Student Blog: Law, Markets, & The Role Of The State
DIFFERENT PLAYING FIELD, SAME PROBLEMS
Immediately before the crash of 1929, the stock market boomed. Wall Streeters and ordinary Americans alike invested in the stock market. Stock could be purchased with only ten percent down. Yet, the playing field was far from level. For example, the price of RCA stock soared from 85 to 420. However, the price was artificially driven up by only a handful of investors who bought stock to increase its demand, leaked favorable reports to news media, and then sold to the eager public. Eventually, the house of cards fell down.
Congress stepped in to regulate the securities markets, and out came the Securities Act of 1933 and the Securities Exchange Act of 1934. These legislative acts, and those that followed, helped to level the playing field by prohibiting short-swing profits by corporate insiders, insider trading, and other types of securities fraud. Yet, as long as the old saying in Wall Street remains true, that fear and greed are the two most important emotions in Wall Street, market rises and falls are inevitable.
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