The First Stock Market Crash
On March 26, 1929, Al Capone was still sequestered for the federal grand jury as ordered by Judge Wilkerson, and the U.S. Attorney had sent a federal raiding party to the Lexington and Metropole hotels to seize Capone’s records. Although ostensibly over fallout from the Chicago Heights raids, Assistant United States District Attorney Daniel Anderson nonetheless asked the famous entrepreneur point-blank: “What is your business?”
“I must stand on my constitutional rights and refuse to answer anything particular about that,” was Capone’s answer. Al was charged with contempt and a warrant issued the following day. Health problems as a pretext for avoiding the courtroom had been successfully invoked by Jew-baiting magnate Henry Ford just two years earlier, but the court extended no such privilege to young Al Capone. The market crashed with a record turnover of over 8 million shares on March 26, 1929. Wall Street sources reported that Chicago banks withdrew substantial sums from Wall Street to meet credit exigencies in the “Middle West.” This announcement would be repeated in even stranger circumstances by Herbert Hoover before the year was out.
Wall Street Journal headlines on March 27 glumly described severe declines on the “largest volume of dealings ever known.” Time Magazine chimed right in, announcing “the biggest stock market crash in Coolidge-Hoover history.” Some of the cash movement had to do with income tax payments—which back then were due March 1—and some with quarterly government financing. Indeed, call money bounced back up to 14% at the close of March. News came in of increased opium trade in China precisely coinciding with a new wave of suppression there.
Judge Winslow’s impeachment was gathering steam, with attorney Isidore Kresel scheduled to conduct an investigation beginning Monday. City Trust, Lancia motors and the late F.M. Ferrari were also back in the news over a disputed note, and George McManus—Rothstein murder “suspect”—was released on bail for want of a speedy trial.
Again the Journal reported that there had been a “drastic movement of funds to Chicago to replace funds called in that City by local banks.” This pattern would repeat itself time and time again before 1933, yet remain a mystery to economists and financiers for the next seventy years. Just how much of the March panic was due the various forms of prohibition we may never know. We do know, however, that this record-volume stock market crash occurred well before the tariff debate had even begun and after no interest rate increases by the Fed.
Yet as the crash occurred, vigilantes closed in on Chicago racketeers, Al Capone fidgeted before Judge Wilkerson in a Federal courtroom interested in his income tax records, banks were caught financing bootleggers, League of Nations narcotics statistics reports were falling due, corporate magnates were tried without publicity or fanfare in a Buffalo star chamber and the Chicago-bound trunkful of drugs case slowly expanded into a conspiracy involving failed banks and other corporations. A pattern was taking shape.
The New York World scrupulously ignored the Illinois Alcohol trial, 73 subpoenas and all—yet covered the news of the following day’s “brief but violent tumble in stock prices.”
Walter Strong, Publisher of the Chicago Daily News had visited President Hoover on March 19. Strong—together with Judge Frank Loesch of the Chicago Crime Commission—had given “chapter and verse for their statement that Chicago was in the hands of gangsters, that the police and magistrates were completely under their control, that the governor of the state was futile, that the Federal government was the only force by which the city’s ability to govern itself could be restored.” Thus spoke President Hoover, who at once gave orders that “all the Federal agencies at once concentrate upon Mr. Capone and his allies.” This was to be accomplished at once, without publicity and regardless of expense. Having thus ordered such Treasury agents as Eliot Ness and Elmer Irey unleashed upon Chicago’s shadow government, the President again turned his attention to the special session he’d been planning for Congress.
If you had never heard of the March 1929 stock market crash, perhaps you have also never heard of court or financial interpreters for the Portuguese language.
 (Bergreen 1994 326) (Pasley 1930 73) (Lacey 1986 216-217)
 (Time Capsule 4/1/29 212)
 (WSJ 2/26/29; 3/27/29 1; 5/18/29 7)
 (NYT 3/31/29 III-6:2; 7/21/29 III-8:8)
 (NYT 2/26/29 24; 14) (NY World Almanac 1930 103)
 (WSJ 5/18/29 7)
 (Hoover Memoirs Vol. 2 277) (Myers & Newton 1936 376)