STOCK MARKET CRASH OF 1929

Medallion Name – STOCK MARKET CRASH OF 1929

Significance – Few events in American history had more societal impact than the stock market crash of October 24, 1929. Over a two-day period, the market lost more than $30 billion, signaling the start of the Great Depression.  More than half the banks in the country closed their doors and the economy lagged for a decade. Savvy Claude Boettcher had access to capital to rebuild the family fortune and rewarded Denver for his success.

Inscription – Overnight, paper empires collapsed. Prominent businessman Claude Boettcher borrowed $2 million in life insurance and plunged into the market to recoup his losses. Fifty-six of Colorado’s 174 state and national banks closed their doors.

Location – 39°44’44.7″N 104°59’26.4″W

Details – During the roaring 1920s, the U.S. stock market underwent rapid expansion and wild speculation. Citizens were wildly optimistic about the future and then it hit… On Black Tuesday, October 29, 1929, Wall Street investors traded a record 16 million shares on the New York Stock Exchange in a panic to get rid of assets. Billions of dollars were lost, wiping out the riches of thousands of investors. In the aftermath of Black Tuesday, America, followed by the rest of the industrialized world, spiraled downward into the Great Depression (1929-39); the deepest and longest-lasting economic downturn in the history of the Western industrialized world. Nearly half of America’s banks failed; in Colorado, a third of banks closed their doors. Unemployment impacted 30% of the workforce. At its lowest point, industrial production in the U.S. had declined 47%. Real gross domestic product (GDP) fell 30%. Stocks were revalued at 20 % of their summer of 1929 high.

The stock market crash of 1929 was one of the more visible causes of the Great Depression. Multiple factors contributed to the crash, which in turn caused a consumer panic that drove the economy even further downhill, in ways that neither President Herbert Hoover nor the financial industry was able to restrain. Failing banks caused massive contraction of the available money supply and turned, “a recession into a depression,” noted Vincent R. Reinhart, former director of the Federal Reserve’s monetary-affairs division.

Claude Boettcher, often known as “Denver’s most famous investor” had positioned himself to take advantage of the debacle.  Boettcher lost his liquidity and investments in the crash, but as banks and stocks dropped to new lows he borrowed $2,000,000 from his Cash Value Whole Life Insurance Policy to buy up assets at rock bottom prices.

Boettcher stood firm as confidence in the banking system eroded, and bank runs became more common. More than 6,000 banks were closing annually, and investors were losing their assets. President Herbert Hoover hoped that the country would right itself with limited government intervention. Wrong. While Nero fiddled, millions sank into grinding poverty as the world economy spiraled out of control. Democrat Franklin Delano Roosevelt won a landslide election in 1932 – bank reforms were job #1 of the New Deal platform that won him the election.

Almost immediately, Roosevelt declared a national “bank holiday,” during which all banks would be closed until they were determined to be solvent through federal inspection. In combination with the bank holiday, Roosevelt called on Congress to come up with new emergency banking legislation to further aid the ailing financial institutions of America.

Roosevelt took the first steps in restoring public confidence, and when the banks reopened many depositors showed up ready to deposit their currency or gold, signaling the end of the nation’s banking crisis.

The U.S. economy would not fully turn around until after 1939, when World War II (1939-45) revitalized American industry.

Through it all, Boettcher was in a position to profit. The Boettcher family built a fortune in Colorado, expanding a mining-era hardware business with the motto “Hard goods. Hardware. Hard cash” into an empire. Boettcher businesses included Great Western Sugar, the Brown Palace Hotel, Ideal Cement, and the Denver Tramway Company. And, they invested in Cash Value life insurance.

Experts note that Cash Value life insurance was not a wise investment; however, if it’s not used for death protection and instead designed to maximize the Modified Endowment Contract rule, then it’s place to park money. According to the rules of the day, the money in the policy was safe from lawsuits, litigation, and even IRS liens.  The money was totally liquid and the policy holder had access to all of the money they invested.

Boettcher, or CK as he was known, may have been “financially ruined,” but did that affect his ability to access capital. If the Cash Value life insurance tool was not in his portfolio then CK would have been just another story of riches to rags.  But still to this day his wealth lives on in Denver, and is shared with the community.

He once said, “Luxury and wealth are all very well if you use them properly, and all very bad if you don’t.”

Boettcher was dedicated to giving back. He started the Boettcher Foundation. Through foundation donations, The Boettcher family has helped fund numerous landmark locations in Denver including The Brown Palace Hotel, The Botanical Gardens, Children’s Hospital, the Museum of Natural History and the Boettcher Concert Hall. Their home was donated to the state and is now the Governor’s mansion.

Today, the Boettcher Foundation continues to invest in Colorado through a scholarship program for Colorado high school seniors and by giving grants to various non-profits in Colorado.

Quiz Questions

  1. What were causes of the Stock Market Crash of 1929?
  2. How do you think a stock market crash might contribute to a nationwide economic disaster?
  3. Who was the president who helped lift the U.S. out of the Great Depression?
  4. What is something admirable that Claude Boettcher has accomplished?
  5. Do you remember the Recession of 2008? How were you impacted?

Bibliography

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