‘Lenders were forced to absorb losses and in turn lost their own cushion of capital, making depositors quite justly fearful for the security of their money and leading to further withdrawals from banks, which in turn forced more loan recalls and thus more defaults. Though depositors and bankers individually behaved quite rationally to protect themselves, collectively their actions imposed a vicious spiral of tightening credit and loan losses on the already depressed U.S. economy.

  "If there is one moment in the I930s that haunts economic historians," writes the economist J. Bradford DeLong, "it is the spring and summer of I93I-for that is when the severe depression in Europe and North America that had started in the summer of I929 in the United States, and in the fall of 1928 in Germany, turned into the Great Depression." The currency and banking convulsions of 193I changed the nature of the economic collapse. As prices fell and businesses were unable to service their debts, bankruptcies proliferated, further chilling spending and economic activity. A corrosive deflationary psychology set in. Fearing that prices would fall further, consumers and businesses cut spending, adding to the downward spiral in consumption and investment.

  Every economic indicator seemed to fall off a c1iff-1932 was the deepest year of depression in the United States. Between September 1931 and June I932, production fell 25 percent; investment dived a stunning 50 percent; and prices dropped another 10 percent, reaching 75 percent of their 1929 level Unemployment shot up beyond ten million-more than 20 percent of the workforce was now without jobs.

  American corporations, which had made almost $10 billion in profits in 1929, collectively lost $3 billion in I932. On July 8, 1932, the Dow, which had stood at 381 on September, 3, 1929, and was trading around 150 before the European currency crisis, hit a low of 4I, a drop of almost 90 percent over the two and a half years since the bubble first broke. General Motors, which had traded at $72 a share in September I929, was now a little above $7. And RCA, which had peaked at $101 in 1929, hit a low of $2. When, in August 1932, a reporter for the Saturday Evening Post asked John Maynard Keynes if there had ever been anything like this before, he replied, "Yes. It was called the Dark Ages, and it lasted four hundred years."’

  Bankers and financiers, the heroes of the previous decade, now became the whipping boys. No one provided a better target than Andrew Mellon. In January 1932, a freshman Democratic congressman from Texas, Wright Patman, opened impeachment hearings for high crimes and misdemeanors against the man once hailed as the "greatest Secretary of the Treasury since Alexander Hamilton." Mellon found himself accused of corruption, of granting illegal tax refunds to companies in which he had an interest, of favoring his own banks and aluminum conglomerate in Treasury decisions, and of violating laws against trading with the Soviet Union. During the ensuing investigations, it turned out that he had used Treasury tax experts to help him find ways to reduce his personal tax bill and that he had made liberal use of fictitious gifts as a tax-dodging device. Being a member of the Federal Reserve Board, he had been required to divest his holdings of bank stock, with which he had duly complied-except that he had transferred the stock to his brother. In February, Hoover, recognizing that Mellon had now become a liability, packed him off as ambassador to London.* His place was taken by his undersecretary, Ogden Mills.

  On March 12, 1932, the world learned that Ivar Kreuger, the Swedish match king, who had bailed out so many penniless European countries, had shot himself in his apartment on the Avenue Victor Emmanuel III in Paris. At first it was assumed that he was just another victim of the times-¬he had recently suffered a nervous breakdown and his physician had warned him about the constant strain of his lifestyle on his heart. Within three weeks it became apparent that his whole enterprise had been a sham. His accounts were riddled with inflated valuations and bogus assets, including $142 million of forged Italian government bonds. When the losses to investors were eventually tallied, they amounted to $400 million.

 Bankers were now increasingly viewed as crooks and rogues. In early 1932, the Senate Banking and Currency Committee began hearings on the causes of the 1929 crash. Designed at first to appease a public hungry for scapegoats, the hearings achieved little until, in March 1933, a young assistant district attorney from New York City, Ferdinand Pecora, took over as chief counsel. The public was soon riveted by the tales of financial skull- duggery in high places.

 *The accusations of tax dodging resurfaced in 1934 when the Justice Department indicted him for having falsified his 1931 tax returns and sought more than $3 million in back taxes and penalties. He was cleared on appeal, but his estate eventually paid some $ 600,000 as a settlement.’

 Interestingly Goldman Sachs, JP Morgan, chase and Citigroup (or their precursors) were all embroiled in scandals.

Plus change…  Kreuger ---> Enron, Mellon ---> ??  too many to chose?