Buying on margin
- Money was borrowed from banks
- It was then invested in stocks
- Ideally would make enough profit to repay loans, interest and then keep the rest
This was a barely regulated activity and therefore quite a risky habit. Buying on margin depends on one thing: the stock prices' continual increase.
"margin requirements began to rise to historic new levels. The typical peak rates on brokers' loans were 40–50 percent. Brokerage houses followed suit and demanded higher margin from investors" -Eugine N White; The American Economist
To what extent would the severity of the crash have been changed if the banks and loans they were giving had been properly regulated?
To what extent would the severity of the crash have been changed if the banks and loans they were giving had been properly regulated?