Buying On Margin Great Depression May 2026

By 1929, an estimated was out on loan to stock speculators—more than the total amount of currency circulating in the United States at the time. This massive influx of borrowed money disconnected stock prices from the actual value of the companies.

The Great Depression taught a brutal lesson about the dangers of unregulated leverage. In the aftermath, the U.S. government passed the , giving the Federal Reserve the power to set margin requirements. Today, investors generally must put down at least 50% of a stock's price, a far cry from the 10% "easy money" of the 1920s. buying on margin great depression

Brokers had borrowed the money they lent to investors from commercial banks. When investors defaulted on their margin loans, the brokers couldn't pay back the banks. When the banks lost that money, they couldn't fulfill withdrawals for ordinary citizens who had never bought a single share of stock. This led to bank runs, the closing of thousands of financial institutions, and a complete freeze on credit that paralyzed the American economy for a decade. The Legacy: Regulation and Caution By 1929, an estimated was out on loan