ONE DAY IN FEBRUARY, 1928, an investor asked an astute banker about the wisdom of buying common stocks. The banker shook his head. "Stocks look dangerously high to me," he said. "This bull market has been going on for a long time, and although prices have slipped a bit recently, they might easily slip a good deal more. Business is none too good. Of course if you buy the right stock you'll probably be all right in the long run and you may even make a profit. But if I were you I'd wait awhile and see what happens."

By all the canons of conservative finance the banker was right. That enormous confidence in Coolidge Prosperity which had lifted the businessman to a new preeminence in American life and had persuaded innumerable men and women to gamble their savings away in Florida real estate had also carried the prices of common stocks far upward since 1924, until they had reached what many hard-headed financiers considered alarming levels. Throughout 1927 speculation had been increasing. The amount of money loaned to brokers to carry margin accounts for traders had risen during the year from $2,818,561,000 to $3,558,355,000-a huge increase. During the week of December 3, 1927, more shares of stock had changed hands than in any previous week in the whole history of the New York Stock Exchange. One did not have to listen long to an after-dinner conversation, whether in New York or San Francisco or the lowliest village of the plain, to realize that all sorts of people to whom the stock ticker had been a hitherto alien mystery were carrying a hundred shares of Studebaker or Houston Oil, learning the significance of such recondite symbols as GL and X and ITT, and whipping open the early editions of afternoon papers to catch the 1:30 quotations from Wall Street.

The speculative fever had been intensified by the action of the Federal Reserve System in lowering the rediscount rate from 4 per cent to 3'/2 per cent in August, 1927, and purchasing Government securities in the open market. This action had been taken from the most laudable motives: several of the European nations were having difficulty in stabilizing their currencies, European exchanges were weak, and it seemed to the Reserve authorities that the easing of American money rates might prevent the further accumulation of gold in the United States and thus aid in the recovery of Europe and benefit foreign trade. Furthermore, American business was beginning to lose headway; the lowering of money rates might stimulate it. But the lowering of money rates also stimulated the stock market. The bull party in Wall Street had been still further encouraged by the remarkable solicitude of President Coolidge and Secretary Mellon, who whenever confidence showed signs of waning came out with opportunely reassuring statements which at once sent prices upward again. In January 1928, the President had actually taken the altogether unprecedented step of publicly stating that he did not consider brokers' loans too high, thus apparently giving White House sponsorship to the very inflation which was worrying the sober minds of the financial community.

While stock prices had been climbing, business activity had been undeniably subsiding. There had been such a marked recession during the latter part of 1927 that by February, 1928, the director of the Charity Organization Society in New York reported that unemployment was more serious than at any time since immediately after the war. During January and February the stock market turned ragged and unsettled, and no wonder-for with prices still near record levels and the future trend of business highly dubious, it was altogether too easy to foresee a time of reckoning ahead.

The tone of the business analysts and forecasters-a fraternity whose numbers had hugely increased in recent years and whose lightest words carried weight-was anything but exuberant. On January 5, 1928, Moody's Investors Service said that stock prices had "over-discounted anticipated progress" and wondered "how much of a readjustment may be required to place the stock market in a sound position." On March 1st this agency was still uneasy: "The public," it declared, "is not likely to change its bearish state of mind until about the time when money becomes so plethoric as to lead the banks to encourage credit expansion." Two days later the Harvard Economic Society drew from its statistical graphs the chilly conclusion that "the developments of February suggest that business is entering upon a period of temporary readjustment"; the best cheer which the Harvard prognosticators could offer was a prophecy that "intermediate declines in the stock market will not develop into such major movements as forecast business depression." The National City Bank looked for gradual improvement in business and the Standard Statistics Company suggested that a turn for the better had already arrived; but the latter agency also sagely predicted that the course of stocks during the coming months would depend "almost entirely upon the money situation." The financial editor of the New York Timesdescribed the picture of current conditions presented by  the mercantile agencies as one of "hesitation." The newspaper advertisements of investment services testified to the uncomfortable temper of Wall Street with headlines like "Will You `Overstay' This Bull Market?" and "Is the Process of Deflation Under Way?" The air was fogged with uncertainty.

