MORE REMINISCING ABOUT THE 1920s AND 1930s
PART I
Dirty Tricks and Corruption During the 1920s
by Donatra, Praetor One, Bible-Belted, Uncle Abe, and Thomas Paine.

As a direct result of my recent conversation with Abe regarding the differences between George W. Bush and Franklin Roosevelt, I realized that we had enough material to compare the current Demander and Thief to another group of Demanders and Thieves, the late, unlamented Calvin Coolidge and the late not so great Herbert Hoover.

As I listened to Abe reminisce about his experiences during the final years of the 1920s and the opening years of the 1930s, I realized that there were more similarities between those horrible, horrible years and the current situation in which we now find ourselves. Let’s face it, dear readers. The opening years of the 21st century are a replay of the disastrous 1920s, and the sad part of it all is that we are living under the reign of an administration which either ignores the lessons of history or openly rewrites or ignores the historical record to serve it’s own, selfish agenda.

“We’ve seen it all before,” Abe said, his tone laced with a lingering disgust. “The heavy emphasis on big business, the transformation of corporate America into an object of public worship.” According to Abe the Coolidge and Hoover Administrations both took their reverence for corporation to ridicules heights. “Time and time again the Republicans tried to associate the word spiritual with American business. Coolidge himself believed that a man who built a factory was building a temple and that the people who worker there were in essence engaging in a form of worship.” Moreover Coolidge and his Republican ilk also believed that American business should be allowed to serve as a moral example to the rest of America. “Some went so far as to compare Jesus Christ to a corporate executive. They genuinely believed that he was a great advertiser, a corporate publicity hound, who employed the tactics of mass marketing to spread his message. And if that sounds familiar it should. We’ve heard it before. We heard it during the Gilded Age, one of the most corrupt eras in American business and politics, and we are hearing it now, as so called conservatives sing the praises of unregulated capitalism at the expense of anything that might serve the public good.” [1]

The 1920s, like the early years of this century, were moralistic in the extreme. The only problem was that the same businessmen who promoted American Corporatism as a form of religion never quite found a way to infuse their money-grubbing religion with a sense of morality. Indeed, when one looked at the business practices of the 1920s it appeared as if there were a race to the moral bottom among the corporate and financial leaders who preached that foul doctrine.

Inside manipulation of the stock market was a tremendous problem. Insiders would hire professional propagandists to promote a stock. Their job was to publish glowing reports about a given company, the ultimate goal being to drive up the value of the stock. At which point the insiders sold out, driving down the price of the stock and often destroying the company and the finances of unknowing investors. This is what happened to the Kolster Radio Company. It hired a professional propagandist named George Breen and offered him stock options. Kolster received about $40,000 to manipulate the media into printing favorable reports about his employer. And it worked. The price of Kolster stock rose from $74 (in 1928) to $95 per share (in 1929). By December 1929 the value of Kolster stock had dropped to $6 a share and the company bellied up. [2] Another trick was called “pegging.” This was the purchasing of stock while a sale was going on. The only problem was that the public was never informed about the sale.. Once the securities had been unloaded the insiders would essentially pull the plug, dump the stocks on the market, and the value of the stock would plummet. It was a great deal for the insiders who knew when to sell but a disaster for the uninformed public who lost their shirts when the value of the stock went into a free fall.” [3]

