(Your name)  History XXX  Quarter and Year  Prof. Childs

The Great Bull Market, Wall Street in the 1920s (New York:  W. W. Norton & Co., 1968), Introduction, Bibliographical Essay, Appendix, Index, 175 pp.

Author:  Robert Sobel:  b. 1931; New York Univ. MA, ‘52, Ph.D. ‘57; Professor of History, 1976-, Hofstra University, NY; around 30 books, most on 20th c. financial industries, but including also topics in the 19th c. and on big business; scholarly and popular guides; mostly American subjects; Inside Wall Street (1977); The Rise and Fall of the Conglomerate Kings (1984); IBM vs. Japan (1986).

Scope:  Institutional history of the NY Stock Exchange, focusing on the transformation from Old Guard to Outsiders; analyzes causes of the Crash of 1929 and Depression.

Sources:  Mostly secondary and contemporary financial sources (New York Times, Moody’s Handbook, Dow Jones Investor’s Handbook).

Theses:

1)  Contrary to popular perception, the Bull Market reflected the need for higher stock prices after the depressed price period of 1921-22.  The higher prices represented a realistic view of the nation’s economic health.

 

2)  The runaway market did not cause the Depression; inept business and government policies did so.

 

3)  The Crash seems inevitable only after-the-fact; it did not appear inevitable at the time and it need not have occurred.

 

4)  The Crash was not as disastrous as once believed by analysts; the market rallied, but basic weaknesses in the economy undermined the rally.

 

5)  “[A]buses, mistakes and excesses” (12) came from the intersection of inept leadership and weaknesses in the institutional framework of finance capitalism in the 1920s.

 

6)  Hoover, the Fed chair, and a few others did not approve developments on Wall Street, but none forcefully challenged the prevailing optimistic mood.

 

7)  The crash occurred because of weak leadership in Wall Street and in Washington, D.C., and because of an “unhealthy nexus between business and speculation, especially in brokers’ loans” (12).

 

Style of presentation:  Technical terms, although defined in notes, interfere with the narrative flow.  Sobel compressed too much material into too short a book.

Importance:  An uneven attempt to broaden economists’ perspective on the Crash, the book nonetheless exposes several important themes:  the institutional changes in the finance industry; the psychology of the market; the inability of business and government to understand what was occurring and why it was occurring; the differences between investor and speculator.  Sobel offers clear definitions of such key concepts as broker call loans, leverage, and common and preferred stock.  John K. Galbraith’s The Great Crash should be read in conjunction with this book.

Reviews:  EHR (‘73); JAH (Dec. ‘69); Choice (Jan. ‘69).

 

 

 

 

(Your name)  History XXX                                                                        Quarter and Year  Prof. Childs

The Interregnum of Despair:  Hoover Congress, and the Depression (Urbana:  University of Illinois Press, 1970), Preface, Appendix, Bibliography, Index, ix + 281 pp.

Author:  Jordan A. Schwarz: b. 1937; Ph.D. Columbia, ‘67; student of William Leuchtenburg; The Speculator, Bernard M. Baruch in Washington, 1917-1965 (1981); Liberal:  Adolf A. Berle and the Vision of an American Era (1988); Prof. History Northern Illinois University.

Scope:  The role of Congress during the early years of the Depression, 1930-1933; documents struggle for federal relief of unemployed and resistance to it; furnishes new view of Hoover and Congress.

Sources:  About 70 manuscript sources; oral histories; government documents; secondary literature.

Theses: 

1)  During the 1920s, Congressional members limited their economic policy making to revenue and appropriations issues.  When the crash occurred, they believed it signaled just another regular downturn in the business cycle.

 

2)  Having gained a majority in the House in the elections of 1930, and believing that if given enough rope Hoover would hang himself, the Democrats consciously decided to work with Hoover and thereby avoid the obstructionist tag.  Indeed, Hoover faced more hostility from Republicans.

 

3)  Leaders of both parties blocked initial calls from the rank-and-file to initiate public works programs.

 

4)  Preoccupied with their majority status (Senate and White House), the Republicans did not foresee the danger in being held accountable for the depressed economic conditions; the Democrats saw the possibility and, at first, let the Republicans have their way.

 

5)  The first 100 days of the 72nd Congress resulted in widespread support for Hoover’s program:  debt moratorium; Reconstruction Finance Corporation (which creditor firms initiated and Hoover supported reluctantly), and lowering of the rediscount rate by the Federal Reserve Board.  A bank bill lowering the rediscount rate, a bill increasing capital to Federal Land Banks, and a Home Loan Bank bill were also enacted.

