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Jacoby, Sanford M.
2011.
The Embedded Firm.
p.
277.
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Sons of the Wild Jackass and the Stock Market
Published online by Cambridge University Press: 24 July 2012
Abstract
Heirs to the Populist-Progressive tradition in Congress declaimed, in the 1920', against low rediscount rates, the use of bank credit for speculative purposes, the rising volume of brokers' loans, and the flow of money to New York from the hinterland. In the bull market environment of the day the warnings went unheeded, in part at hast because of their origins.
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- Copyright © The President and Fellows of Harvard College 1959
References
1 For example. Goldman, Eric F., Rendezvous with Destiny (New York, 1952), pp. 314–815Google Scholar; Nye, Russell B., Midwestern Progressive Politics (East Lansing, Mich., 1951), pp. 347, 350.Google Scholar Richard Hofstadter asserts that the 1920's “Congressional Progressives were on the whole a fake” and cites with approval a critic who charged them with “underlying party regularity.” The Age of Reform, From Bryan to F. D. R. (New York, 1955), pp. 281–283. Their Senate voting record, 1925–1933, refutes this claim, however; it shows a definite and consistent insurgency in socio-economic matters, a pattern scarcely altered from that of 1910! Hofstadter's “other-directed” antipathy for the “inner-directed” moralistic nativism characteristic of most Midwest Populists and Progressives has made him too suspicious of their sincerity and too ready to discount their remedies.
2 Tucker, Ray and Berkley, Frederic, Sons of the Wild Jackass (Boston, 1932), pp. i–iii.Google Scholar
3 Ibid.
4 Nye, op. cit., p. 348.
5 LaFollette's Magazine (March, 1925), pp. 42–43. In 1930 Senator Shipstead blamed the easy credit policy of the Federal Reserve Board for the false prosperity of 1925–1929 and the crash. The Progressive, Dec. 20, 1930.
6 LaFollette's Magazine (March, 1925), pp. 42–43.
7 “Brokers's Loans,” Hearings before the Committee on Banking & Currency, United States Senate, 70th Cong., 1st Sess. (Washington, 1928). At the suggestion of Senator Carter Glass, the committee later amended the resolution by removing the words following “speculative purposes” in paragraph one; evidently Glass and some other moderates did not favor limiting loans “to the lowest possible amount.”
8 “Brokers' Loans,” p. 3.
9 Ibid., pp. 2, 3.
10 Ibid.
11 Haney, Lewis H., Logan, Lyman S., and Gavens, Henry S., Brokers' Loans; A Study in the Relation between Speculative Credits and the Stock Market, Business, and Banking (New York, 1932), pp. 3–43.Google Scholar
12 “Brokers' Loans,” p. 19.
13 Ibid., pp.
14 Ibid., p. 6. Cf. Owens, Richard N. and Hardy, Charles O.Interest Rates and Stock Speculation (New York, 1926)Google Scholar, preface. These two economists announced that they could find no evidence for the theory that stock prices are controlled by short-term and call loan rates.
15 “Brokers' Loans,” pp. 6–7.
16 The two-year term, 1923–1925, was to fill the vacancy caused when Senator William S. Kenyon accepted a judgeship.
17 Time Magazine (Jan. 19, 1925).
18 Luthin, Reinhard H., “Smith Wildman Brookhart of Iowa: Insurgent Agrarian Politician,” Agricultural History, Vol. 25 (Oct., 1951), pp. 187–197.Google Scholar
19 “Brokers' Loans” (Feb. 6, 1928), p. 6.
20 Ibid., pp. 8, 19.
21 Ibid., p. 64.
22 Ibid., pp. 75, 83. Lawrence, Joseph Stagg, Wall Street and Washington (Princeton, 1929)Google Scholar, quoted Brookhart as saying “Unless something of this kind is done we are now headed for the greatest panic in the history of the world.” Lawrence, a Princeton professor who had served as economic consultant to the New York Stock Exchange, ridiculed Brookhart, declaring that the proposals of Midwest radicals could not be taken seriously. See pp. 309–314.
23 “Brokers' Loans,” pp. 32–33. Experts had long claimed that there were too many small, inadequate banks. John M. Chapman and Ray Westerfield, B., Banking, Branch; Its Historical and Theoretical Position in America and Abroad (New York, 1942), pp. 128–129.Google Scholar
24 Ibid., pp. 33–34.
25 Ibid.
26 Ibid., p. 35. 1913 = 100.
27 Ibid.
28 Ibid., pp. 45, 39, 62.
29 Ibid., p. 54. Dr. Sprague did acknowledge that current stock prices were too high for prospective earnings.
30 The Senate Banking & Currency Committee voted 7 to 5 in favor of the resolution. For: Brookhart (R–Iowa), Fletcher (D–Fla.), Frazier (R–N.D.), Glass (D–Va.), May field (D–Tex.), Norbeck (R–S.D.), and Steiwer (R–Ore.). Against: Barkley (D–Ky.), Edge (R–NJ.), Phipps (R–Colo.), Sackett (D–Ky.), and Wagner (D–N.Y.). In view of their later support of New Deal reforms, it is interesting to note the nay votes of Senators Alben Barkley and Robert Wagner. Commercial Financial Chronicle, Vol. 126, Part 2 (April 30, 1928), p. 2, 737.
