1929: Inside the Greatest Crash in Wall Street History--and How It Shattered a Nation - 47

On the afternoon of November 23, 1937, just two days before Thanksgiving, Thomas Lamont looked up from his desk at J.P. Morgan to see his partner George Whitney standing before him looking “thunderstruck.”

This was a rare sight, as Morgan men were not known to wear their emotions on their sleeves. Struggling to find his words, Whitney confided in Lamont that he needed some advice about how to handle a dire situation involving his younger brother, Richard.

If people expected Wall Street to show signs of humility or contrition about the crash and the hard times that followed, they certainly weren’t going to get it from Richard Whitney. The head of the New York Stock Exchange still entered every room with the aura of the “white knight” nickname that he had acquired on Black Thursday—October 24, 1929—when he strolled onto the trading floor and placed a bid of $205 for U.S. Steel. For that bold (if ultimately ineffectual) gesture, he won the sobriquet “Hero Whitney” from Time . In 1930, he ascended to the presidency of the Exchange—at forty-one, the youngest leader in its history—where he distinguished himself as Wall Street’s fiercest attack dog.

“ You gentlemen are making a great mistake,” he had lectured Pecora and his investigators, defending pools, short selling, and other practices that the public had come to view with misgiving, if not outright disgust. “The Exchange is a perfect institution,” he insisted, an institution built on integrity.

Nonetheless, by 1934, Congress had passed, and Roosevelt had signed, a law establishing a new federal agency, the Securities and Exchange Commission, designed to prevent the investor pools, debt-fueled speculation, and general opacity of the markets that led to the crash. Joseph Kennedy, a former speculator himself, was appointed by Roosevelt as its first chairman. Three years later, in late October 1937, the market crashed again, evoking the trauma of 1929. Whitney, though no longer president of the Exchange, blasted the new government agency, arguing all the new government regulations were strangling the flow of capital.

But on that day in November 1937 when George Whitney walked into Lamont’s office, he wasn’t worried about his brother’s criticism of the SEC. It was a much more difficult, personal matter.

Richard’s high-flying lifestyle—the townhouse, his country estate, and all the rest of it—was about to implode. In addition to his role running the New York Stock Exchange, he also ran a bond trading firm; unbeknownst to his clients there, he had been pilfering millions of dollars from their accounts. Richard told George that he had taken securities certificates that needed to be replaced the following day. In order to do so, he desperately needed a loan of about $1 million. George, who had already loaned Richard almost $3 million, told Lamont that his brother was in “ a very serious jam.”

Given all the negative attention heaped on the House of Morgan since the crash, Lamont had a horrible sense of foreboding about how this could unfold.

William O. Douglas, who had succeeded Kennedy as chairman of the SEC, had begun using his new role to rail against the “goddamn bankers,” calling “the Morgan influence…the most pernicious one in industry and finance today.” Douglas often advocated for the creation of new regional banks to Roosevelt, citing the need to “ displace the Morgan influence in the various regions [with] a new and enlightened leadership in the business.”

Richard Whitney’s deep ties to the House of Morgan were about to hand Douglas, the SEC, and anyone else who held a grudge against Wall Street all the ammunition they needed to finish off whatever reputation it still had. The work Lamont had been quietly putting in behind the scenes to ingratiate himself with Roosevelt’s cadre of New Deal advisors would likely be rendered a waste of time.

“ Well, that is a devil of a note, George,” Lamont said. “Why, Dick Whitney is all right, how could he mishandle securities even for a moment, no matter what the jam?”

“I don’t know, it is an inexplicable thing,” George said. “It is an isolated instance. But he has got to deliver them tomorrow, and I am going to help him out; I have got to help him out, of course.”

“I think you are dead right,” Lamont told him. “Certainly I will help you to help your brother. Certainly.”

George’s characterization of his brother’s problem as a “jam” would, in time, turn out to be an almost comical euphemism. Richard eventually admitted to his brother that he had taken securities valued at $1 million from the New York Stock Exchange’s $2.5 million Gratuity Fund, which paid life insurance to families of its members, and had pledged those securities as collateral for loans to himself and his company. On November 24, Lamont wrote a personal check for $1,082,000 to George, who signed the check over to his brother to get the bonds released and restore about $221,000 of the money Richard had stolen.

