For Sale —American Paradise (53 page)

Fuller had a pithy explanation for the failure of Florida's real estate market: “We just ran out of suckers.”

Even Coral Gables was drowning in red ink, with $35 million in debts.

In a letter to the editor of the
South Florida Developer
, author Robert Ranson of St. Augustine said that while much was being made of the fact that the state government was debt-free, Florida's local governments were drowning in red ink.

“Though what we owe in bonds could only be properly estimated by a county-
to-county, and town-
to-town canvass, I might tell you that as near as I can get it from various sources, it is somewhere between $400 million and $538 million, and increasing,” Ranson wrote.

Stated more bluntly, while the per capita debt of the population of the United States was $16.61, the per capita debt of Florida was about $508, he said.

Those figures never appeared in the
Wall Street Journal
or the columns of Arthur Brisbane.

If the mountain of debt wasn't enough for Florida to deal with, a dangerous natural pest appeared to cause still more trouble. On April 6, citrus growers discovered Mediterranean fruit flies in groves near Orlando. These flies are considered one of the world's most destructive pests. Their larvae feed on the pulp of fruits, and can eventually destroy an entire crop.

There was speculation that the pest had been brought into Florida on straw used to wrap bootleg whiskey. If there was an upside to the pest's presence in Florida, it was that twenty thousand men were hired to eradicate the flies. The state's citrus industry was nearly destroyed before the pest was eliminated in November 1930.

Still, the good times and easy money kept rolling elsewhere in the country. Wall Street continued spewing paper profits to millions of new investors, and no one expected it to end.

But the market showed signs of shakiness in March after Michael Meehan and other stock manipulators drove up the price of RCA shares—the high-tech stock of the 1920s—for a week and then sold their holdings for gigantic profits on March 18, 1929. Others began to sell stock, and on March 25, the market started tumbling.

Many investors had bought their stocks on margin. Like Florida real estate speculators four years earlier, snapping up binders for down payments of 10 percent, they had put up perhaps 10 percent in cash of the actual cost of the stocks. The rapid decline in the market caused a credit crunch. Investors who'd bought on margin had to come up with more cash for their brokers when the value of their stocks fell below the amount of cash they'd actually put up when they bought those stocks. Interest rates soared when investors had to borrow more money to hold on to their portfolios.

The slide was halted when Charles Mitchell of National City Bank said he'd make $25 million available for lending so investors wouldn't lose their investments. The market stabilized, the fear abated, and the return of good times seemed assured.

But in Florida, where giddy land speculators had seen their wealth evaporate almost overnight, more seasoned observers looked at the stock market stumble and recovery with some skepticism. On March 27, the
Stuart Daily News
published an editorial comparing the Wall Street edginess of a few days earlier to the rise and fall of the Florida land boom. The editorial warned that like Florida's real estate market, the stock market could eventually tumble.

The editorial was not signed, but it read like Menninger's work.

“We can recall what happened to us, and we can also remember how very sure we were in 1925 that nothing could check our excitement and prosperity,” the editorial said.

“Good old Wall Street!” the editorial continued. “You are having a glorious time right now, just as we had a few years ago. Have a good swig of it while it lasts, boys, because the reckoning day is coming for you, just as it did for us. The bottom drops out of every overburdened basket.”

The editorial even scolded Martin County's famous patron, Arthur Brisbane, for talking so optimistically about Florida in his column and making his readers think that prosperity was just beginning.

“That is what we Floridians thought in 1925,” the editorial continued. “Today we are sadder and wiser. We have seen plenty of days when first class, improved, income-
producing real estate could not be sold at any price. And Wall Street will see the day when its highest grade stocks will be a drag on the market. Laugh all you want to now, but watch for the doldrums. They come!”

It was a prescient comment, although no one would realize it for six or seven months. Groucho Marx, who, with his brothers, was making a movie
of the Florida satire
The Cocoanuts
, recalled that everyone was buying stock in 1929.

“The plumber, the iceman, the butcher, the baker, all of them panting to get rich, were tossing their puny salaries—and in many cases, their life's savings—into Wall Street,” Marx wrote in his autobiography,
Groucho and Me
. “Occasionally the market would falter, but then it would shake itself free from the resistance of the bears and common sense and resume its steady upward climb.”

On September 3, 1929, the Dow Jones Average climbed to its highest point in history—381.17. RCA had reached $505 a share, and AT&T was at $304. General Electric was at $396, and US Steel at $262.

Beneath the roaring prosperity, however, investors' fears were volatile, and it took only a small spark to ignite a panic. That came on September 5, only two days after the market's historic peak, when economist Roger Babson spoke at a conference of businessmen in Massachusetts.

He was unmoved by the stock market's latest surge, and he warned that terrible times were ahead. Babson used the spectacular collapse of real estate prices in Florida as an example of what would eventually happen to the stock market. “Sooner or later a crash is coming,” Babson said, “and it may be terrific.”

The market dropped the following day. It stabilized briefly and then began fluctuating wildly, like an electrocardiogram tracing for a patient with a failing heart. Brief rallies were followed by long slumps.

Still, as the end of summer approached, great things again were predicted for Florida's winter tourism season. George Morse, executive manager of Florida Motor Lines, told reporters in Orlando that all transportation providers who served the state—railroads, steamship lines, and bus lines—were expecting a banner season. Morse said the predictions were based on his conversations with executives of transportation companies in New York, Atlantic City, Philadelphia, and other larger cities in the urban Northeast.

