History is different in Galesburg: The Crash that wasn't 75 years ago!
By Mike Kroll
American history was changed irrevocably seventy-five years ago by the great stock market crash of 1929. Throughout the decade of "the roaring 20's" our country experienced an extended economic boom where the value of stocks increased more than four-fold. Most of this nation's capital was invested in the stocks or bonds of corporations and many were of the feeling that investing in the stock market was almost a sure thing. During that last week of October, 1929 they discovered nothing is a sure thing as the crash triggered the Great Depression. Here in Galesburg the impact was less than immediate.
To get a flavor for just how the Galesburg community experienced this event I looked back upon the newspaper coverage of the time in what was then known as the Daily Evening Register Mail. In mid-October the Santa Fe Railroad donated the area now known as Lake Storey Park to the city and the Galesburg City Council was preparing to present a $150,000 bond referendum before the voters. While still somewhat of a novelty there were already enough automobiles on local streets and roads in the hands of inexperienced drivers that each day's paper covered a half-dozen or more area traffic accidents, many with injuries or deaths. And the board of Galesburg Cottage Hospital had put together plans for a major expansion as their supporters were kicking off a $350,000 fund raising drive.
On Monday, October 21st the main headline read: Fortunes Lost as Stocks Sag in New York." Traders were beginning to recognize that the artificially high stock prices weren't representative of the various corporations real value (not unlike the wildly inflated Internet and technology stocks of just a few years ago). The story read: "Wall Street went through one of its great days today buying and selling in such great volume that no one could keep an adequate check on the trends of the market. ...Tickers were far behind. ...at one time the tape was 69 minutes late and trading was at an estimated 8 million share pace giving indications that all previous records would be broken for trading volume."
The next day's paper contained a number of interesting stories boding ill for the economy. The headline of one small story, "State Closes Benton Bank" referred to a shaky small town bank where the president dies in an accident and state banking officials step in to prevent a run on the bank due to a crisis in depositor confidence. Apparently a number of downstate banks had already experienced a sudden surge of depositors demanding to withdraw their cash. Another apparently unrelated story related the plight of a number of small banks in and around Champaign-Urbana, "Reserve Bank Rushes Aid to Urbana Banks." A supply of cash was first flown and then delivered by armored car to the banks involved. "The Chicago Federal Reserve Bank has rushed aid to the threatened downstate banks."
Toward the rear of that Tuesday's paper in the Business section could be found a story headlined: "Stocks Take Upward Turn" with the sub-head "Prices rebound sharply after yesterdays selling wave." Reading the actual story led one to question the upbeat tone of the headline as you discovered sales volume far below that of the previous day and only modest increases in the prices of stocks that fell precipitously the day before.
On Wednesday, October 23rd the story returns to the paper's front page with the headline: "Stocks Take Another Fall in New York." The story reports "scenes of wild confusion reign in Stock Exchange as prices break again. ...The latest break in prices come with breathtaking swiftness and were unaccountable on the basis of anything in the day's business or industrial news."
That gloomy economic story was offset by another one positioned across the page headlined: "September Hits New Record for Employment." This story reports record numbers of Americans employed just one month prior and credits the booming economy.
The very next day finds a page one banner headline: "CHECK PANIC ON STOCK MARKET." Among the stories on that page was one headed: Bankers Meet to Halt Wild Selling Wave" that applauded a group of east coast bankers for taking it upon themselves to band together to help steady the volatile stock market. "All records for sales are broken as 10 million shares change hands up to 1:20pm today." Another story relates a hopeful tone: "While the terrific collapse of prices was by far the most precipitous ever seen, veteran Wall Street observers said that the decline, in view of the current high prices, was relatively smaller and considerably less disastrous than have been experience in panic times in the past."
Friday and Saturday's newspapers in Galesburg were laboring to reassure readers that things weren't so bad in the stock market. Extensive coverage of both the Cottage Hospital campaign and the city council's desire to sell bonds to fund improvements on what we now call Lake Storey. That name was decided later, chosen to honor the then president of the Santa Fe railroad W. B. Storey. Headlines relevant to the stock market those days included: "Market has Better Tone Losses Small," "Bankers Pool Resources to Save Markets," and "Stock Market Calmed After Selling Wave."