Two weeks later, after George partially repaid Lamont’s loan, he went to Jack Morgan. Referring again to his brother being in an “awful jam,” George asked to withdraw funds from his partnership account. Morgan agreed, assuming there was some business necessity for the money.

In the meantime, George confided his fear to Lamont that his brother was not capable of “ handling a business properly and adequately” and indicated that he intended to get him “to wind up the business.” He admitted that for several years, he had been covering Richard’s losses. When in 1934 state bank examiners had conducted the first-ever inspection of the House of Morgan, George papered over his loans to his brother by providing his own securities as collateral.

Shutting down Richard’s business, Lamont agreed, was “ a wise thing.”

And with that, Lamont left for a golfing holiday, trying hard to put the disconcerting conversations out of his mind. Neither he nor George informed anyone at the stock exchange what Richard had done. The matter had been settled among gentlemen.

But it hadn’t been. Three months later, in February 1938, Thomas and Florence Lamont, with his valet, Metcalfe, and her maid, Madeleine, sailed for the French Riviera, where the Lamonts had rented an old château. Lamont was still stewing; he could not relax.

“ His heart began to ‘thump’ (as he calls it) and making a ringing in his ears,” Florence wrote to her son Tom. “I think it is mostly just strain and worry…He has been dreadfully upset by the Whitney affair. What a terrible thing.”

On March 5, 1938, shortly before he was due to appear before an investigative committee of the New York Stock Exchange, Richard showed up at a club where Morgan partner Frank Bartow was playing bridge.

“ I am in a jam,” Richard told Bartow, pleading for a loan—then he confessed that he had stolen shares from the New York Yacht Club.

“This is serious,” Bartow said.

“This is criminal,” Richard acknowledged.

Bartow insisted on consulting a lawyer. When he and Jack Morgan met with the firm’s counsel, John Davis, he advised them that anything they did to help Richard would implicate the bank. They called George, who was in Florida convalescing from an illness, and explained the situation.

“My God!” George cried, devastated to learn how quickly his brother’s situation had crumbled.

America’s moneyed class was stunned as the news broke in the press. Roosevelt learned the news while he was eating breakfast in bed. “Not Dick Whitney!” the president said. “Dick Whitney—Dick Whitney! I can’t believe it.”

The New York Stock Exchange board of governors filed misconduct charges against Richard Whitney. He was indicted for grand larceny and securities theft, which included $100,000 stolen from his wife. Unlike Mitchell, Whitney decided not to fight. Within a month of the charges being filed, Richard Whitney pleaded guilty. The former president of the Exchange was sentenced to five to ten years at New York’s infamous Sing Sing prison.

The case ensnared the studiously careful Lamont, who had managed to maintain his impeccable reputation until that moment. (Years later, his reputation took a hit thanks to his friendship with Mussolini. His attraction to men in power reportedly even caused him to ask a senior German official, “ Just what sort of fellow is Hitler? Is he the sort you’d go fishing with?” The reply: “My dear Lamont, he is the nicest fellow in the world—always making jokes. You couldn’t ask for a more delightful companion.”)

Lamont insisted he had no idea that Richard was a criminal—a contention that was hard to believe, given the breadth of his experience and the plain-as-day circumstances—but he clung to the explanation that he’d done what any friend would do.

“ It never occurred to me that Richard Whitney was a thief,” Lamont said in his testimony to SEC investigators probing Whitney’s misdeeds. “What occurred to me was that he had gotten into a terrible jam, had made improper and unlawful use of securities; that his brother was proposing to try to make good his default. That is what occurred to me, and even then, as I say, my confidence in him was such that when the story came out, when I was abroad, it gave me the most tremendous shock in the world. It made me ill almost that all that time he could have been deceiving his brother, deceiving his partners, deceiving his wife and community. Well, it was just—it is inconceivable.”

To his longtime friend Lady Astor, Lamont explained his bewilderment at the situation. “It is all a bit like Alice in Wonderland to me. Ought we all to forget the principles on which we were trained to help one another, to try to forgive and to try to give the fellow another chance?

“Of course,” continued Lamont, “as the evidence proved, Dick was a thoroughgoing crook. He lied to George up to the last moment, he falsified his books, he deceived his wife and children, etc. etc. But all this was unknown to George last November at the time he tried to help Dick undo the wrong that he had done.”