As the peak of the hurricane season arrived in September, Florida again was very lucky. On the whole it was a quiet season, but on September 19, a tropical depression formed about nine hundred miles east of Nassau and began slowly meandering toward the islands.

First it drifted westward, then turned to the northwest, slowing strengthening into a minimal hurricane. On September 24, however, the storm encountered very favorable conditions and began rapidly strengthening, continuing its slow, indecisive movement.

By September 25, its strongest winds had increased from 85 to 120 miles an hour, and it started a sharp but slow turn to the southwest. Hurricanes often lose some of their power when they make sharp turns, but this storm's intensity mushroomed. In eighteen hours, its peak winds were blowing at 155 miles an hour.

The storm moved slowly across the Bahamas, gradually weakening but doing major damage and killing forty-
eight people. It then turned to the northwest,
weakened some more, and crossed the then sparsely populated Florida Keys, with peak winds of around 115 miles an hour. It continued to weaken as it crossed the Gulf of Mexico and made another landfall near Pensacola as a minimal hurricane.

The storm had been at its roaring peak when it crossed the Bahamas, and even though it had hit the Florida Keys with powerful winds, its odd, meandering path had kept even those winds away from much more densely populated Miami and southern Florida.

Arthur Brisbane advised his readers not to get too upset about reports of the storm's intensity. “The newspapers will tell of a ‘tropical storm of great intensity leaping toward the Florida coast, taking in a region between Jupiter and Miami,'” he wrote in “Today.”

“But like eastern stories of western earthquakes, Florida's tornado stories often resemble the report of Mark Twain's death, which he described as ‘greatly exaggerated.'”

It was an irresponsible and callous comment to make about a storm that had blasted the Bahamas with winds exceeding 150 miles an hour, killing dozens of people there.

An editorial in the
Schenectady Union Star
was much more accurate about the hurricane's damage and unpredictability.

“The trouble with this particular hurricane was that it took a fancy to remain stationary over the Bahamas, Nassau suffering long and heavily from its violence,” the
Union Star
said. “Which way the storm would spring when it did decide to move, no one could predict with certainty. Meteorology has still much to learn about the life habits of hurricanes. Let us hope that it has learned some secret from this one. Suspense of the kind Florida has been experiencing is too much of a strain even for her steady nerves.”

Edwin Menninger, the determined and analytical optimist, kept his readers informed and entertained during the edgy fall of 1929. Stuart's streetlights were turned back on in early October. And he peppered his editorial page comments with humor and cornball jokes

In the September 20 edition of the
Developer
, Menninger noted that a reader had dropped by his office recently to give him a bar of soap as a present.

“So many dirty things appear in the paper from time to time that I was not surprised to receive a contribution of this kind,” he quipped.

Menninger said he'd keep the soap “for an emergency.” If he was ever on a boat that sank, he said, “I can always get out this bar and wash ashore.”

The
Developer
also reported that, once again, a record-breaking number of tourists were forecast for Florida. The prediction was based on numbers tabulated at inspection stations set up at the state's borders, with Georgia and Alabama as part of the effort to eradicate the Mediterranean fruit fly. The
Developer
reported that careful records were being kept of all automobiles entering the state. During the first week of October, 6,222 vehicles entered Florida. Every state except South Dakota was represented, the
Developer
said.

The arrhythmias in the stock market continued, however, and the underlying edginess that had characterized the market for months was about to erupt into full-scale panic.

“There came a Wednesday, October 23, when the market was a little shaky,” economist John Kenneth Galbraith said. “Weak. And whether this caused some spread of pessimism, one doesn't know. It certainly led a lot of people to think that they should get out. So on Thursday, October 24—the first ‘Black Thursday'—the market, beginning in the morning, took a terrific tumble.”

Once again, prominent bankers stepped in with offers of millions of dollars in cash and credit, and the panic eased. But something happened between Friday night, October 25, and Sunday night, October 27. During that weekend, investors had time to think about the previous week's frightening drop.

When the market opened on Monday, October 28, people started unloading their stocks.

The real panic set in on Tuesday, October 29. Everyone was selling. No one was buying.

“It was just like a nightmare,” said Horace Silverstone, who was a telephone clerk at the New York Stock Exchange. “I couldn't believe what was going on here. Every ‘Buy' order was written on a black pad, and every ‘Sell' order was on a red pad. All I saw was members running around with a fistful of red orders, just like chickens with their heads cut off. They didn't know which way to run. They were panicking. Screaming. Everybody was bumping into everybody else.”

When the market closed, anyone who wanted RCA stock could've bought it for $26 a share, but no one was touching it. At the end of the awful day, about $10 billion in stock values—more than twice the amount of money in circulation in the United States at the time—had vanished.

“Some of the people I knew lost millions,” said Groucho Marx. “I was luckier. All I lost was $240,000. I would have lost more, but that was all the money I had.”

On the day of the crash, Marx got a phone call from his friend Max Gordon, who had also lost a fortune that day. “All he said was ‘Marx, the jig is up!' Before I could even answer, the phone was dead,” Marx said.

The United States and the rest of the world were headed for the worst economic depression in anyone's memory.

In the immediate aftermath of the crash, Edwin Menninger still thought he saw a reason to be optimistic about the future.

“I believe that 1929 will go down in Florida history as our worst year,” he wrote in the
South Florida Developer
. “There are unmistakable signs on every hand of an improvement in fundamental conditions, and the first real estate activity in years is in evidence in Florida.”