Anybody who had chosen this moment to predict that the bull market was on the verge of a wild advance which would make all that had gone before seem trifling would have been quite mad-or else inspired with a genius for mass psychology. The banker who advised caution was quite right about financial conditions, and so were the forecasters. But they had not taken account of the boundless commercial romanticism of the American people, inflamed by year after plentiful year of Coolidge Prosperity. For on March 3, 1928-the very day when the Harvard prophets were talking about intermediate declines and the Times was talking about hesitation--the stock market entered upon its sensational phase.

Let us glance for a moment at the next morning's paper, that arm- breaking load of reading-matter which bore the date of Sunday, March 4, 1928. It was now many months since Calvin Coolidge had stated, with that characteristic simplicity which led people to suspect him of devious meanings, that he did not "choose to run for President in 1928"; and already his Secretary of Commerce, who eight years before had been annoyed at being called an amateur in politics, was corralling delegates with distinctly professional efficiency against the impending Republican convention. It was three months since Henry Ford had unveiled Model A, but eyes still turned to stare when a new Ford went by, and those who had blithely ordered a sedan in Arabian Sand were beginning to wonder if they would have to wait until September and then have to take Dawn Gray or leave it. Colonel Lindbergh had been a hero these nine months but was still a bachelor: on page 21 of that Sunday paper of March 4, 1928, he was quoted in disapproval of a bill introduced in Congress to convert the Lindbergh homestead at Little Falls, Minnesota, into a museum. Commander Byrd was about to announce his plans for a flight to the South Pole. Women's skirts, as pictured in the department store advertisements, were at their briefest; they barely covered the kneecap. The sporting pages contained the tidings that C. C. Pyle's lamentable Bunion Derby was about to start from Los Angeles with 274 contestants. On another page Mrs. William Jay, Mrs. Robert Low Bacon, and Mrs. Charles Cary Rumsey exemplified the principle of noblesse oblige by endorsing Simmons beds. The Bridge of San Luis Rey was advertised as having sold 100,000 copies in ninety days. The book section of the newspaper also advertised The Greene Murder Case by S. S. Van Dine (not yet identified as Willard Huntington Wright), Willa Cather's Death Comes for the Archbishop, and Ludwig Lewisohn's The Island Within. The theatrical pages disclosed that "The Trial of Mary Dugan" had been running in New York for seven months, Galsworthy's "Escape" for five; New York theater-goers might also take their choice between "Strange Interlude," "Show Boat," "Paris Bound," "Porgy," and "Funny Face." The talking pictures were just beginning to rival the silent films: A1 Jolson was announced in "The Jazz Singer" on the Vitaphone, and two Fox successes "with symphonic movietone accompaniment" were advertised. The stock market-but one did not need to turn to the financial pages for that. For on page I appeared what was to prove a portentous piece of news.

General Motors stock, opening at 1393/4 on the previous morning, had skyrocketed in two short hours to 1441/4, with a gain of more than five points since the Friday closing. The trading for the day had amounted to not much more than 1,200,000 shares, but nearly a third of it had been in Motors. The speculative spring fever of 1928 had set in.

It may interest some readers to be reminded of the prices brought at the opening on March 3rd by some of the leading stocks of that day or of subsequent days. Here they are, with the common dividend rate for each stock in parentheses:

On Monday General Motors gained 21/4 points more, on Tuesday 31/2; there was great excitement as the stock "crossed 150." Other stocks were beginning to be affected by the contagion as day after day the market "made the front page": Steel and Radio and Montgomery Ward were climbing, too. After a pause on Wednesday and Thursday, General Motors astounded everybody on Friday by pushing ahead a cool 91/4 points as the announcement was made that its Managers Securities Company had bought 200,000 shares in the open market for its executives at around 150. And then on Saturday the common stock of the Radio Corporation of America threw General Motors completely into the shade by leaping upward for a net gain of 123/4 points, closing at 1201/2.

What on earth was happening? Wasn't business bad, and credit inflated, and the stock-price level dangerously high? Was the market going crazy? Suppose all these madmen who insisted on buying stocks at advancing prices tried to sell at the same moment! Canny investors, reading of the wild advance in Radio, felt much as did the forecasters of Moody's Investors Service a few days later: the practical question, they said, was "how long the opportunity to sell at the top will remain."

