On August 2, 1927, President Calvin Coolidge released to the nation his famous terse pronouncement: “I do not choose to run for President in 1928.”
To Coolidge’s consternation, the Republican Party took him at his word.1 The following June, in the oppressive heat of Kansas City, the listless perspiring delegates to the Republican National Convention nominated Herbert Clark Hoover on the first ballot as their Presidential candidate. The former Secretary of Commerce was elected on November 6, 1928.
In the opinion of the iconoclastic author, Calvin Coolidge, Hoover was simply a “fat Coolidge.” William Allen White summed up Hoover as an “adding machine.” Ferdinand Lundberg portrayed him as an “erstwhile vendor of shady mining stocks who before the war had been reprimanded by an English court for his role in a promotional swindle.”
While there was undeniable truth in each of these characterisations, none of them did full justice to the Thirtieth President of the United States.
It was not merely in terms of physical girth that Hoover was a bigger man than his taciturn predecessor. Whereas Coolidge had hewed to the precepts of Wall Street with the respectful obedience of a grateful employee, Hoover was a millionaire in his own right, moved on an easy, gracious footing with renowned financiers and was, in fact, he accepted as a leading figure in big business circles.
As the Wall Street Journal had observed after Hoover’s nomination as the Republican Party candidate:
Never before, here or anywhere else, has a Government been so completely fused with business. There can be no doubt that Hoover as President would be a dynamic business President. He would be the first business, as distinguished from political, president, the country has ever had…
Hoover would serve the public by serving business . . .
Such a statesman, for all his preoccupation with business statistics, precise commercial graphs and stock market evaluations, was not to be dismissed as a mere “adding machine,” a mechanism wholly lacking in the knack of self-enrichment.
Nor were Hoover’s promotional talents by any means limited to the field of dubious mining ventures. No President before him had been so gifted in the art of self-promotion. Despite his never having shone in the engineering profession and the fact he had made his fortune through organizing stock companies to exploit gold, timber, ore and other concessions in Czarist Russia, Australia, China and other backward regions, Hoover had sold himself to the American public as “The Great Engineer”; despite his systematic use of food as a political weapon to sustain savage White Guard regimes and suppress the democratic upsurgence in post-war Europe, Hoover was widely known in the United States as “The Great Humanitarian”; and despite his complete preoccupation with business matters and the accumulation of material wealth, there were millions of Americans who had been taught to think of Hoover as “The Great Idealist.”
As Drew Pearson and Robert S. Allen wrote in their book, Washington Merry-Go-Round, “Every possible trick, every new device, known or capable of being invented by skilled publicity agents had been invoked to make Hoover the Superman, the Great Executive…” 2
With Hoover in the White House, the stock market soared to fabulous new heights and scores of new investment houses were incorporated. In January 1929, over a billion dollars worth of new securities were floated. In every major city throughout the land, brokerage offices were jammed with eager buyers, their eyes hypnotically glued to lighted screens across which moved a rapid procession of symbols and numbers recording the ever-mounting prices on the New York Stock Exchange.
“We in America,” opined Herbert Hoover, “are nearer to the final triumph over poverty than ever before in the history of any land . . . the outlook for the world today is for the greatest era of commercial expansion in history.” The United States, the President proclaimed in his inaugural address, had “reached a higher degree of comfort than ever existed before in the history of the world … In no nation are the fruits of accomplishment more secure.”
Eight months later, America was overwhelmed by the most catastrophic economic crisis in all history.
In the last week of October 1929, the bottom dropped out of the stock market.
During the preceding weeks, prices on the Exchange had followed a continuous downward trend without causing much apprehension: the Big Bull market had sagged before, only to surge back to spectacular new peaks and bigger profits for the pool operators. By the middle of the month, however, alarm spread as the decline in prices rapidly picked up momentum.
On October 23, with ticker tapes in brokerage offices running almost two hours behind market transactions, more than 6,000,000 shares exchanged hands; and the New York Times averages for fifty leading industrial and railroad stocks recorded a loss of 18.24 points.
Then on Thursday, October 24, the deluge really got underway.
That day the volume of sales was nearly 13,000,000 shares. Within the first hour of trading, as prices plunged downward at a fantastic rate, thousands of speculators were wiped out in an avalanche of selling. There was pandemonium in the great hall of the New York Stock Exchange; shouting, madly gesticulating brokers rushed to and fro, their faces contorted with fear and dismay. Brokerage firms in every major city were jammed with dishevelled clients, frantically trying to dispose of their holdings before they were completely ruined . . .
Shortly after noon, Charles E. Mitchell of the National City Bank, Albert H. Wiggin of the Chase National Bank, and two other leading bankers hurried into the J. P. Morgan & Company building and closeted themselves in the office of Thomas W. Lamont. Within a few minutes they had agreed to put up $20,000,000 apiece, together with one other financier, to form a buying pool of two hundred and forty million dollars to slow the cataract of sales and bring a semblance of order to the chaos at the Exchange.