A story in the Saturday paper reported on an address by president Herbert Hoover. The Republican president was an avid free marketer who saw no place for government intervention even as banks were failing across the nation. Any efforts to stem bank failures were done by the Federal Reserve System or state bank regulators while federally chartered banks were mostly left to fend for themselves. Coverage of Hoover's comments included the following: "President Hoover is convinced that the general condition of American business is strong and sound." This was just three days prior to the market crash.
Monday's news was once again bleak but the headlines did their best to blunt the impact of the wire service stories. "Stock Values Hit New Lows in New York" headed a story reporting continuing major concerns about a sell-off of the market. The crash occurred the very next day, now known as "Black Tuesday" when nearly 16.5 million shares of stock were sold as the market of inflated priced stocks, many of which were purchases on credit, collapsed. When stock prices fell most of those who had purchased stock on credit had those loans called and few possessed the cash to cover these expenses. Banks and brokerage firms that had loaned the money found that in most cases those loans could not be repaid and the institutions themselves didn't have the necessary cash to continue doing business. A panic among large investors began on the east coast and quickly spread westward.
The banner headline in the Tuesday Galesburg paper: "STOCKS RALLY AFTER RECORD FALL" appears to have been wildly optimistic. Smaller headlines on specific stories were somewhat more accurate: "Two Disastrous Breaks Carry Prices to New Low Levels Before Rally Comes" and in a separate story "Chicago Hard Hit by Break in Markets." Essentially there was little sign of financial fear or panic in the Galesburg newspaper unlike many major newspapers across the nation.
Amazingly the Wednesday banner headline was: "CONFIDENCE RETURNS TO MARKET." It is true that a number of market insiders foresaw the coming crash, if not the exact timing, and had quietly begun cashing out of the market before prices tumbled to the floor. For the many who had purchased their stock on credit this wasn't really an option even if they had the foresight to get out before the crash. But if the impact were solely on stock market investors this would not have triggered the Great Depression. However, in those days of little or no bank regulation many banks not only had huge outstanding loans secured by now worthless stock-- large numbers of banks had invested their depositor's money in the now collapsed market and were near ruin.
The Galesburg newspaper stories that Wednesday were factually accurate but nonetheless misleading, "Heavy Buying Brings Upturn in All Stocks" and "Stock Market Crash Brings Sale of 'Bargains'" and avoided any mention at all of the impact of this catastrophe on the local area. Cute stories highlighting the plight of distant rich folks suffering were included however, anecdotal reports of the emergency sales of Rolls Royces, furs and jewelry. No questions were asked about the potential impact on local banks or wealthy citizens with investments within the pages of the local newspaper.
Thursday was Halloween and there was significant coverage of local celebrations and parties and a story covering a request by the manager of the Orpheum Theatre. They were showing the first ever talky movie mystery and he was fearful of patrons disclosing the plot to their friends and relatives who hadn't yet seen the movie. He pleaded with folks to not deprive others of the opportunity to see the movie for themselves and discover the plot as the filmmaker presented it. They also reported with great excitement that the Cottage Hospital capital campaign had already reached half the $350,000 goal in pledges.
Meanwhile, that pesky story from New York continued to require some coverage. "Mad Scramble to Buy Stock; Prices Soar" headlined a story of the fortunate "army of bargain hunters [invading] market seeking securities for investment purposes." The New York Stock Exchange was closed early Thursday and had an all-day holiday on Friday. The Friday paper included a full-page ad from the Ford Motor Company announcing car price reductions across their entire line ranging from $20-60 on vehicles priced between $495-1,200 each. The Ford ad explained that this was one way for their company to help the country weather the financial storm. To Galesburg newspaper readers this must have seemed quite odd.
By Saturday, a mere four days after Tuesday's crash the local headline was "Wall Street Optimistic." In the months to come the word would begin spreading across the country that many banks were close to insolvency. During 1930 and 1932 millions of bank depositors went to their banks demanding access to cash in the accounts and finding that the banks could not honor their requests. Hoover was true to his principles and did little to stem this crisis and that cost him the 1932 election to Franklin Roosevelt. Roosevelt was inaugurated to a banking system that no longer functioned as $140 billion in deposits simply disappeared. And there was almost no confidence in the rest of the American financial system either. No credit was available for either businesses or individuals and checks became worthless. Eventually even this depressing news made its way to Galesburg but as 1929 was concluding such problems must have seemed remote indeed to the average Galesburger.