The Hatry Case and the 1929 Stock Market Crash
Most authors studying the 1929 stock market crash list the Hatry case as a major contributing factor. Kindleberger ( 1978, p. 92) in his classic book states, "He was caught using fraudulent collateral in an attempt to borrow £8 million to buy United Steel, and his failure led to a tightening of the British money market, withdrawal of call loans from the New York market, a topping out of the stock market, and the October crash."
The Hatry case makes the financial news starting on September 20, 1929, but we will begin the story in December 1926. Clarence Hatry was the prime mover of a mini-conglomerate engaged in, among other things, photography equipment, industrial machinery, retailing, and light iron goods. In December 1926 he took a major step towards disaster when he founded Corporation and General Securities, Ltd., a company that issued new financial securities. It innovated in two ways. One was by reducing the investment banker's spread, thus reducing the profit opportunities of its competitors. Secondly, it advertised and sold its securities to small investors. In a manner similar to Drexel Burnham fifty years later, it broadened the capital market, making it accessible to less than investment-grade corporations, municipalities, and other entities that needed capital but had previously been shut out or charged relatively large amounts to raise capital. The City (the British financial center) was upset by