Clarence Hatry and the Wall Street Crash of 1929

Clarence Hatry Wall StreetPhoto by Jonathan Gross

Clarence Charles Hatry who was at the origin of the fall of the Hatry group in September 1929 is widely cited as a major contributing factor to the Wall Street Crash of 1929.

Clarence Hatry began his professional career as an insurance clerk in London’s West End. Shrewd fellow-promoters remember that “Clarence” made his first killing in silk, and then recouped the ensuing bankruptcy in insurance, through City Equitable. City Equitable was a modest reinsurance business when it was bought from German and Austrian owners in 1914 for £60,000; Hatry reorganised it in six months and sold a controlling interest for £250,000 to Gerald Lee Bevan and an associate called Peter Haig Thomas.

Clarence Hatry found the First World War a chance to profit, and by 1921 he was director of 15 corporations.

He had already come to the attention of the American public for a different reason: transporting Eastern European immigrants to the United States and Canada.

In 1924 his Commercial Corporation of London failed for $3.75 million. In some manner, three successive bankruptcies had left him successively richer. He built a new business empire (Photomaton), with investments in photographic supplies, cameras, vending machines, and loan offices.

In early 1929 investors flocked to the Hatry group: General Securities Ltd. of which Henry Paulet, 16th Marquess of Winchester, was chairman; Austin Friars Trust, Ltd.; Dundee Trust; Oak Investment Corp.; Associated Automatic Machines Corp.; Drapery Trust; Retail Trade Corp.; Photomaton Parent Corp.; and Far Eastern Photomaton Corp.

Photomaton Parent Corporation Limited was set up by Clarence Hatry in 1928 to operate photograph machines in hundreds of public places such as railway stations and amusement parks.

By 1929 he had returned to the top table of corporate finance, and had worked out his greatest project, a merger of steel and iron concerns into the $40 million United Steel Companies. Just as this deal was to be consummated, the Stock Exchange Committee caught him borrowing $1 million on worthless paper. On 20 September 1929, the fraud became known and the Hatry empire collapsed.

Clarance Hatry asserted that in late August 1929 he had made a secret visit to the Bank of England to appeal to Montagu Norman for financing to allow him to complete a merger with United Steel Companies, a UK firm. Norman had adamantly refused Hatry’s bid for a bridge loan. By 17 September, when Hatry stock began to fall on the London exchange, Hatry had liabilities of £19 million and assets of £4 million. On 19 September, after Hatry had approached Lloyds Bank in last a desperate bid for financing, he asked Sir Gilbert Garnsey, a chartered accountant, to intervene on his behalf.

However, Clarance Hatry did not tell his accountant, Garnsey, that he had been issuing stocks to try to cover the deal, and some of the stocks were fraudulent – the same certificates had been printed twice and given as security to different leading banks. Hatry had obtained a million dollar loan on forged bearer scrip certificates of City of Wakefield 4½% stock – and an alert clerk had spotted the discrepancy.

Garnsey made a second approach to Norman for emergency financing, and was again rebuffed. By this point Norman had informed the chairman of the London Stock Exchange that the Hatry group was bankrupt; in this conversation it was agreed that trading in Hatry shares would be suspended on 20 September.

As planned, on 20 September 1929, the London Stock Exchange committee suspended all shares of the Hatry group, which had been worth about £24 million. On that day Hatry and his leading associates confessed to fraud and forgery in the office of Sir Archibald Bodkin, the Director of Public Prosecutions, and were jailed.

The Wall Street Crash of 1929

The London Stock Exchange crashed when Clarence Hatry and many of his associates were jailed for fraud and forgery. The London crash greatly weakened the optimism of American investment in markets overseas. In the days leading up to the crash, the market was severely unstable. Periods of selling and high volumes were interspersed with brief periods of rising prices and recovery.

The Wall Street Crash began late the following month.

The Wall Street Crash of 1929, also known as Black Tuesday (October 29), the Great Crash, or the Stock Market Crash of 1929, began on October 24, 1929 (Black Thursday), and was the most devastating stock market crash in the history of the United States, when taking into consideration the full extent and duration of its aftereffects. The crash, which followed the London Stock Exchange’s crash of September, signaled the beginning of the 10-year Great Depression that affected all Western industrialized countries.

Over the weekend, the events were covered by the newspapers across the United States. On October 28 (Black Monday), more investors facing margin calls decided to get out of the market, and the slide continued with a record loss in the Dow for the day of 38.33 points, or 13%.

The next day (Black Tuesday), October 29, 1929, about 16 million shares traded as the panic selling reached its peak. Some stocks actually had no buyers at any price that day. The Dow lost an additional 30 points, or 12 percent. The volume of stocks traded on October 29, 1929, was a record that was not broken for nearly 40 years.

On October 29, William C. Durant joined with members of the Rockefeller family and other financial giants to buy large quantities of stocks to demonstrate to the public their confidence in the market, but their efforts failed to stop the large decline in prices. Due to the massive volume of stocks traded that day, the ticker did not stop running until about 7:45 p.m. that evening. The market had lost over $30 billion in the space of two days which included $14 billion on October 29 alone.

In 1932, the Pecora Commission was established by the U.S. Senate to study the causes of the crash. The following year, the U.S. Congress passed the Glass–Steagall Act mandating a separation between commercial banks, which take deposits and extend loans, and investment banks, which underwrite, issue, and distribute stocks, bonds, and other securities.

After the experience of the 1929 crash, stock markets around the world instituted measures to suspend trading in the event of rapid declines, claiming that the measures would prevent such panic sales. However, the one-day crash of Black Monday, October 19, 1987, when the Dow Jones Industrial Average fell 22.6%, was worse in percentage terms than any single day of the 1929 crash, although the combined 25% decline of October 28–29, 1929 was larger than October 19, 1987, and remains the worst two-day decline ever.

Photo by Jonathan Gross 

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