On other occasions manipulators, insiders, would form a self-serving pool and then drive up the price of the stock by buying and selling those stocks to one another. Then, once they had driven the stock up to a level that they considered appropriate they would turn around and sell short, and make another fortune while the stock value hit rock bottom. This of course was a disaster for the regular investor who had no idea as to how the stock was being manipulated by insiders, and who assumed incorrectly that they were investing in an honest venture. This happened to RCA. In 1924 RCA stock was worth approximately $7 a share. By 1929 it was worth more than $500 a share. Then, “The Powers That Be,” the insiders,noticed that some investors had decided that the stock was overvalued and began to sell short. In the end those who sold short lost out because the insiders decided it would be a ‘really neat idea’ to corner the floating supply. The end result was that those who had sold short were left holding the bag. In 1928 RCA stock jumped by as much as forty, fifty, and finally, sixty points in a few days while the insiders walked away with a “cool $500 million.” [4]
Another form of corruption involved the holding company in which a parent company owned another company, which owned another company etc. This not only made it difficult for the states to regulate various types of corporate behavior, it also created a situation in which it appeared as if individual companies were buying and selling one another when in fact they were owned and dominated by the same business at the top of the corporate pyramid. In other words, a company could manipulate the value of its stock(s) by buying and selling within its own corporate empire while the American people, the every day investor, hadn’t a clue as to what was happening [5]
“Every era has its own type of corporate scandal,” Abe said. “In the 1920s it was the kind of insider manipulation that we just discussed. During the Reagen Administration we had a rash of insider trading scandals. “It was essentially a repeat of the 1920s,” Abe suggested. “And Bush is little better. In fact he’s cut from the same moldy cloth. During the Bush regime we had the Enron scenario and the war profiteering scenario that we have seen since the illegal invasion and occupation of Iraq.” In other words, the exact practices and nature of the corruption may vary, but in the end it all comes out of the same corporate well. The right wing belief in unregulated (some might say pirate) capitalism becomes the idee fixe in the minds of the corporate elite and its puppet politicians who do their bidding. This became obvious during the years of Newt Gingrich when corporations were literally allowed to write their own, self-serving legislation which was quickly passed (often without a chance for proper review and debate) by the Republican dominated Congress. “For the corporatists–Brandon might say fascists–business is indeed a religion, and all too often religious fanaticism is the end result. They will break any law or any code of ethical standards to promote their corporate faith.” And let’s not forget the profit motive. In many cases it is perfectly obvious that the only morality these corporations hold dear–then and now–is the bottom line. In the 1920s we had greedy insiders who were only more than happy to twist and distort the system for their own selfish ends, and the same can be said about today. Just as in the 1920s, when ethics and the welfare of the middle class were considered quaint or even obstructions to corporate profits, today we see a corporate set of ethics–or lack thereof–in which the well being of the American people are dismissed to benefit the corporate elite. Outsourcing American jobs to third world and/or communist countries; off shore tactics which allow corporations to escape paying their fair share in axes; corporation backed measures which are designed to curtail the workers’ rights to freedom of assembly, to form unions, or to speak out against a corporation; a general weakening of work place safety regulations and the eradication of the eight hour work day; not to mention shrinking wages and longer hours. In many ways the Reagen, Bush I, and Bush II regimes represent a return to the bad old days of Warren G. Harding, Calvin Coolidge, and Herbert Hoover. Was no accident that Ronald Reagen removed a portrait of Thomas Jefferson, one of our Founding Fathers mind you, and replaced it with a picture of his favorite misanthrope, Calvin Coolidge? Of course not. While seemingly symbolic, that action should have told us that Reagen and the pirate capitalists who he brought to power, were deadly serious about dismantling those portions of Roosevelt’s New Deal which had been designed to protect the American worker and to shield the American people from another economic catastrophe like the Great Depression.

Another problem was loose credit. The average American could buy stocks for as little as ten percent of the price of the stock. “Does the term ‘buying on margin mean anything to you?” Abe asks. “After plopping down his ten percent (for the price of the stocks he was purchasing) the rest of the cost was covered by large commercial banks. They basically transferred the money to brokerage houses and it was the brokerage house that handled the remaining 90 percent of the cost (of the stock).” The pitfalls in this are obvious. As long as the stock performs well and goes up, the investor can always hope to reap a small fortune and then pay off the 90 percent with his profits, but if the price of the stock begins to go down he is for all intent and purposes, out of luck. “Regrettably, a lot of investors bought more on margin than they could ever hope to pay back, more than they could afford. They over extended themselves and were unable to repay the 90 percent if the stock ever fell.” [6] And no one bothered to tell them that the idea of a constantly rising stock market was a myth. Nobody told them that such a scenario was unsustainable, that what goes up must come down. Worse yet, the Republican dominated government of the era went out of its way to create the impression that such a system was perpetually sustainable. Leaders of industry and politicians alike touted the idea of industrial innovation, claiming that the dynamic economy would continue to spiral upwards as new technologies were invented, each new technology creating new jobs and new opportunities. [7] “In many ways they were like George W. Bush who told us to show our patriotism through shopping. SHOPPING of all things,” Abe chuckles. “In the days following 911 Bush began to sound more and more like a modern day Hoover of Coolidge. He really seemed to believe that the way to dig ourselves out of a recession, and to deal with the trauma of 911 was to make a special trip to Sprawl Mart. Like old Cal and Herbert,” Abe continued, George W. Bush really and sincerely believed that shopping, going into debt to buy things we don’t even need, is a patriotic act.” (To which my husband, PraetorOne (AKA Brandon) would undoubtedly add, “And you thought Franklin Roosevelt was into Keynesian economics.”)

“Sadly,” Abe continued, “We have another problem with easy credit in today’s economic climate. I am of course referring to sub prime loans.” In the 1920s, Abe suggested, “we were buying stock on credit. In the early 21st Century we were buying our houses on credits. Only now the interest rates on those loans have begun to inch upwards, incomes are not keeping up with the extra burden of increased (mortgage) interest rates, and people are beginning to lose their homes.” Like in the 1920s, Abe maintains, we have a dishonorable sector of the American public, the credit industry, which sold these loans as a kid of panacea to the potential American home owner. Like the propagandists of the 1920s who maintained that the boom would continue forever, George W. Bush praised and promoted the ownership society, openly encouraging the American people to purchase homes that they were unable to avoid. And he was aided by an all to willing Federal Reserve Board which kept interest rates at low rates for so so long that the American people began to believe the lies that their president and the credit industry were spinning on an almost regular basis.

To be continued…

Crossposted at Coalition For a Democratic America

Share This