Before World War I only small fractions of Americans invested or had interest in the Stock Market. Many Americans thought of Wall Street with fear and loathing. Populist politicians denounced Wall Street as the center of financial shell games thought up by millionaire operators like Gould, Drew, Morgan and others.
But with the conclusion of the War, many of Americans were getting a different perspective of the Stock Market. Many lost fears of investing due to many were previously buyers of Liberty Bonds. Many Americans assumed they knew the advantages of investing and knowledgeable about stock splits, margin accounts, dividends, etc. New financial methods, the investment trust offered new approaches to investing in the market and many major corporations such as General Motors, General Electric and AT&T offered common stock and bonds were starting to boom and attracted many new money-seeking investors.
And till last month, the market was center of conversation, talked about and financial advice was shared everywhere! The market continued to increase, Major Corporations stocks rose incredibly. But brokers loans reached $137 million, and New York's banks were in debt to the Federal Reserve by $64million. Warning signs began to appear in the market, and many market analysts began predicting the crash. Throughout the nation, thousands of investors were margin trading, buying stock on credit. The margin trader bought stock by paying less than the full price. This was highly profitable but extremely risky. If the stock value decreased the customer had to invest more money to sustain the account. And if the stock kept falling, the customer would run out of their money, and the broker, who usually borrowed money from their banker, was forced to sell out the account for any amount offered. If the customer could not pay the broker, the broker was unable to pay the banker, which placed of them all in debt.
Many banks wanted...
Please join StudyMode to read the full document