What was actually happening was that a group of powerful speculators with fortunes made in the automobile business and in the grain markets and in the earlier days of the bull market in stocks-men like W. C. Durant and Arthur Cutten and the Fisher Brothers and John J. Raskobwere buying in unparalleled volume. They thought that business was due to come out of its doldrums. They knew that with Ford production delayed, the General Motors Corporation was likely to have a big year. They knew that the Radio Corporation had been consolidating its position and was now ready to make more money than it had ever made before, and that as scientific discovery followed discovery, the future possibilities of the biggest radio company were exciting. Automobiles and radios-these were the two most characteristic products of the decade of confident mass production, the brightest flowers of Coolidge Prosper- ity: they held a ready-made appeal to the speculative imagination. The big bull operators knew, too, that thousands of speculators had been selling stocks short in the expectation of a collapse in the market, would continue to sell short, and could be forced to repurchase if prices were driven relentlessly up. And finally, they knew their American public. It could not resist the appeal of a surging market. It had an altogether normal desire to get rich quick, and it was ready to believe anything about the golden future of American business. If stocks started upward the public would buy, no matter what the forecasters said, no matter how obscure was the business prospect. They were right. The public bought.

Monday the 12th of March put the stock market on the front page once more. Radio opened at 120'/2-and closed at 138'/2. Other stocks made imposing gains, the volume of trading broke every known record by totaling 3,875,910 shares, the ticker fell six minutes behind the market, and visitors to the gallery of the Stock Exchange reported that red-haired Michael Meehan, the specialist in Radio, was the center of what appeared to be a five-hour scrimmage on the floor. "It looked like a street fight," said one observer.

Tuesday the 13th was enough to give anybody chills and fever. Radio opened at 160, a full 21'/2 points above the closing price the night before-a staggering advance. Then came an announcement that the Stock Exchange officials were beginning an investigation to find out whether a technical corner in the stock existed, and the price cascaded to 140. It jumped again that same day to 155 and closed at 146, 7'/2 points above Monday's closing, to the accompaniment of rumors that one big short trader had been wiped out. This time the ticker was twelve minutes late.

And so it went on, day after day and week after week. On March 16th the ticker was thirty-three minutes late and one began to hear people saying that some day there might occur a five-million-share day-which seemed almost incredible. On the 20th, Radio jumped 18 points and General Motors 5. On March 26th the record for total volume of trading was smashed again. The new mark lasted just twenty-four hours, for on the 27th-a terrifying day when a storm of unexplained selling struck the market and General Motors dropped abruptly, only to recover on enormous buying-there were 4,790,000 shares traded. The speculative fever was infecting the whole country. Stories of fortunes made overnight were on everybody's lips. One financial commentator reported that his doctor found patients talking about the market to the exclusion of everything else and that his barber was punctuating with the hot towel more than one account of the prospects of Montgomery Ward. Wives were asking their husbands why they were so slow, why they weren't getting in on all this, only to hear that their husbands had bought a hundred shares of American Linseed that very morning. Brokers' branch offices were jammed with crowds of men and women watching the shining transparency on which the moving message of the ticker tape was written; whether or not one held so much as a share of stock, there was a thrill in seeing the news of that abrupt break and recovery in General Motors on March 27th run across the field of vision in a long string of quotations:

GM 50.85 (meaning 5,000 shares at 185) 20.80. 50.82. 14.83. 30.85. 20.86. 25.87. 40.88. 30.87. . . .

New favorites took the limelight as the weeks went by. Montgomery Ward was climbing. The aviation stocks leaped upward; in a single week in May, Wright Aeronautical gained 343/4 points to reach 190, and Curtiss gained 35'/Z to reach 142. Several times during the spring of 1928 the New York Stock Exchange had to remain closed on Saturday to give brokers' clerks a chance to dig themselves out from under the mass of paper work in which this unprecedented trading involved them. And of course brokers' loans were increasing; the inflation of American credit was becoming steadily intensified.

The Reserve authorities were disturbed. They had raised the rediscount rate in February from 3'/2 to 4 per cent, hoping that if a lowering of the rate in 1927 had encouraged speculation, a corresponding increase would discourage it-and instead they had witnessed a common-stock mania which ran counter to all logic and all economic theory. They raised the rate again in May to 4'/2 per cent, but after a brief shudder the market went boiling on. They sold the Government bonds they had accumulated during 1927, and the principal result of their efforts was that the Government-bond market became demoralized. Who would ever have thought the situation would thus get out of hand?

In the latter part of May, 1928, the pace of the bull market slackened. Prices fell off, gained, fell off again. The reckoning, so long expected, appeared at last to be at hand.