31 New York Times, May 13, 1928.
32 Commercial & Financial Chronicle, Vol. 126, Part 2 (May 19, 1928), pp. 3,061–3,062.
33 Congressional Record, Vol. 71, Part 1, 71st Cong., 1st Sess. (June 4, 1929), p. 2,324.
34 Wall Street Journal, May 15, 1928.
35 Barron's, March 5, 1929, p. 12; April 30, 1929, p. 4.
36 New York Times, May 13, 1928.
37 Congressional Record, Vol. 69, Part 9, 70th Cong., 1st Sess., p. 9,203. This was the customary type of loan made to brokers who re-lent to clients who were buying stocks on margin.
38 Ibid., pp. 9,203–9,204.
39 The faithful 18 were: Hugh L. Black (D–Ala.), John J. Blaine (R–Wis.), Smith W. Brookhart (R–Iowa), James Couzens (R–Mich.), Bronson M. Cutting (R–N.M.), Clarence C. Dill (D–Wash.), William J. Harris (D–Ga.), Richard B. Howell (R–Neb.), Hiram Johnson (R–Calif.), Robert M. LaFoUette (R–Wis.), Earle B. MayBeld (D–Tex.), Matthew M. Neely (D–W.Va.), George W. Norris (R–Neb.), Gerald P. Nye (R–N.D.), Morris Sheppard (D–Tex.), Henrik Shipstead (F–L, Minn.), Elmer Thomas (D–Okla.), and McMaster. Norbeck was absent but of course favored the tax. Oddly enough, Walter Edge (R–N.J.), although he did not vote, was reported as favoring the call loan tax. Congressional Record, Vol. 69, Part 8 (May 10, 1928), p. 8,276.
40 Ibid.
41 lbid.
42 Ibid., pp. 8,277–8,278.
43 Ibid.
44 Ibid.
45 The other victory was the voice vote passage of the Heflin resolution in 1929; see p. 152. Like all votes on speculative matters since 1892, the vote to retain the transfer tax at 2 cents had a definite sectional pattern. Here is the vote by section: Note the difference between New England and the Middle Atlantic states; the former is pro-corporation, the latter is narrowly pro-speculation. The Antispeculator Tier includes; North and South Dakota, Nebraska, Kansas, Oklahoma, and Texas. This Great Plains region was the locus of Populist sentiment in the 1890's and has continued to be the citadel of pre-industrial, nativistic equalitarianism. Great Plains senators from both political parties have been the most consistent critics of speculation, middleman profits, and financial oligarchy. From 1892 until the New Deal, legislators from this area were virtually unanimous in this attitude.
46 Congressional Record, Vol. 69, Part 8 (May 10, 1928), p. 8,276.
47 Democratic Campaign Book (1924), pp. 20–24.
48 Allen, Frederick Lewis, Only Yesterday (New York, 1931), pp. 302–303.Google Scholar
49 “Has the Federal Reserve System Promoted Speculation?” Review of Reviews, Vol. 78 (Sept. 28, 1928), pp. 256–260.
50 The G.O.P. had rejected LaFollette Progressive platforms at every convention since 1908. Nye, Midwestern Progressive Politics, p.337.
51 Proceedings Democratic National Convention (Houston, 1928), p. 187.
52 New York Times, Jan. 24, 1928, p. 3.
53 While the remarks of respectable conservative reformers like Senators Carter Glass and Daniel U, Fletcher of Florida, and Dr. H. Parker Willis often infuriated the “Sons of the Wild Jackass,” the insurgents could usually count on picking up two or three votes in the Senate for their less extreme measures from these moderate critics of speculation.
54 Wall Street Journal, Feb. 7, 1929.
55 According to The Literary Digest, the majority of American newspapers supported editorially the Board's action. For a list of papers endorsing the action see “Can the Federal Reserve Board Check Speculation?” Literary Digest, Vol. 100 (Feb. 23, 1929), pp. 78–82.
56 Duluth Labor World, Feb. 23, 1929, Vol. 2, p. 6; March 9, Vol. 4, p. 1; March 16, Vol. 4, p. 2.
57 Congressional Record, Vol. 70, Part 3, 70th Cong., 2nd Sess. (Feb. 11, 1929), pp. 3,203–3,207.
58 Ibid., p. 3,203.
59 Commercial & Financial Chronicle, Vol. 128, Part 1 (Feb. 16, 1929), p. 993.
60 Fulmer's colleagues did not have a high opinion of his abilities. His appointment as chairman was regarded as a triumph of the seniority system. McCune, Wesley, The Farm Bloc (Garden City, 1943) pp. 49–50.Google Scholar
61 Congressional Record, Vol. 70, Part 3, 70th Cong., 2nd Sess. (Feb. 16, 1929), pp. 3,699–3,700.
62 Ibid. (Feb. 11, 1929), pp. 3,205–3,207.
63 Sakolski, Aaron M., “American Speculative Manias,” Current History, Vol. 30 (Aug., 1929), pp. 860–868.Google Scholar
64 Borah, William E., “Call Money and Stock Gambling,” World's Work, Vol. 58 (June, 1929), pp. 33–34.Google Scholar
65 Ibid.
66 Lawrence in Wall Street and Washington, pp. 295–296, bitterly assailed Borah's plan. The Princeton economics professor said that Borah had no right to ask banks of the nation to loan only for two-week periods, that the plan would not deter speculators. In addition, he accused Borah of harboring a prejudice against Wall Street that rested upon a “profound substrata of dour Calvinism.”
67 Congressional Record, Vol. 71, Part 3, 71st Cong., 1st Sess. (June, 1929), p. 2,325.
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