Era 03 · 1929 — 1934

The SEC

Lag

5-year lag

Pulse cycle

4.5s

The 1929 crash revealed that US public companies were under essentially no obligation to tell the truth. It took five years, a 90% decline in the Dow, and a new administration for Congress to create the Securities and Exchange Commission.

Events in this era

Oct 1929

Black Tuesday

On October 29, 1929, the Dow fell 11.7 percent. Roughly 16 million shares changed hands on the NYSE, a volume record that stood for 39 years. Ticker tapes ran hours behind actual trading because the equipment could not keep up. By July 1932 the index was down 89 percent peak-to-trough. Margin lending, pooled manipulation, and insider trading had been technically legal and widespread throughout the 1920s.

~$30B wiped in one day; Depression followed

Jun 1934

Securities Exchange Act Signed

Signed June 6, 1934, roughly five years after Black Tuesday. The Act created the Securities and Exchange Commission and established the first federal disclosure regime for US public companies. It banned market manipulation and insider trading at the statutory level. Joseph Kennedy was named the first SEC chair. Periodic reporting, proxy rules, and registration of exchanges followed. The enforcement apparatus Congress built in 1934 remains the core of American securities law more than 90 years later.

Foundation of modern securities law

Jun 16, 1933

Glass-Steagall signed

Separated commercial deposit-taking banks from investment banks. Passed in the aftermath of over 4,000 US bank failures between 1929 and 1933. The structural firewall it imposed lasted 66 years until its repeal in 1999.

Banking firewall stood for 66 years

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