The SEC ultimately issued a report that accused Lamont and George Whitney of following an “unwritten code of silence” in not reporting Richard’s criminal conduct. The Justice Department declined to prosecute Lamont or George Whitney. But after the report was made public, Douglas, the chair of the SEC, declared that a vast conspiracy with “a powerful figure with money and political connections” had protected them, leading to speculation that the House of Morgan had cashed in its last chit.

Of the men who witnessed 1929 from the uppermost echelons of Wall Street and Washington, the one who fell the hardest was also the one who survived the longest. Richard Whitney died at the age of eighty-six in 1974, not long after the stock market had settled into its second prolonged malaise of the twentieth century. After being paroled from Sing Sing in 1941, he went into dairy farming, then started a textile business in Florida. He was debt free. His brother George, who ultimately rose to chairman of J.P. Morgan in 1950, personally paid back every dollar Richard stole.

Jack Morgan died in 1943. Carter Glass, still serving as senator, died in 1946. William Durant died in 1947, Lamont in 1948, Mitchell in 1955. Pecora served as a New York judge for fifteen years, ran unsuccessfully for mayor of New York City in 1950, and died in 1971.

Herbert Hoover rehabilitated his reputation the best way he knew how—by feeding starving people yet again. He organized relief efforts in Europe and Asia following the Second World War. Congress subsequently appointed him to run a commission on improving government efficiency, which was considered a success. Hoover died as a respected elder statesman in 1964.

Winston Churchill took years to recover from his financial losses incurred in the crash. Through the 1930s, he remained functionally broke, barely staying ahead of creditors by taking writing fees to publish a torrent of articles, including one about being hit by the car in Manhattan. After a long-overdue bill from his shirtmaker threatened to push him into personal bankruptcy, an Austrian-born financier named Sir Henry Strakosch bailed him out. When Churchill became prime minister, he finally had an expense account to match his appetites. A massive book deal for his World War II memoir, as well as relatively lavish sums for film rights to previous books, gave him the financial security he had lacked for most of his life, and when he died in 1965, he had money to leave his heirs.

John Raskob left the most enduring monument, the Empire State Building. When it opened to much pomp and circumstance in 1931— President Hoover ceremoniously turned on the lights by pressing a button in Washington—it was the world’s tallest building. Raskob had successfully outdueled Walter Chrysler and his Chrysler Building for that title by adding an observation deck and a 200-foot mast. The nascent National Broadcasting Company secured exclusive rights to transmit its signal from atop the building, an unexpected new source of revenue.

Like the Chrysler Building, however, as well as Rockefeller Center, the other stupendous addition to the New York skyline during that era, the Empire State Building was a financial albatross for years. At its opening, it was less than 20 percent occupied. Raskob’s friend Al Smith gave space away for free to Catholic charities, just so it didn’t seem so terribly vacant. Nonetheless, the press dubbed it the “Empty State Building.” Because Raskob was personally averse to debt and had financed the construction himself, he was able to weather the lean years. For the most part, he kept out of the spotlight. He hated Glass–Steagall and the reforms that the Pecora commission had forced on Wall Street, and became an avowed enemy of Roosevelt and the New Deal. The press, however, had largely stopped calling, no longer interested in his views on politics, and to the extent he had any involvement with Washington at all, it was mostly to badger the DNC about paying back his loans.

In 1941, Raskob fought one last big fight, engaging in a long-running tax dispute with the Internal Revenue Service. In 1929, he originated a scheme whereby he and his friend Pierre du Pont would sell each other big blocks of stock at a price below what they had paid, then buy them back the following year. In doing so, they could create enormous tax write-offs. According to Raskob’s interpretation of tax law, such wash sales were fully within legal bounds. The courts disagreed, and after the Supreme Court refused to hear Raskob’s appeal, he was forced to pay $1,450,000 in cash to the government immediately.

In 1945, tragedy struck when the pilot of a B-25 bomber, “lost in a blinding fog,” crashed his plane in between the seventy-eighth and seventy-ninth floors of the Empire State Building, killing thirteen people and causing a frightening fire at high altitude. So sturdy was the construction that the building was closed for less than a week. In 1952, a year after Raskob’s death, the building was sold for $51 million, then the highest price paid for a single structure. As an investment, it had not paid off—the land alone had cost Raskob $34.5 million in 1929—but unlike many other bad bets of the era, the Empire State Building had an undeniably enduring impact.

