This Day in Wall Street History 1929: Fed bans bank loans for margin trades

During the 1920s, the stock market was transformed from a playground for the wealthy into common fodder for America. Fueled by the increasingly common belief that Wall Street offered a sure road to prosperity, more and more people devoted their attention, and pocketbooks, to the markets.  America's burgeoning media industry encouraged this trend: Ladies Home Journal declared that "Everybody Ought to be Rich" and counseled its readers to funnel $15 a month into common stock. But, rather than set aside cash for investments, many Americans simply borrowed money to fund their dreams of getting rich; the nation's newfound faith in the markets was built on a mountain of margin trades and tenuous loans.  Though it wasn't readily evident at the time, disaster was in the offing. Banking officials made a few precautionary moves in hopes of stemming the credit frenzy and, on this day in 1932, the Federal Reserve announced a ban on bank loans for margin trades. However, the move couldn't prevent the inevitable: in the fall of 1929, the markets suffered their famous crash, badly shaking the nation's faith in Wall Street.  Source: www.history.com