 

6)  In February 1932, opposition from progressives in both parties to the federal sales tax issue destroyed bipartisan support for Hoover’s program.

 

7)  The initiative thus shifted from Hoover to Congressional progressives and Democrats, who then pushed for relief programs for the unemployed.

 

8)  Between the fall elections 1932 and inauguration in March 1933, Congress lacked leadership.  The drift of the lawmakers reflected the drift in American society.

 

Style of presentation:  The topical organization and lack of dates makes reading confusing at times.  Liberal use of quotations often clutters the presentation, but insertions of biographical details enliven it.

Importance:  The book dispels the myth that Congress and Hoover were locked in constant battle.  Schwarz challenges the FDR-orientation of New Deal historiography and argues that the Hoover presidential era represents a transition between the free-enterprise rhetoric of the 1920s and the welfare state reality of the New Deal.

Reviews:  James Patterson, AHR (Feb. 1972); Dean Albertson, JAH (Mar. 1972); Choice (Sept. 1971).

Discussion

 

Taken together, Sobel’s The Great Bull Market and Schwarz’s The Interregnum of Despair present a political-economic prologue to the New Deal era.  Sobel’s account lays before the reader not only the interconnected causes of the Depression, but also the importance of psychology to the operation of the stock market and the economy.  Schwarz recounts early political attempts to come to grips with the economic downturn and shows how those attempts led to despair among politicians and the American people alike.

Sobel chronicles the change in the Wall Street point-of-view during the 1920s.  Before World War I, the Old Guard leadership supported the Republican party and held values associated with Protestant and Victorian America.  Born to the upper class, and educated in prep schools and the Ivy League, they exhibited a commitment to civic improvements and the arts.  Although patriotic Americans, they accepted London as the financial center of the Atlantic community.  These leaders were investors, preferring long term growth stocks to quick profits, and they took responsibility for helping out the New York Stock Exchange during downturns.  Their commitment to full disclosure of assets and operations of the exchange foreshadowed how the Securities and Exchange Commission of the New Deal operated.

During World War I, common stocks became less costly and more attractive and drew to the finance industry people whom Sobel labels the Outsiders.  These were speculators interested in making money from money and they took advantage of the new finance, which involved in part the issuance of common stock in lieu of dividends.  The use of call loans also sustained these speculators during the decade.  They formed financial syndicates and offered politicians early and low-cost access to new securities, which in turn drove up the price of stock before the public had a chance to buy.

Sobel criticizes the lack of leadership in the private and public sectors during the decade and ties that theme into most of the problem areas of the economy.  He notes how the use of credit to buy consumer products was transferred to the call loan market and how the continuance of low wages during a time of increased productivity created a fatal flaw in the economy [maldistribution of wealth].  Tax policies released even more money for the call market and thus fueled speculative purchases of common stock.  He notes the weaknesses in the Federal Reserve (its governors were inexperienced) and how publicity, rumors, and optimism made the Outsiders the new wave in the market.

Schwarz chronicles the early attempts to respond to the developing depression between 1930 and 1933 and shows how “[T]he rhetoric of confidence had become submerged in a welter of despair” (159) by the spring of 1932.  Within the narrative of Republican-Democratic politics, there emerges a group of progressives from both parties; Schwarz shows how these individuals promoted policies that foreshadowed many New Deal programs.  Senators Wagner, Black, Costigan, and La Follette, especially, rise to prominence with proposed legislation for major relief and reform programs.

The contrasts of the interregnum with the New Era of the 1920s and the electric atmosphere of the early New Deal is striking:  Congress, immobilized by a lack of leadership and the threat of a veto, did nothing after the defeat of the sales tax proposal in March 1932.  That the idea received so much attention is curious:  such a tax would have accentuated one of the key problems underlying the depression—the lack of purchasing power.

Schwarz’s description of the election of 1932 presents a sad picture.  Hoover held no power, yet no one in the GOP moved to substitute another candidate.  Instead, Republican candidates distanced themselves from the president.

Schwarz traces the apparent consensus for action in Congress during the first hundred days of the New Deal “to the apparent wrath of the electorate” (237) in November 1932.  That emphasis on democratic forces and his contention that this era laid the foundation for New Deal relief and recovery programs makes Schwarz’s book an important contribution to understanding how the American polity avoided a violent revolution in the early 1930s.  It also presents a corrective to the early historiographical emphasis on the personalities of Hoover and FDR; while their personalities explain much about failure and success during this period, there existed other individuals, especially the progressives, who contributed substantially to the policy making story.