Wall Street crash of 1929

[[United States Congress|Congress]] responded to the events by passing the [[1933 Banking Act|Banking Act of 1933]] (Glass–Steagall Act), which separated [[Commercial bank|commercial]] and [[investment banking]], and the [[Securities Act of 1933]] and [[Securities Exchange Act of 1934]], which created the [[U.S. Securities and Exchange Commission]], authorized the creation of its [[United States securities regulation|disclosure regulations]], and prohibited the [[market manipulation]], [[insider trading]], and speculative investing practices that precipitated the crash.{{sfn|Sorkin|2025|pp=38–64, 103–130, 147–162, 308–313, 359–372, 383–390, 405–407, 414–419}} Stock exchanges introduced a practice of suspending trading when prices fell rapidly to limit [[panic selling]]. Scholars disagree about the crash’s role in the Great Depression. Some argue that the price swings were not, by themselves, severe enough to trigger a major collapse of the financial system. Others contend that the crash, combined with other economic problems in the U.S. in the 1920s, should be understood as one stage of a broader [[business cycle]] affecting [[Capitalism|capitalist]] economies.

[[United States Congress|Congress]] responded to the events by passing the [[1933 Banking Act|Banking Act of 1933]] (Glass–Steagall Act), which separated [[Commercial bank|commercial]] and [[investment banking]], and the [[Securities Act of 1933]] and [[Securities Exchange Act of 1934]], which created the [[U.S. Securities and Exchange Commission]], authorized the creation of its [[United States securities regulation|disclosure regulations]], and prohibited the [[market manipulation]], [[insider trading]], and speculative investing practices that precipitated the crash.{{sfn|Sorkin|2025|pp=38–64, 103–130, 147–162, 308–313, 359–372, 383–390, 405–407, 414–419}} Stock exchanges introduced a practice of suspending trading when prices fell rapidly to limit [[panic selling]]. Scholars disagree about the crash’s role in the Great Depression. Some argue that the price swings were not, by themselves, severe enough to trigger a major collapse of the financial system. Others contend that the crash, combined with other economic problems in the U.S. in the 1920s, should be understood as one stage of a broader [[business cycle]] affecting [[Capitalism|capitalist]] economies.

==Background==

an era defined by wealth, luxury and excess. Building on post-war optimism, rural Americans migrated to the cities in vast numbers throughout the decade with hopes of finding a more prosperous life in the ever-growing expansion of America's industrial sector, pursuing means of [[conspicuous consumption]].{{cite web|url=http://www.americanhistoryusa.com/great-farm-depression-1920s/|title=The Great (Farm) Depression of the 1920s|author=Dan Bryan|publisher=American History USA|access-date=November 10, 2013|archive-date=November 5, 2013|archive-url=https://web.archive.org/web/20131105061129/http://millercenter.org/president/coolidge/essays/biography/8|url-status=dead}}

[[File:1929 wall street crash graph.svg|thumb|upright=1.8|The [[Dow Jones Industrial Average]], 1928–1930]]

The "[[Roaring Twenties]]", the decade following [[World War I]] and the [[Recession of 1920–1921]],{{Cite news |last=Smith |first=David |date=2008-03-23 |title=America gets depressed by thoughts of 1929 revisited |url=https://www.thetimes.com/article/america-gets-depressed-by-thoughts-of-1929-revisited-vl7lgq9kvw5 |access-date=2024-10-22 |language=en}} has been scholarly and biographically regarded as an era defined by wealth, luxury and excess. Building on post-war optimism, rural Americans migrated to the cities in vast numbers throughout the decade with hopes of finding a more prosperous life in the ever-growing expansion of America's industrial sector, pursuing means of [[conspicuous consumption]].{{cite web|url=http://www.americanhistoryusa.com/great-farm-depression-1920s/|title=The Great (Farm) Depression of the 1920s|author=Dan Bryan|publisher=American History USA|access-date=November 10, 2013|archive-date=November 5, 2013|archive-url=https://web.archive.org/web/20131105061129/http://millercenter.org/president/coolidge/essays/biography/8|url-status=dead}}

Declines in the money supply caused by decisions made by the Federal Reserve were beginning to have a severely contractionary effect on output.{{cite web | url=https://www.britannica.com/event/Great-Depression/Causes-of-the-decline | title=Great Depression - Causes of the Great Depression | Britannica }} Despite the inherent risk of [[speculation]], it was widely believed that the stock market would continue to rise. On March 25, 1929, after the [[Federal Reserve]] warned of excessive speculation, a small crash occurred as investors started to sell stocks at a rapid pace, exposing the market's shaky foundation. Two days later, banker [[Charles E. Mitchell]] announced that his company, the [[National City Bank of New York|National City Bank]], would provide $25 million in credit to stop the market's slide. Mitchell's move brought a temporary halt to the financial crisis, and [[call money]] declined from 20 to 8 percent. However, the American economy showed ominous signs of trouble. Steel production declined, construction was sluggish, automobile sales went down, and consumers were building up large debts because of easy credit.

Declines in the money supply caused by decisions made by the Federal Reserve were beginning to have a severely contractionary effect on output.{{cite web | url=https://www.britannica.com/event/Great-Depression/Causes-of-the-decline | title=Great Depression - Causes of the Great Depression | Britannica }} Despite the inherent risk of [[speculation]], it was widely believed that the stock market would continue to rise. On March 25, 1929, after the [[Federal Reserve]] warned of excessive speculation, a small crash occurred as investors started to sell stocks at a rapid pace, exposing the market's shaky foundation. Two days later, banker [[Charles E. Mitchell]] announced that his company, the [[National City Bank of New York|National City Bank]], would provide $25 million in credit to stop the market's slide. Mitchell's move brought a temporary halt to the financial crisis, and [[call money]] declined from 20 to 8 percent. However, the American economy showed ominous signs of trouble. Steel production declined, construction was sluggish, automobile sales went down, and consumers were building up large debts because of easy credit.