While the wealthiest men of America were largely able to sustain their sumptuous lifestyles through the 1930s, some were not so lucky.

In late 1930, William Durant and his wife, Catherine, were returning home in a chauffeured car after having gone to dinner with friends. Staring dejectedly at the dark streets of New York, Durant admitted to his wife, “I’m wiped out.”

To the outside world, Durant maintained a brave face. He continued to condemn the Federal Reserve for its interference and attack Hoover for failing to prevent the hike in interest rates. Americans would see “longer breadlines, more soup kitchens, continued uneasiness and distress, and a more pronounced tendency to socialism and communism,” he declared, until someone emerged to provide “leadership that has the confidence of the people.”

Durant became the head of the Bank Depositors’ League, which lobbied for “ legislation to give depositors in national and state banks absolute protection…[and] provide safe and convenient places where people can put their money, with a United States government guarantee that it will be returned any time they ask for it.” Though Durant had been accused of shorting the market to profit from its collapse, he adamantly denied the allegations and begged Richard Whitney to ban short selling to inspire dispirited investors: “ The word TRAITOR is the only term that properly applies to the gamblers who, without let or hindrance, and with the approval of your organization, are taking advantage of the weak and helpless and adding greatly to the demoralization now existing.” Durant, who had participated in many bull pools, saw no irony in this hypocritical barrage.

Despite being broke, Durant kept up appearances until 1936 when, at the age of seventy-four, he declared bankruptcy. He put his net income that year at $5,428. He blamed litigation, unreasonable brokerages, greedy creditors—everyone but himself. “ My petition in bankruptcy, filed today, is due to frequent and repeated court proceedings instituted by a few creditors, representing less than 5 percent of my total obligations, who have attempted to gain a preferential position,” he wrote on February 8, 1936, in a declaration in federal district court in New York. “Action by the creditors referred to has prevented me from giving my best efforts to rebuilding my fortune, and I no longer propose to be harassed and annoyed. I wish to state that all creditors will be treated alike, and if fortune favors me all will be paid in full.”

The Durants slowly pared back their lifestyle, moving to a cheaper apartment while their daughter, Margery, continued to live the high life, as if nothing had changed. She took up aviation, bought an airplane, and with her own pilot and mechanic traveled for several years on well-publicized tours of Europe and Africa to promote private air travel. “ Let others sit by the fire,” she told reporters. “I seek adventure.”

Durant struggled to get back in the game with various businesses, from the extravagant (“flying machines” for agriculture) to the mundane (a chain of bowling alleys). All met the same fate. But Durant still dressed in fine clothes, and he and Catherine continued to stay in nice hotels when they traveled. “ You’d never know he was broke,” observed a friend after encountering him in Detroit. But in the bankruptcy filing he declared debts of $914,000, mostly funds owed for his apartment and office rentals. All he had to his name was $250 worth of clothing. In 1938, the spectacular contents of Raymere, his seaside estate in Deal, New Jersey, were put up for auction. A silk Beauvais Aubusson tapestry, purchased for $5,500, sold for $375, while a seventeenth-century Flemish tapestry, purchased for $10,000, went for $200. The property itself went for $44,000.

In 1938, Durant was compelled to write to Margery, who still had her GM stock, to ask for money. He explained that for the previous five years, his income had totaled about $500 per month, against expenses of $1,700. He needed a “loan (not a gift)” of $1,200 a month until he could get back on his feet. Margery helped out, as did friends, but GM had cut its dividends from $3 to $1 a share, so her own wealth was dwindling and she had her own money problems. Durant died on March 18, 1947, at the age of eighty-five, leaving Catherine, once one of the wealthiest women in the United States, penniless. Later that year, Margery and her husband were arrested for narcotics trafficking. Durant’s only son, Clifford, had died years earlier of a heart attack, likely brought on by obesity and alcoholism. In the Durant saga, much more than a great fortune was lost.

What did it feel like to move through the world of money and power with complete confidence, only to see it all vanish, as if you were no less expendable than those living in Hoovervilles? The male ego certainly took a beating in the aftermath of the crash.

On November 27, 1940, the house photographer at the Stork Club approached Jesse Livermore, then sixty-three, and his third wife, Harriet, and asked if he might take a picture. Livermore smiled and said, “Of course.” The Stork was his favorite club, and a long time had passed since anyone cared about his comings and goings. “But it’s the last picture you will take,” Livermore added, “because tomorrow I’m going away for a long, long time.”

