July 31, 2008, 2:30 pm
Don’t Blame the Shorts. Blame the Longs.
Posted by Dennis K. Berman
We present, without comment, excerpts of testimony from a House Judiciary Committee hearing on short selling. The main actors: New York Congressman Frank Oliver, and New York Stock Exchange President Richard Whitney. The date: Feb. 24, 1932.
Frank Oliver: Is it not a fact that the collapse in the prices and disappointment of the people is the main reason why they are blaming everything on the stock exchange?
Richard Whitney: Very likely; but that is a mere conjecture on my part.
Oliver: But the stock exchange has no agency and does not purport to have any to evaluate stocks.
Whitney: None whatsoever.
Oliver: When the stock collapsed from the high to the low, the public started to blame “the shorts” for that. Is that not a fact?
Whitney: I think from a hindside point of view, they blamed “the shorts.”
Oliver: They blamed the “shorts,” whereas, as a matter of fact, if the prices were inflated, they should have blamed the “longs” for having inflated them?
Whitney: And themselves.
Oliver: But instead of being logical about it, and blaming those who inflated prices, they blamed those who might have deflated them had they the power at that time–that is, the “shorts”?
Oklahoma Congressman Tom McKeown: Just talking as two citizens of a great country, you realize there is a good deal of feeling about people losing their money in stocks, just like there was about people losing their money in lands down in Florida. There is no law by which you can prevent people from speculating. They go ahead and think they can make money, just as they rush to the oil fields to get into the oil game, or to the gold mines to shovel gold.
McKeown: There is always a bitterness left following a condition of that kind.
There is a great deal of bitterness in the country today on account of the
losses on stocks in 1929….