Scholars believe that declines in the money supply caused by Federal Reserve decisions had a severely contractionary effect on output. Despite the inherent risk of speculation, it was widely believed that the stock market would continue to rise forever. On March 25, 1929, after the Federal Reserve warned of excessive speculation, a small crash occurred as investors started to sell stocks at a rapid pace, exposing the market's shaky foundation. Two days later, banker Charles E. Mitchell announced that his company, the National City Bank, would provide $25 million in credit to stop the market's slide. Mitchell's move brought a temporary halt to the financial crisis, and call money declined from 20 to eight percent. However, the American economy showed ominous signs of trouble. Steel production declined, construction was sluggish, automobile sales went down, and consumers were building up large debts because of easy credit.
Scholars believe that declines in the money supply caused by Federal Reserve decisions had a severely contractionary effect on output. Despite the inherent risk of speculation, it was widely believed that the stock market would continue to rise forever. On March 25, 1929, after the Federal Reserve warned of excessive speculation, a small crash occurred as investors started to sell stocks at a rapid pace, exposing the market's shaky foundation. Two days later banker Charles E. Mitchell announced that his company, the National City Bank, would provide $25 million in credit to stop the market's slide. Mitchell's move brought a temporary halt to the financial crisis, and call mon,ey declined from 20 to eight percent. However, the American economy showed ominous signs of trouble Steel production declined, construction was sluggish automobile sales went down and consumers were building up large debts because of easy credit.