It came in June, after several days of declining prices. The Giannini stocks, the speculative favorites of the Pacific coast, suddenly toppled for gigantic losses. On the San Francisco Stock Exchange the shares of the Bank of Italy fell 100 points in a single day (June 11th), Bancitaly fell 86 points, Bank of America 120, and United Security 80. That same day, on the New York Curb Exchange, Bancitaly dove perpendicularly from 200 to 110, dragging with it to ruin a horde of small speculators who, despite urgent warnings from A. P Giannini himself that the stock was overvalued, had naively believed that it was "going to a thousand."

The next day, June 12th, this Western tornado struck Wall Street in full force. As selling orders poured in, the prophecy that the Exchange would some day see a five-million-share day was quickly fulfilled. The ticker slipped almost two hours behind in recording prices on the floor. Radio, which had marched well beyond the 200 mark in May, lost 23'/2 points. The day's losses for the general run of securities were not, to be sure, very large by subsequent standards; the New York Times averages for fifty leading stocks dropped only a little over three points. But after the losses of the preceding days, it seemed to many observers as if the end had come at last, and one of the most conservative New York papers began its front-page account of the break with the unqualified sentence, "Wall Street's bull market collapsed yesterday with a detonation heard round the world."

(If the Secretary of Commerce had been superstitious, he might have considered that day of near-panic an omen of troubles to come; for on that same front page, streamer headlines bore the words, "HOOVER CERTAIN ON 1ST BALLOT AS CONVENTION OPENS.")

But had the bull market collapsed? On June 13th it appeared to have regained its balance. On June 14th, the day of Hoover's nomination, it extended its recovery. The promised reckoning had been only partial. Prices still stood well above their February levels. A few thousand traders had been shaken out, a few big fortunes had been lost, a great many pretty paper profits had vanished; but the Big Bull Market was still young.

A few weeks after the somewhat unenthusiastic nomination of Herbert Hoover by the Republicans, that coalition of incompatibles known as the Democratic party nominated Governor Alfred E. Smith of New York, a genial son of the East Side with a genius for governmental administration and a taste for brown derbies. A1 Smith was a remarkable choice. His Tammany affiliations, his wetness, and above all the fact that he was a Roman Catholic made him repugnant to the South and to most of the West. Although the Ku Klux Klan had recently announced the abandonment of its masks and the change of its name to "Knights of the Great Forest," anti-Catholic feeling could still take ugly forms. That the Democrats took the plunge and nominated Smith on the first ballot was eloquent testimony to the vitality of his personality, to the wide-spread respect for his ability, to the strength of the belief that any Democrat could carry the Solid South and that a wet candidate of immigrant stock would pull votes from the Republicans in the industrial North and the cities generally-and to the lack of other available candidates.

The campaign of 1928 began.

It was a curious campaign. One great issue divided the candidates. As already recorded in Chapter Ten, A1 Smith made no secret of his distaste for prohibition; Hoover, on the other hand, called it "a great social and economic experiment, noble in motive and far-reaching in purpose," which "must be worked out constructively." Although Republican spellbinders in the damply urban East seemed to be under the impression that what Hoover really meant was "worked out of constructively," and Democratic spellbinders in the South and rural West explained that Smith's wetness was just an odd personal notion which he would be powerless to impose upon his party, the division between the two candidates remained: prohibition had forced its way at last into a presidential campaign. There was also the ostensible issue of farm- relief, but on this point there was little real disagreement; instead there was a competition to see which candidate could most eloquently offer largesse to the unhappy Northwest. There was Smith's cherished water- power issue, but this aroused no flaming enthusiasm in the electorate, possibly because too many influential citizens had rosy hopes for the future of Electric Bond & Share or Cities Service. There were also, of course, many less freely advertised issues: millions of men and women turned to Hoover because they thought Smith would make the White House a branch office of the Vatican, or turned to Smith because they wished to strike at religious intolerance, or opposed Hoover because they thought he would prove to be a stubborn doctrinaire, or were activated chiefly by dislike of Smith's hats or Mrs. Smith's jewelry. But no aspect of the campaign was more interesting than the extent to which it reflected the obsession of the American people with bull- market prosperity.

