An Overview of the Causes of the Crash
The market reached a peak on September 19, 1929, and then started to slide. But the crash actually picked up momentum on October 3. On that day the news report of the talk by Philip Snowden, the British chancellor of the exchequer, concerning the "orgy of American speculation" was reported by the newspapers. The Hatry collapse was old news by October 3, but the consequences to British investors were still relevant.
On August 8 the Federal Reserve Bank of New York increased the rediscount rate from 5 to 6 percent. This increase was approved by the Federal Reserve Board and was the strongest action taken by the board since its letter of February 2, 1929, to all Federal Reserve Banks. The February 2 letter stated, "A member bank is not within its reasonable claims for rediscount facilities at its Federal Reserve Bank when it borrows either for the purpose of making speculative loans or for the purpose of maintaining speculative loans" ( Bierman, 1991, p. 100). Both of these actions were reinforced by repeated messages from the members of the Federal Reserve Board for banks not to make loans to support speculative investments, reducing the inclination of the New York banks to finance broker loans.
In September stock prices peaked and started a slight slide. The action of the New York Federal Reserve Bank to increase the discount rate from 5 to 6 percent on August 8 was not a significant