Harriet snapped her head around. “Laurie,” she said, using her pet name for her fifth husband, whose middle name was Lauriston. “What do you mean?”

“ Just a joke, darling, only a joke,” Livermore said with a smile.

They posed and the photographer took their picture, Harriet with a happy grin, Livermore looking straight into the camera with a vacant stare. He picked at his food while Harriet danced with several friends and enjoyed the evening out.

The crash had left Livermore richer than he’d ever been, but it didn’t last long. Within a few years, he made another one of his audacious bets and lost nearly everything. He was forced to ask the financier Arthur A. Robertson for a loan of $5,000. “ Do men of your kind put away ten million dollars where nobody can ever touch it?” Robertson asked him. “Young man, what’s the use of having ten million if you can’t have big money?” Livermore replied.

His finances and life were falling apart. His second wife, Dorothy, who received a divorce settlement worth about $10 million, was beset by heavy drinking and had a scandalous affair with a twenty-five-year-old undercover Treasury agent who specialized in Prohibition enforcement. Livermore’s own dalliances were somewhat less public. Livermore downsized to a modest office with a handful of employees. At the age of fifty-five he was traveling in Europe when he heard a concert singer named Harriet Metz, from Nebraska. They wed in 1933.

The day after his enigmatic comment to the photographer at the Stork Club in 1940, Livermore left his office in the Squibb Building on Fifth Avenue at lunchtime and walked three blocks to the Sherry-Netherland Hotel on Fifty-Ninth Street, entering under the gaze of its famous gargoyles on the roof. The Livermores had lived in an apartment at the Neo-Romanesque hotel for five years before moving into an apartment at 1100 Park Avenue. But he liked stopping in for a cocktail after work. As he often did, Livermore made a point of talking to the manager, Eugene Voit.

Livermore appreciated having a place where everyone who worked in the restaurant and bar knew him. And the elegance of the Sherry-Netherland, with its frescoes in the style of Raphael painted on the ceiling of the arched lobby, made it even better. He had earned his place in this sumptuous environment. It felt familiar, comfortable.

When he took a seat near the bar, the bartender, Carl Fischer, placed his usual old-fashioned—good whiskey, bitters, a bit of water and ice—in front of Livermore without him saying a word. Livermore ordered lunch and ate alone. Fischer noticed he seemed nervous, a bit troubled. After eating, Livermore chain-smoked and scribbled furiously in a leather-bound notebook. He used a gold pen on a chain, a singular accessory that had appeared in many news stories about him over the years—that and his pinkie ring.

At 2:30 p.m., Livermore rose and walked back to his office, but the Sherry-Netherland staff noticed him return to his regular table at about 4:30 p.m. Fischer, preparing another old-fashioned, noticed that Livermore appeared upset.

The famous trader sipped his drink and again pulled out the notebook, writing urgently, and then tucked it back into his pocket. Livermore signaled the bartender for another cocktail, then left through the door that led to the gilded lobby at 5:25 p.m., quickly making his way toward the men’s restroom. Manager Voit saw Livermore but noticed nothing unusual about his demeanor, recalling, “ He looked normal and cheerful enough to me.”

Livermore slipped through a door that led to the darkened cloakroom, where visitors to the now-empty banquet hall checked their coats and hats. He seated himself on a chair and took out a .32-caliber Colt automatic, which he had purchased in 1928 to add to his large collection of firearms. He pressed the cold steel muzzle of the weapon against his head, just behind his right ear, and pulled the trigger. The bullet tore through his skull. No one heard the gunshot.

“My dear,” Livermore had written in an eight-page letter to his wife in the notebook. “ Can’t help it. Things have been bad with me. I am tired of fighting. Can’t carry on any longer. This is the only way out. I am unworthy of your love. I am a failure. I am truly sorry, but this is the only way out for me.”

Livermore’s lifelong struggle to balance his obsession with the market and his life was over. Had he stepped away from the stock market in late 1929, he could have lived the rest of his life in prosperity. But his nature made that impossible. Like many gamblers, Livermore lived as much for the action as for the profits.

Livermore had told his oldest son, Paul: “Every stock is like a human being: it has a personality, a distinctive personality. Aggressive, reserved, hyper, high-strung, volatile, direct, logical, predictable, unpredictable. I often studied stocks like I would study people; after a while their reactions to certain circumstances become more predictable.”