From the White House, President Hoover, who had been in constant touch with Thomas Lamont by long distance telephone, proclaimed to the nation: “The fundamental business of our country, that is, production and distribution of commodities, is on a sound and prosperous basis.”
But neither multi-million dollar bankers’ pools nor sanguine Presidential proclamations could halt the debacle. The catastrophic collapse in market prices continued unabated. On October 29, with more hundreds of millions of dollars of “values” abruptly vanishing into thin air, the volume of sales on the Exchange reached the phenomenal all-time high of 16,410,030 shares.
And as the whole crazy cardhouse structure of credit, speculation, paper values and stock market pools crumbled in a thousand pieces, wild rumours multiplied on every side:
All the banks have collapsed. The exchanges are being shut down by Government decree! Twenty bankers have committed suicide! Angry mobs are marching on Wall Street!
The Great Panic was on.
“The present week,” declared the November 2, 1929, issue of the Commercial and Financial Chronicle, “has witnessed the greatest stock market catastrophe of the ages.”
But what was happening was far more than a gigantic stock market catastrophe. It was a world catastrophe. The era of spurious post-war stability and prosperity had ended. An economic crisis of unprecedented severity had begun which would swiftly engulf the globe . . .
On December 18, 1930, Benito Mussolini summed up the effects of the World Crisis on Europe:
The situation in Italy was satisfactory until the fall of 1929, when the American market crash exploded suddenly like a bomb. For us poor European provincials it was a great surprise . . . Suddenly the beautiful scene collapsed and we had a series of bad days. Stocks lost thirty, forty and fifty per cent of their value. The crisis grew deeper . . . From that day we were again pushed into the high seas, and from that day navigation has become extremely difficult for us.
Unemployment, hunger, mass demoralization and destitution went hand in hand with the economic crash that swept like a hurricane across America, Europe and Asia. Great financial and industrial corporations collapsed in ruins; millions of small investors were wiped out; workers were turned out into the streets. While the masses starved, fruit was dumped into the sea; wheat rotted in the crammed silos; coffee was used for stoking furnaces; cattle were slaughtered and buried in ditches. The nations could no longer pay for the plethora of commodities they had produced. An entire system of economic distribution had broken down.
Early in 1932, former U.S. Secretary of the Treasury Andrew Mellon, who had been appointed American Ambassador to England by President Herbert Hoover, told a Pilgrim’s dinner in London:
“1 do not believe there is any quick or spectacular remedy for the ills from which the world is suffering, nor do I share the belief that there is anything fundamentally wrong with the social system.”
The famous American steel magnate, Charles M. Schwab, expressed a sentiment more widely prevalent in business circles. “I am afraid,” he said. “Every man is afraid.”
1 Describing President Coolidge’s reaction when the Republican National Convention in 1928 failed to make any attempt to draft him for another term, Irwin H. (“Ike”) Hoover, chief usher at the White House, wrote in his memoirs:
“There was dismay at the White House . . .. The President was not long in vacating the Executive Office. He came to the White House visibly distressed. He was a changed man . . .
“He threw himself across the bed continuing on indefinitely to lay there. He took no lunch and only that the physician came out a couple of times to inquire, at the suggestion of the President, for word of the Convention doings, was it known, the drift of his thoughts. In this room he continued on to remain through the rest of the day and night, not emerging there from until nearly eleven o’clock the next (Monday) morning. Even then it was a different President we knew . . .. That night he left for Wisconsin.”
2. For twenty years prior to his appointment as U. S. Food Administrator in 1917, Herbert Hoover had lived abroad, rarely visiting the United States.
In the spring of 1897, at the age of twenty-two, Herbert Hoover had left San Francisco to seek his fortune in the goldfields of West Australia. As a representative of British gold mine owners in Australia, the youthful Hoover soon won a reputation, as Rose Wilder Lane writes in The Making of Herbert Hoover, “as a hard and ruthless man . . . whose ruthlessness was known from Perth to the farthest reaches of the back country.”
During the early 1900’s, acting as an agent for various British mining concerns and financial syndicates, Hoover became widely known for his ability to organize and promote stock companies to exploit the resources of backward colonial areas. By 1910 Hoover himself had large holdings in a number of these stock enterprises, including eleven oil companies in Czarist Russia. Around this time Hoover became associated with the British multimillionaire Leslie Urquhart in three companies which had been set up to exploit timber and mineral concessions in the Urals and Siberia; and, soon afterwards, in the Russo-Asiatic Corporation, which was floated by Urquhart and obtained concessions from the Czarist regime to properties in Russia whose total value was estimated at $1,000,000,000.
Late in 1914, with the backing of the Belgian financier, Emile Francqui, with whom he had been associated in the Chinese Engineering and Mining Company, Hoover became Chairman of the Commission for Relief in Belgium. This post was used by Hoover as a stepping-stone to the far more important position of Director of the U. S. Food Administration.