NARRATOR: Everything was not fine in 1929 with the American economy. It was showing ominous signs of trouble. Steel production was declining. The construction industry was sluggish. Car sales dropped. Customers were getting harder to find. And because of easy credit, many people were deeply in debt. Large sections of the population were poor and getting poorer.
Just as Wall Street had reflected a steady growth in the economy throughout most of the 20s, it would seem that now the market should reflect the economic slowdown. Instead, it soared to record heights.
Stock prices no longer had anything to do with company profits, the economy or anything else. The speculative boom had acquired a momentum of its own.
Wealthy investors would pool their money in a secret agreement to buy a stock, inflate its price and then sell it to an unsuspecting public...
Mr. ROBERT SOBEL (Historian): I would say that practically all the financial journals were on the take. This includes reporters for The Wall Street Journal, The New York Times, The Herald-Tribune, you name it. So if you were a pool operator, you'd call your friend at The Times and say, "Look, Charlie, there's an envelope waiting for you here and we think that perhaps you should write something nice about RCA." And Charlie would write something nice about RCA. A publicity man called A. Newton Plummer had cancelled checks from practically every major journalist in New York City.
Mr. NESBITT: Then, they would begin to -- what was called "painting the tape" and they would make the stock look exciting. They would trade among themselves and you'd see these big prints on RCA and people will say, "Oh, it looks as though that stock is being accumulated."
Mr. SOBEL: Now, if they are behind it, you want to join them, so you go out and you buy stock also. Now, what's happening is the stock goes from 10 to 15 to 20 and now, it's at 20 and you start buying, other people start buying at 30, 40. The original group, the pool, they've stopped buying. They're selling you the stock. It's now 50
and they're out of it. And what happens, of course, is the stock collapses." [and on a large enough scale, the stock market, and the regional or national economy].
PBS Frontline:
The Great Crash of 1929
"The bribes are disclosed at a 1932 Congressional hearing on the stock market crash. The Wall Street Journal was not immune to indiscretions by its reporters and editors. Scharff notes that many of its reporters and editors played the market in the 1920s, buying stocks of many of the companies they wrote about:
What drew most young men to the Journal was an open secret having nothing whatever to do with the fabled fun of the news business or the romance of the rolling presses. Newspapermen and radio newscasters were privy to inside information that could practically guarantee profits in the stock market. In addition, they were paid – sometimes handsomely – to work in conjunction with speculative rings and stock syndicates.
An investigation later discovered that business journalists for at least eight papers promoted stocks in their writing in return for bribes. The most embarrassing were at the Wall Street Journal, where reporters who wrote “Broad Street Gossip” and “Abreast of the Market” took payoffs for stock tips in the 1920s. The revelations about the Journal reporters came out during hearings by the Senate Banking and Currency Committee in 1932, more than three years later, when Congressman Fiorello LaGuardia produced cancelled checks written to the Journal reporters from publicist A. Newton Plummer. The stories based on the bribes had gone as far back as 1923.
Rosenberg states that the Journal had no specific rules against its business journalists playing the market. But it did have a written regulation that its staff should “bend over backwards to avoid any action, no matter how well intentioned, that could provide grounds for even suspicion.” The regulation, however, was written in such vague language to be interpreted in various ways. After the scandal broke, the paper instructed its staffers to avoid writing that would affect a stock’s price and to avoid using inside information before it became available to the public."
University of North Carolina,
History of Business Journalism
Well thank goodness this sort of white collar corruption isn't a problem in the mainstream media anymore. Presumably.
The financial press were being crowded out by the Congress. Remember the huge scandals about widespread trading on inside information by members of Congress and their spouses and children?
But luckily the Congress fixed all that with the bipartisan
Stop Trading on Congressional Knowledge Act of 2012. Here's an update.
"Following revelations that several senators engaged in heavy stock trading following a confidential briefing on the COVID-19 pandemic in January 2020, the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) launched probes, but the DOJ probe has since ended and no civil or criminal charges have been filed...
California Democrat Dianne Feinstein and her husband sold $1.5 million to $6 million in shares of a California biotech company in transactions split between Jan. 31 and Feb. 18 in 2020. Meanwhile, Oklahoma Republican James Inhofe sold up to $400,000 in stock on Jan. 27, 2020. The Justice Department ended probes into the trading by Inhofe, Feinstein, Loeffler and their spouses in May 2020."
Investopedia, Stock Act
Well, maybe not so much.
At least the Fed is above reproach right?
"Dallas Fed President, Robert Kaplan, wasn’t just trading like an aggressive hedge fund kingpin in 2020, he’s been doing the same thing for five years at the Dallas Fed while simultaneously having access to non-public, market moving information from the Federal Reserve’s interest-rate setting FOMC meetings and other confidential communications."
Martens, Trading Like a Hedge Fund Kingpin for Five Years while President of the Dallas Fed, September 2021
Luckily the Fed conducted an internal investigation and announced that there was nothing to see here, so move along. No evidence provided and no charges or even wrist slaps noted.
There are dozens of opportunities for people in positions of trust to abuse their offices and engage in personal profiteering. The trillions spent in largely unaccounted ways on Defense is just one example. It's a good thing everything is above board and by the books.
We are so fortunate.
So let's move on. Tonight we can watch two crusty retreads, Stinky and Sniffy, mumble slurs at each other while filling their Depends. Two spokesmodels from a widely ignored news network will be slinging their usual leftover hash. Watch for the quotable fireworks, the insubstantial distractions, the pizzazz!
It's an innovative debate. Neither man is their party's nominee, because they have not bothered to hold their conventions yet. There will be no audience, and no popular third party contenders to make things interesting by going off script.
We deserve better than this.
Well you get what they pay for, these days.
Stocks were wobbly ahead of the big show tonight.
VIX fell of course.
The Dollar is still riding high.
Gold rebounded sharply after its recent smackdown in observance of the futures option expiration on the Comex.
What a surprise.
Silver lagged but also rebounded. It's a little more sensitive to non-monetary factors.
PCE inflation data coming out tomorrow.
PCE is the Fed's favorite inflation indicator.
And the band played on.
Have a pleasant evening.