One day after the crash, he had been seated at a table in Palm Beach playing bridge with Walter Chrysler, Ed Kelley of United Fruit, and T. Coleman du Pont. Livermore began talking about his latest wheat trade, bemoaning the fact that he had made a bad mistake by cashing out his position after wheat rose 25 cents above his average price.

“J.L., how the hell could it be a bad mistake to make a profit of two and a half million dollars?” Chrysler asked.

“Because, Walter, I sat back and watched wheat rise another twenty cents in price in three days.”

“I still don’t get it,” Chrysler said.

“Why was I afraid?” Livermore replied. “There was no good reason to sell the wheat. I simply wanted to take my profit.”

“It still looks like a pretty good trade to me,” Kelley said. “I’m afraid you lost me, J.L.”

Livermore patiently explained that he was acting out of fear. “I was in too big a hurry to convert a paper profit into a cash profit. I had no other reason for selling out that wheat, except that I was afraid to lose the profit I had made.”

The best traders, Livermore understood, were fearless.

About one hundred people, mostly the luminaries of Wall Street and the social set of Palm Beach, attended his funeral in New York. At his death Livermore’s net worth, when debts were settled, was in the red by $361,010. He’d arranged trusts for his children, but they had consistently lost money. To Harriet’s surprise, he owed $11,000 on the lease of a secret apartment at 550 Park Avenue. To economize, she moved his ashes from the expensive Ferncliff Mausoleum to Acton, Massachusetts, where he shares a modest gravesite with his parents, just a few miles from his childhood home, as if this peripatetic soul had never gone anywhere.

Of all the major actors of 1929, Charles Mitchell remains the most enigmatic. He crossed boundaries. He was the hero. He was the villain. He was the iron-chinned stoic who got knocked down and pulled himself back up.

Throughout the 1920s, being a public figure felt essential to his success as a businessman. After the crash, all he could see was how much it had cost him. “ I honestly mean it—that if I could go on and attend to my own living with my name never in the press again, it would be Santa Claus to me,” he reflected after his acquittal.

By that point, Mitchell stood “ stripped of all his possessions—threadbare.” The building at 934 Fifth Avenue was sold to the French government for use as its consulate. He and his wife took up residence at their twenty-five-room Tuxedo Park home, most of which they closed off to save money. Living off the relatively small income from Elizabeth’s holdings, they adjusted to new habits, like home-cooked meals. Eventually, Tuxedo Park had to be sold, too, auctioned off in 1940. It was used during the war as a clearinghouse for British child evacuees.

Mitchell kept up his pattern of brisk exercise, which, one friend snidely speculated, could have been a factor in his fall from power: “ If Charlie had indulged himself more, and occasionally had awakened in the morning with that dark brown taste in his mouth which kills all ambition for the day, it probably would have been better for the bank.”

Unwilling to let Mitchell off the hook, even after his acquittal, Roosevelt’s Department of Justice filed a civil lawsuit against him with the Board of Tax Appeals. That a jury failed to convict him of a criminal charge, the board decided, did not prevent “the imposition of a fraud penalty of 50 percent of the deficiency,” which cost Mitchell more than $2 million. Government attorney E. S. Greenbaum, who pursued the case for four years, received a personal letter of praise from Roosevelt. “ The amounts involved are not important. The government’s successful challenge of the practices to which Mr. Mitchell resorted in this case has served largely to end those practices.”

With the civil suit mostly behind him by 1935, Mitchell rented a three-room office at 41 Broad Street, opposite the site of the old curb market, where he set up a consulting firm, C.E. Mitchell, Inc., representing himself as a “ poor fellow going back into business.” He didn’t stay poor for long. Less than six months later, he accepted the position of chairman of the board of Blyth & Co., a West Coast investment bank. Soon he was worth millions again.

Mitchell kept his struggles very much to himself. His son Craig, who was away at boarding school at St. Paul’s during the Pecora hearings, said his father never talked to him about his tribulations. He said he “ was left to my own devices in coping with the headlines. No one spoke to me about the matter.” In 1936, the Mitchells’ daughter, Rita, married the boy next door, George Adam Rentschler, son of National City’s president under Mitchell, Gordon Rentschler, in a low-key ceremony at Mitchell’s new home at 1 Sutton Place South. The luxuries Rita and Craig had known in their childhood—governesses, chauffeured cars, country estates—were long gone. Rita did not mind. “ It was about time,” she said years later.

