading up to the stock market crash oozed with confidence on Wall Street. The strong upward trend of the stock market in the late 1920s convinced millions of Americans that investing in it would guarantee instant wealth.

Even those who didn’t have the financial means bought millions of shares of stock “on margin,” a practice similar to buying products with credit. They paid a small share up front and borrowed the rest, hoping they could sell the stock at a high enough price to repay the loan and make a profit.

But there were several underlying factors that would weaken the economy. For example, income was unevenly distributed. The income for the top one-tenth of 1 percent of American families was equal to that of the bottom 42 percent, according to the book “The Great Depression: America, 1929-1941.”

The hammer fell in October 1929. On Oct. 28 and 29, now known as Black Monday and Black Tuesday, the Dow fell 23.5 percent.

The emotional distress of the market crash was captured on the front page of the Oct. 29, 1929, edition of the Huntington Advertiser.

“In the streets, in the vicinity of the stock exchange, groups of small investors walked about aimlessly,” according to an Associated Press report. “Many of them wore sad, drawn faces.”

In Huntington, residents rushed to local brokers’ offices waiting to hear the latest word. The offices of Rhodes & Miller were “jammed beyond capacity,” the Advertiser reported.

“An overflow crowd, unable to enter the quotation board room, had to be content with standing in the corridors and peering through the windows at the fateful marks which adorned the board from time to time,” according to the report.

There were small rallies in the following days, but the direction over the next three years was downward. By the time the stock market hit rock bottom in 1932, stock prices had fallen 89 percent from their 1929 levels.

The market crash ushered in the Great Depression, a 12-year period marked with unemployment, bank closings, factory shutdowns and farm and home mortgage foreclosures. By 1932, unemployment had risen to 25 percent, leaving almost 15 million Americans out of work.

Locally, the building boom came to a halt as Tri-Staters fought to provide for their families.

“After the stock market folded, everything came to a standstill,” Huntington resident Joseph F. Hines told The Herald-Dispatch in 1999. “I remember seeing people going to the bank after the crash trying to get money, but all they could get was 10 cents on the dollar. It was devastating.

“Before the crash, there were about 10 banks in Huntington. After 1930, all but two had folded. I saw Huntington stores close. It was horrible. People were committing suicide.”

The Depression had made President Herbert Hoover so unpopular that he was voted out of office in 1932, bringing Franklin Delano Roosevelt and his New Deal to the forefront of the nation’s economic troubles.

Within days of his inauguration, Roosevelt declared a national four-day “bank holiday,” shutting down all banks to stop fidgety depositers from withdrawing their money. On the eve of the banks reopening, Roosevelt gave his first evening radio address to the nation. Roosevelt would give 30 of these “fireside chats,” many of which were used to calm fears and gain support for his New Deal policies.

The New Deal resulted in a broad range of programs to regulate banking and the stock market, reduce unemployment, assist businesses and agriculture and provide security for the elderly, needy and disabled. Roosevelt also focused on increasing demand by infusing large sums of money into the economy through public works programs that not only provided jobs, but also built roads, schools and dams.

While the economy had improved by the late 1930s, unemployment still was prevalent. Almost 9.5 million Americans, or 15 percent of the labor force, was out of work. Economic problems persisted until the nation’s entry into World War II in 1941.

The federal government began spending millions of dollars to bolster the country’s fleet of aircraft and ships. As a result, industry expanded and unemployment was replaced by a shortage of workers.