The 1920's
The Roaring '20s
 - With their newfound wealth, people buy in record numbers everything from houses to cars to appliances.
- Assembly lines increase production.
- Department stores give credit cards to their wealthier customers. Metal charge-plates are introduced. Oil companies offer courtesy cards for charging gas.
- Banks offer installment loans, mortgages, and loans to stock market speculators on 90 percent margins.
- There are no insider-trading laws.
 - The dramatic expansion in the financial sector introduces new corporate securities issues, especially in common and preferred stock. The stock market undergoes an extraordinary, unprecedented expansion and is caught in a speculative euphoria between 1925 and 1929.
- About 10 percent of U.S. households own stock. Today, about 50 percent own stock, largely because of 401(k)s.
- Wealthy Americans look for ways and means to invest their surplus funds.
 - The middle class considers retail brokerage houses and securities affiliates of commercial banks safe investments.
- Banks unveil new securities affiliates with names almost identical to their own to wipe away the distinction between saving and speculating.
- First National City Bank (Citibank) and its stock subsidiary, the National City Company, have 2,000 brokers selling stocks.
- National City Company repackages bad Latin American loans from its affiliated bank and sells them to unknowing investors as new securities. This is one of the deals that initiate the Glass-Steagall Act of 1933.
- Banks speculate on land development.
- The financial environment of the Roaring '20s creates new financial products. First National City Bank (Citibank) creates instruments that include the unit trust (known today as the mutual fund) and compound-interest savings accounts.
The McFadden Act of 1927
This act:
- Establishes the Federal Reserve Board (FRB) as a permanent central bank
- Prohibits interstate banking. This prohibition is not repealed until 1994
- Authorizes hometown branches for national banks, if allowed by the state. This authorization helps to put national banks on par with state banks. National banks still cannot branch outside of the city in which they are headquartered
- Gives national banks the authority to buy and sell marketable debt obligations.
1929
There are 17,583 state banks and 8,150 national banks.
 Black Tuesday: Stock Market Crash of 1929
October 29, 1929
- The crash of the U.S. stock market heralds the beginning of the Great Depression. The Federal Reserve keeps money tight. The Dow drops 25 percent in two days and 30 percent in one week. Public confidence in government and business plummets.
- President Herbert Hoover tells Congress the worst effects of the crash are over.
| Important Dates Leading Up To and Following the Crash of 1929 |
 - August 24, 1921: The Dow begins its post-war boom at 63.90 points.
- August 22, 1922: The Dow tops 100 for the first time, closing the day at 100.75.
- Between 1922 and 1929, the Dow rises 400 percent.
- September 3, 1929: The Dow hits its pre-crash high, closing at 381.17.
- October 24, 1929 (Black Thursday): The crash begins. A record-breaking 13 million shares are traded, indicating panic. That afternoon, 5 banks pony up about $20 million each to buy stock and restore confidence in the market. It seems to work. There's a late rally, and the Dow closes at 299.47.
- October 25, 1929: The rally continues, and the Dow closes at 301.22
- October 28, 1929 (Black Monday): The rally ends. Panic selling resumes. The Dow drops almost 40 points (nearly 13 percent) to close 260.64.
- October 29, 1929 (Black Tuesday): The Dow drops another 30 points
(nearly 12 percent) to close at 230.07 on trading of 16 million shares.
- July 8, 1932: The Dow closes at 41.22, an 89 percent drop from its pre-crash high.
- November 23, 1954: 25 years after the crash, the Dow reaches its pre-crash high again, closing at 382.74.
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