In 1939, Mitchell was again compelled to testify, this time before a Senate committee conducting an industry-wide inquiry into alleged monopoly practices in investment banking by “exchange of business favors.” There he disclosed for the first time that his debt to J.P. Morgan—which had once stood at more than $12 million—had been settled in full. If he nursed old grudges, he kept them to himself; he called the Glass–Steagall Act “ one of the greatest steps of progress that has been made.”

For decades, the debate continued to rage— how responsible were Sunshine Charlie and his peers on Wall Street for causing the Depression? Did Mitchell do as much as any single man could to push the economy over the cliff, or was he a convenient scapegoat, as his attorney had argued, “ a big fish” to be gutted and filleted as an example of what society thought of “banksters”?

In a speech in July 1935, Senator Carter Glass was still raging about Mitchell not being removed from the board of the New York Fed for his role in rekindling speculation when the Federal Reserve had tried to shut it down.

In response, Charles Sumner Hamlin, a longtime member of the Washington board who kept an extensive diary, wrote to Federal Reserve governor Marriner S. Eccles, who had taken over as chairman of the Fed board, citing a report he had written in 1931 that cast a whole new light on Mitchell’s critical actions in March 1929.

The report said that on March 26, 1929, about six weeks after the Fed’s “direct pressure” campaign to reduce total borrowing of the banks, the New York Stock Exchange suffered one of the sharpest breaks in its history.

“ Frightened traders all over the country were selling stocks blindly on that day…Under these circumstances, Mr. Mitchell…came to the relief of the money market, advancing six million dollars on call loans.”

Mitchell’s real purpose, Hamlin declared, was to stop the credit market from completely freezing up. If investors believed “ that money could not be had no matter what was offered for it,” Hamlin wrote, the effects on the economy—not merely the stock market—would be catastrophic. When Mitchell stepped into the breach, the market took a breath, and call-money rates went down, from as high as 20 down to 9 percent.

Hamlin’s examination of withdrawals from the Federal Reserve over the twelve weeks following Mitchell’s actions revealed that National City Bank had borrowed money on only eleven days—effectively refuting the charge that Mitchell was using Federal Reserve funds to loan to stock traders pushing the stock market higher.

“ The final crash of October, 1929,” he concluded, “came not from the withdrawal of Federal Reserve credit from speculative channels, but from the increase of speculative credit in those channels brought about by the avalanche of ‘bootlegging’ credit consisting of loans ‘for others’ over which the Federal Reserve System had no control, which avalanche made the speculative credit structure so top-heavy that it finally broke of its own weight.”

Hamlin argued that Mitchell had not been the feckless stock promoter his critics made him out to be. In fact, he had averted a disaster.

His penchant for making snappy remarks to reporters, however, had been dangerous, Hamlin allowed. “ Attention should be called to Mr. Mitchell’s grotesque misinterpretation of credit conditions between the time of the above interviews and the final crash in October,” Hamlin said, citing several articles in which Mitchell repeatedly talked up the market.

“In my opinion,” concluded Hamlin in his report, “ it would be better for the Board to leave Mr. Mitchell in the morass in which he has placed himself, and not incur the risk of making a martyr of him by any further proceedings.”

Elliott V. Bell, the reporter who had written down Mitchell’s famous proclamation that day in March of 1929, when he announced that National City would supply funds in contravention of the Fed, later reflected, “ I do not presume to set myself up as a champion of Mr. Mitchell, but as far as this particular incident is concerned the charges are hardly just. His position was that banks had no right, even at the behest of the Federal Reserve Board, deliberately to precipitate a stock market panic by a concerted refusal to lend money at any price.”

Years later, economist John Kenneth Galbraith wrote that, in the face of Mitchell’s actions, “ The Federal Reserve board remained silent…It meant that it conceded Mitchell’s mastery.”

In fact, the story, as it has emerged, is a lot more complicated than that. Mitchell’s actions in March 1929 were encouraged, and indeed approved, by New York Fed governor George L. Harrison. Throughout the entire episode, the board refused to condemn Mitchell and, in truth, only appeared to be frustrated with the comments he made in his interview with Bell, not the substance of his plan to lend money. For reasons that still remain unexplained, throughout the controversy, Harrison remained in the shadows, letting Mitchell take the heat.

