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CHAPTER 6 Depression, War, and the Aftermath—Reflecting on Finance from 1929 to 1973

In April of 1929, a yellow taxicab turned into the White House grounds carrying the great Wall Street speculator William Durant, Earl Sparling recounts (Sparling 1930). It was after 9:30 P.M. and the visitor had no appointment. After convincing the staff and the private secretary to President Hoover that the matter was urgent and, indeed, secret, the visitor was shown up to the second floor study. After a while the president appeared and listened to one of Wall Street’s greatest investors warn that the worst financial panic in the history of the republic impended. He cautioned the president that unless the Federal Reserve Board was forced to cease its attempts to curtail brokerage loans and security credit, a crisis was inevitable.

Of course, the Federal Reserve Board did not end its attempts to restrict the use of credit on Wall Street in the early part of 1929. Applying a gold standard model, the Fed felt compelled to continue to restrict credit. By May, the crisis of which Durant warned was already visible and would increase like a massive storm, reaching its peak in October and November of that year.

Durant, being a sensible man, sailed to Europe the month following his meeting with President Hoover for a lengthy holiday. The master of the market knew what would happen and even predicted it in his audience with the Great Engineer. Though ruined in the 1920s after he lost control of GM for ...