Bulls, Bears & Presidents

It was a tumultuous election year. The incumbent president, having served two terms, was not running. His party faced what looked like an uphill fight to hold the White House. The weakened economy had been wracked by financial crises. Public resentment of financial institutions was on the rise, and much political rhetoric struck a note of strident economic populism. The stock market slid to new lows.

However up-to-date that synopsis might sound, it’s about the long-ago events of the 1896 presidential race. The incumbent was Grover Cleveland, the populist rhetoric came from candidate William Jennings Bryan, and a recently minted market measure known as the Dow Jones Industrial Average reached its lowest level ever before recovering after the election of the pro-business William McKinley.

The financial sector and presidential election politics have long been intertwined. Not only do markets unavoidably get affected by the political process, but the financial industry itself sometimes shows up in the political spotlight. When that happens, there’s often some harshness to the glare, as politicians decry economic problems and point a finger of blame in the direction of Wall Street.

Such was the case in the pivotal election of 1896. Cleveland, a conservative Democrat, was stepping down, having lost power within the party to its agrarian wing, led by Bryan. The economy had gone into a steep downturn after a spate of financial turmoil known as the Panic of 1893. And whereas Cleveland had staunchly supported the gold standard, Bryan demanded “free silver,” meaning linking the dollar to the fast-growing silver supply to help farmers and laborers pay off their debts.

While McKinley, the Republican nominee, ran a sedate “front porch” campaign centered on his home, Bryan traveled around the country, addressing crowds in his booming voice, and railing against the bankers and moneyed interests that backed the gold standard. Hearing complaints that his candidacy was undignified, Bryan responded: “I would rather have it said that I lacked dignity than that I lack backbone to meet the enemies of the government who work against its welfare in Wall Street.”

On July 9, 1896, addressing the Democratic convention in Chicago, Bryan spoke what would be the most remembered words of his life: “You shall not press down upon the brow of labor this crown of thorns; you shall not crucify mankind upon a cross of gold.” He then held his arms up as if being crucified, holding that pose for five seconds.

This kind of thing contributed to the Panic of 1896, with markets sinking on the mere possibility that Bryan would win the presidency, even though it was generally assumed that McKinley held the electoral edge. The Dow, which had stood at 40.94 when it was first published on May 26, 1896, sank to its all-time nadir of 28.48 on August 8.

On November 3, McKinley won the election with 271 electoral votes to Bryan’s 176. Call money rates, which had spiked the day before the election, returned to normal levels. The Dow, which had drifted upward for several months on growing expectations of a McKinley victory, now pushed firmly above the 40 line, marking the start of what would be called the “McKinley boom.” By the end of 1900, it would be above 70.

The Post-Crash ElectionSeveral decades later, another Republican president, Herbert Hoover, also would have his name attached to a rising stock market. But not for long. Hoover won the 1928 election with 58 percent of the vote amid a buoyant prosperity. The Dow, which had first hit 100 in 1922 and moved above 200 in 1927, closed 1928 at exactly 300. Hoover took office on March 4, 1929, and stocks continued rising briskly for the next six months. The euphoria was called the “Hoover bull market.”

The high point came on September 3, with the Dow closing at 381.17. The Great Crash began on October 24, or Black Thursday, and by the end of October 29, Black Tuesday, the Dow was at 230.07. The market would go steadily downhill for the next several years, bottoming out at 41.22 on July 8, 1932 — wiping out not just the Hoover bull market but gains going back all the way to McKinley.

With the Depression in full swing, Hoover faced bleak prospects in the 1932 election. As Republican Senator Dwight W. Morrow glumly noted, “Any party which takes credit for the rain must not be surprised if its opponents blame it for the drought.”

Franklin Delano Roosevelt, accepting the Democratic nomination for president in July, gave a speech describing the pre-crash boom in dark terms. The corporate profits of the 1920s, he complained, had not adequately translated into lower consumer prices or higher wages or even higher dividends. Expanding upon his campaign theme of fighting for “the forgotten man,” FDR now added a new category: “The stockholder was forgotten.”

Roosevelt won the 1932 election massively, getting 472 electoral votes to Hoover’s 59. The stock market barely blipped with the election, though it did rally past the 100 level after Roosevelt took office in March 1933. FDR had campaigned on the promise of a balanced budget, but his New Deal program emphasized deficit spending and public-works projects. The economy remained weak through the 1930s, and the Dow closed the decade skirting the 150 line. It would not be until November 23, 1954 — a quarter century after the Crash — that the market would ascend again to its pre-crash high.

Wall Street “Bloodsuckers”The 1948 presidential election was another one in which the financial world was prominently at issue. That’s because FDR’s successor, Harry S. Truman, opted to run rather forcefully against Wall Street, in the course of defending his office from the challenge posed by Republican candidate Thomas E. Dewey.

During the campaign, Truman attacked “Wall Street reactionaries” and “gluttons of privilege.” He said a Republican victory would empower “bloodsuckers with offices in Wall Street…princes of privilege…plunderers.” These were, he warned, “the most reactionary elements,” “silent and cunning men,” who would “skim the cream from our natural resources to satisfy their own greed.” They would, he said, “tear the country apart,” and also make it “go to the dogs.”

It might seem odd in light of such rhetoric, but Truman’s administration had some financiers in high-level positions. Commerce Secretary W. Averell Harriman had come from Brown Brothers Harriman, as had Under Secretary of State Robert A. Lovett. Defense Secretary James V. Forrestal was from Dillon Read.

As for Truman’s opponent, Dewey had started his career as a Wall Street lawyer but before long had given that up to become a prosecutor. Similar to a later Republican prosecutor-turned-politician named Rudy Giuliani, Dewey was known not only for going after gangsters but also for tackling malfeasant financial titans. In the late 1930s, District Attorney Dewey indicted Richard S. Whitney — once known as the “Monarch of Wall Street” — for misappropriating funds, and the financier ended up doing time in Sing Sing.

Dewey was the favorite to win, and he ran a cautious campaign. Truman was feisty, and on November 2 he pulled off one of the greatest election upsets in American history. The president got 303 electoral votes to Dewey’s 189, with another 39 going to Strom Thurmond’s Dixiecrats. The next morning, Truman posed for what would be a famous photo of him with an erroneous newspaper headlined “Dewey Defeats Truman.”

The market promptly slumped after Truman’s victory. The Dow, which had closed October at 188.28, finished November at 171.2. The market would bottom out in mid-1949, with the economy in recession, before beginning a long upward path that would last through most of the 1950s.