The 30th Anniversary Of Black Monday: A Day That Made Wall Street Quake

Enlarge this image toggle caption Maria Bastone/AFP/Getty Images Maria Bastone/AFP/Getty Images

Hysteria. Panic.

Those were words reporters were using on this day 30 years ago to describe the stock market crash, now remembered as Black Monday.

Oct. 19, 1987, brought the single biggest one-day percentage drop in history — and yes, that includes the 1929 crash that presaged the coming of the Great Depression.

On that frightening Monday three decades ago, the Dow Jones industrial average plunged 508 points — more than 22 percent — to just over 1,700.

Since then, the Dow has more than bounced back. In fact, this week it set another record, surpassing the 23,000 milestone. If the Dow were to repeat the 1987 plunge, it would have to lose more than 5,000 points in a day.

"People were coming out for their smoking breaks and they looked shellshocked," NPR's former economic correspondent Barbara Mantel reported from outside the New York Stock Exchange on Black Monday. "They were using words like hysteria, panic to describe what was going on inside."

But markets didn't disintegrate. They pulled themselves together and recovered.

Enlarge this image toggle caption Jennifer Kerrigan/NPR Jennifer Kerrigan/NPR

"It wasn't like any previous market crash and yet, every crash since has been similar to '87," says Diana B. Henriques, author of a new book, A First-Class Catastrophe: The Road to Black Monday, the Worst Day in Wall Street History.

"Not only was Black Monday worse than we remember today; it was worse than we knew at the time," she says. "Some events are important because of what they reveal, what they show us about the world we're living in. And that was what made the 1987 crash so important."

Since Black Monday, the country has seen other scary crashes. For example, in the financial crisis of 2008, there was the "Lehman Monday" that spooked markets and led to frantic government intervention.

But the financial landscape has changed, with high-speed computers able to trade tens of millions of shares within minutes.

In a way, Black Monday was "like a crystal ball," Henriques says. By closely examining the events within it, it becomes clear that the crash has contributed to the financial world that exists now, she argues.

"You could see that giant investors, and novel derivatives, and high-speed trading using computers in a balkanized regulatory system was going to be the shape of the future," she says.

Regulators responded to Black Monday with so-called circuit breakers — rules intended to prevent massive panic sell-offs by allowing exchanges to temporarily halt trading during exceptionally large price declines.

But Henriques says there is still unfinished business from Black Monday that regulators should address.

"I think we need to get serious about trying to build a regulatory system that matches the market we're living in, not the one we left behind," she says.