As late as 1950, the federal government was still after Mitchell, adding him to an antitrust lawsuit against seventeen investment banking firms “and especially Blyth,” which it considered merely a successor to the mothballed National City Company.

After nearly three years, Judge Harold R. Medina dismissed the lawsuit as being based on “ ill-founded rumors, conjecture, and age-old suspicion.”

Mitchell’s lawyer claimed he was “millions in the red.” Mitchell himself said, “ That’s truer than Gospel.” Tone-deaf to the end, he added, “Like everyone else, I presume, I have cut down on club memberships very markedly.”

But unlike so many others from that period that lost so publicly, he kept going.

“ I have never lost my nerve,” Mitchell said. “I spent all my life at work. One can’t quit, and I don’t propose to quit. I think I have something from my long experience to offer. I can play a part and I’m going to give myself the chance to play it.”

If Mitchell deserves a second, more nuanced consideration, so, too, does Carter Glass. The man whose name is enshrined on the Glass–Steagall Act, lauded for its boldness in separating commercial and investment banking and reining in financial excess, was not exactly the brave reformer he is often made out to be. He did not set out to transform the existing financial order; he wanted to protect it.

He had to be browbeaten into accepting key elements of his own bill. He initially opposed federal deposit insurance, believing it would reward reckless banks and encourage moral hazard, and objected to regulating interlocking directorates—the practice of corporate leaders serving on multiple, potentially conflicting boards—which was seen by many as the essence of financial oligarchy and the business strategy of J.P. Morgan. And his secret participation notwithstanding, he loathed the Pecora hearings, without which the self-dealing of the banking elite might never have been fully exposed. More than anything, it was those hearings that built public momentum for reform.

“ Carter Glass has asserted that the entire proceeding was a circus which brought forth nothing new. Mr. Glass, as a newspaperman himself, should know better than that,” a syndicated columnist, Heywood Broun, wrote after the Pecora hearings. “The headlines themselves show that all the editors of America regard the facts spread on the record through Mr. Pecora’s investigation as decidedly new, vastly vital, and of paramount public importance.”

The Glass–Steagall Act would almost certainly not have passed without the intervention of Winthrop Aldrich and his rallying of Roosevelt to the cause of separating bank functions. Similarly, it was Steagall’s insistence on deposit insurance—something Glass decried—that won the critical backing of rural representatives. Small-town America finally felt like it had won a battle with Wall Street.

One thing Glass knew how to do better than anyone else, however, was take a victory lap. When the final version of the Glass–Steagall Act was signed into law, Steagall wasn’t even invited to the Oval Office. Glass got the glory; Steagall got a footnote.

Even after the Glass–Steagall bill was signed into law, the Pecora hearings continued and uncovered that Albert Wiggin of Chase National Bank had shorted his own company’s stock in the hectic days of 1929. In doing so, Glass’s attacks on Wall Street continued to be vindicated. And to his credit, in 1934, Glass, in an about-face in his view about the Pecora hearings, proposed “a special allowance” of $125,000 be paid to Ferdinand Pecora to recognize his service to the country. “I sit here, hanging my head in shame, when I look back upon the work of our committee in the year and a half, and think of the high-priced lawyers that were brought down here as attorneys for the witnesses that Mr. Pecora put on the stand,” Glass said. Pecora turned down the money.

In Glass’s later years, even as his health continued to deteriorate and he became increasingly absent from Senate proceedings—he didn’t appear in the Senate chamber for two years—he refused to retire. Some Virginia voters actually went to court to have Glass removed, but he would not stand down.

A few weeks after his famous bill signing in 1933, Glass returned from Virginia to Washington and checked into the hotel where he stayed for twenty-seven years. He discovered that while he had been away, the Black waiters in the hotel’s restaurant had been replaced by white women. Glass was furious. As a newspaper account put it, Glass considered the hotel his home, “ but, by gosh…no white girl would wait on him. He would have his black boys.” Sure enough, later that night, the hotel management issued a stern directive: “Senator Glass,” it read, “will be served by a Negro waiter at all times, either in the dining room or in his apartment.”

Carter Glass may have changed Wall Street and the banking industry, but there were some things that would never change, so long as he could help it.