Stock Market Crash

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Americans living during the 1920s were more prosperous than any American generation before. New technological advances were changing the way individuals lived, among them being air travel, the telephone, the radio, and electricity. American workers benefited from higher wages, benefits, and shorter working hours. Hoover was elected president, and Wall Street saw a record number of transactions in hopes the new president would fulfill his promises and end poverty in America. Despite a massive outpouring of optimism, by the end of the 1920s, the roots of the Great Depression were already taking hold. In the U.S., poor investment practices, a decline in spending and consumption, and mistakes made by the Federal Reserve hastened the onset of the stock market crash. Mass enthusiasm led to overvalued stocks, with American corporations unable to match projected earnings. Worldwide, countries that owed the United States great sums of money were unable to pay back the loans, or to buy American exports.

Studying the causes and effects of the stock market crash in the 1920s and the resulting Great Depression is important in that mistakes in history tend to be repeated once the generations who experienced the tragedy first hand have passed the torch on to those that succeed them. Once memory and the lessons taught become separated by time, the laws and practices meant to protect future generations are often thought of as outdated, and the stage is set for history to repeat itself with a new generation being forced to learn the harsh lessons of their forefathers.

To understand why the stock market crash happened, this paper will examine the issues leading up to it, the laws enacted to prevent a future disaster, and the societal costs involved with the stock market crash and the resulting Great Depression.

President Franklin D. Roosevelt inherited the national emergency created by his predecessor and the questionable business and investing practices of the 1920s. Upon assuming office, Roosevelt acted immediately to persuade Congress into passing laws that would protect American citizens from abuses of corporations and faulty banking practices. His New Deal included many laws that transformed the relationship between the government and citizens. Two of the most significant new laws put into place after the stock market crash were the Glass-Steagall Banking Act and the Truth in Securities Act. While Roosevelt's actions did not bring an immediate end to the Great Depression, they did provide protection against potential abuses as well as created hope in the American people.