Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
(22) There was also a fairly new type of loan in the stock market - the broker call loan. Very simply, this loan allowed<br />
an investor to put down only a fraction of the stock’s value with the rest being loaned from the broker. This<br />
method was very popular in the roaring 1920’s as everyone seemed to be making money in the market. However,<br />
there was a catch to this loan. It could be called in at any time and had to be paid within 24 hours. And the typical<br />
result was the selling of the stock purchased with that loan.<br />
[ Clarification: The narration makes a generalization with the phrase “Broker Call Loan” and the 24 hour time frame. The<br />
more correct phrase would be - “24 Hour Broker Call Loan,” as the time distinction is not inherent. ]<br />
Call Loan: “A loan which may be terminated or “called” at any time by the lender. The loan is then immediately payable,<br />
with any accrued interest, by the borrower to the lender. These loans are used to finance purchases of securities and<br />
exclude personal loans extended by banks to its customers.” 1<br />
The Call Loan is a loan that is made which is repayable on demand. During the period in question “24 Hour Call Loans”<br />
were in operation in the markets, which meant that any person holding this loan could be made to pay it back with 24<br />
hours, on demand of the broker who loaned it out. (See further testimony by William Jennings Bryan below- #24)<br />
(23) So, a few months before October in 1929, J.D. Rockefeller, Bernard Baruch and other insiders quietly exited<br />
the market, knowing the bubble created was about to burst.<br />
While this exit is well known via the biographies of these men and more (such as J.P. Morgan, Joseph P. Kennedy, Henry<br />
Morganthau, Douglas Dillon), the reasoning is, of course, speculative. The traditional assumption is that such insiders<br />
were simply “smart”. Also, a common refutation in regard to J.D. Rockefeller is that he came to “save the day” by buying<br />
stocks after the crash occurred.<br />
The New York Herald Tribune on October 31st 1929, wrote:<br />
“Revived by spontaneous investment buying and declarations of large extra cash dividends by leading companies, and<br />
free of the delirium that has recently gripped share owners, the stock market yesterday received a fresh start and scored<br />
a record comeback. Volume on the Stock Exchange totaled 10,727,320 shares, the third largest day on record. The high<br />
spot of the day from a stock market viewpoint was the statement by John D. Rockefeller that there was no need to destroy<br />
values and that he and his son, John D. Rockefeller Jr., had been heavy buyers of stocks for investment in the last few<br />
days, and would continue to buy at present prices.” 2<br />
What isn’t often realized is that “bottom fishing” is a very common investment tactic for a falling market, especially if you<br />
know the decline is temporary. It is not unreasonable to assume that such an action was indeed possible and anticipated,<br />
with insider information. To say J.D Rockefeller was buying stock in an act of “goodwill” defies credulity and can only be<br />
considered naive given the history of the Rockefeller’s business practices and intents.<br />
In Gary Allen’s famous work “None Dare Call it Conspiracy”, he writes:<br />
“The investing public, including most stock brokers and bankers, took a horrendous blow in the crash, but not the insiders.<br />
They were either out of the market or had sold “short” so that they made enormous profits as the Dow Jones plummeted.<br />
For those who knew the score, a comment by Paul Warburg had provided the warning to sell. That signal came on March<br />
9, 1929, when the Financial Chronicle quoted Warburg as giving this sound advice: “If orgies of unrestricted speculation<br />
are permitted to spread too far, the ultimate collapse is certain … to bring about a general depression involving the whole<br />
country.” 3<br />
As a final note on this point, it is worth denoting that in a letter written to ‘The Australian’, a newspaper in Sydney Australia,<br />
W.C. Wentworth wrote about a chance meeting with Montagu Norman, Governor of the Bank of England from 1920 to<br />
1944:<br />
“In 1929 I was a member of the Oxford and Cambridge athletic team, visiting America...I, together with some other members,<br />
boarded a smallish passenger vessel in New York. A fellow passenger was “Mr. Skinner,” and a member of our<br />
team recognized him, He was Montagu Norman, returning to London, after a secret visit to the US central Bank, traveling<br />
incognito...he asked us not to blow his cover, because if the details of his movement were made public, it could have serious<br />
financial consequences...He said, “In the next few months there is going to be a shake-out. But don’t worry- it wont<br />
last for long.” ” 4<br />
1 http://www.globeinvestor.com/resources/glossary/glossaryc.html<br />
2 New York Herald Tribune, October 31st 1929<br />
3 Allen, Gary, None Dare Call it Conspiracy, 1971 p 35 |*Warburg Quote reprinted in the Commercial and Financial Chronicle ,<br />
March 9 1929, p1444<br />
4 Letters to the editor, “The Australian” ( GPO Box 4162, sydney, NSW. 2001), February 7, 1989