To begin with, there was no formidable third party in the field in 1928 as there had been in 1924. The whispering radicals had been lulled to sleep by the prophets of the new economic era. The Socialists nominated Norman Thomas, but were out of the race from the start. So closely had the ticker tape bound the American people to Wall Street, in fact, that even the Democrats found themselves in a difficult position. In other years they had shown a certain coolness toward the rulers of the banking and industrial world; but this would never do now. To criticize the gentlemen who occupied front seats on the prosperity band- wagon, or to suggest that the ultimate destination of the band-wagon might not be the promised land, would be suicidal. Nor could they deny that good times had arrived under a Republican administration. The best they could do was to argue by word and deed that they, too, could make America safe for dividends and rising stock prices.

This they now did with painful earnestness. For the chairmanship of the Democratic National Committee, Al Smith chose no wild-eyed Congressman from the great open spaces; he chose John J. Raskob, vice-president and chairman of the finance committee of the General Motors Corporation, vice- president of the General Motors Acceptance Corporation, vice-president and member of the finance committee of the E. I. duPont de Nemours & Company, director of the Bankers Trust Company, the American Surety Company, and the County Trust Company of New York-and reputed inspirer of the bull forces behind General Motors. Mr. Raskob was new to politics; in Who's Who he not only gave his occupation as "capitalist," but was listed as a Republican; but what matter? All the more credit to Al Smith, thought many Democrats, for having brought him at the eleventh hour to labor in the vineyard. With John J. Raskob on the Democratic side, who could claim that a Democratic victory would prevent common stocks from selling at twenty times earnings?

Mr. Raskob moved the Democratic headquarters to the General Motors Building in New York-than which there was no more bullish address. He proudly announced the fact that Mr. Harkness, "a Standard Oil financier," and Mr. Spreckels, "a banker and sugar refiner," and Mr. James, "a New York financier whose interests embrace railroads, securities companies, real estate, and merchandising," did not consider that their interests were "in the slightest degree imperiled by the prospect of Smith's election." (Shades of a thousand Democratic orators who had once extolled the New Freedom and spoken harsh words about Standard Oil magnates and New York financiers!) And Mr. Raskob and Governor Smith both applied a careful soft pedal to the ancient Democratic low tariff doctrine-being quite unaware that within two years many of their opponents would be wishing that the Republican high- tariff plank had fallen entirely out of the platform and been carted away.

As for the Republicans, they naturally proclaimed prosperity as a peculiarly Republican product, not yet quite perfected but ready for the finishing touches. Herbert Hoover himself struck the keynote for them in his acceptance speech.

"One of the oldest and perhaps the noblest of human aspirations," said the Republican candidate, "has been the abolition of poverty .... We in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poorhouse is vanishing from among us. We have not yet reached the goal, but, given a chance to go forward with the policies of the last eight years, we shall soon, with the help of God, be in sight of the day when poverty will be banished from this nation. There is no guarantee against poverty equal to a job for every man. That is the primary purpose of the policies we advocate."

The time was to come when Mr. Hoover would perhaps regret the cheerful confidence of that acceptance speech. It left only one loophole for subsequent escape: it stipulated that God must assist the Republican administration.

Mr. Hoover was hardly to be blamed, however, for his optimism. Was not business doing far better in the summer of 1928 than it had done during the preceding winter? Was not the Big Bull Market getting under way again after its fainting fit in June? One drank in optimism from the very air about one. And, after all, the first duty of a candidate is to get himself elected. However dubious the abolition of poverty might appear to Hoover the engineer and economist seated before a series of graphs of the business cycle, it appeared quite differently to Hoover the politician standing before the microphone. Prosperity was a sure-fire issue for a Republican in 1928.

A1 Smith put up a valiant fight, swinging strenuously from city to city, autographing brown derbies, denouncing prohibition, denouncing bigotry, and promising new salves for the farmer's wounds; but it was no use. The odds against him were too heavy. Election Day came and Hoover swept the country. His popular vote was nearly 21,500,000 Smith's 15,000,000; his electoral vote was 444 to Smith's 87; and he not only carried Smith's own state of New York and the doubtful border states of Oklahoma, Tennessee, and Kentucky, but broke the Solid South itself, winning Florida, Texas, North Carolina, and even Virginia.

It was a famous victory, and in celebration of it the stock market which all through the campaign had been pushing into new high ground-went into a new frenzy. Now the bulls had a new slogan. It was "four more years of prosperity."