I must confess that I am only now reading John Brook’s classic Once in Golconda, which is a history of Wall Street from the 1920 to 1938. It’s a heady mix of lush and leisurely narrative with keen attention to financial tradecraft.

Of course, any tale that involves market manipulation, no matter how far in the past, will sound oddly modern, and I thought this section in particular might entertain readers:

The chief instrumentality through which the Wall Street insiders, with Stock Exchange approval, sheared the gullible public lambs was the stock pool…..The point of a pool manipulation was simplicity itself: it was a way of inducing the Stock Exchange ticker tape to tell a story that was essentially false, and thus to deceive the public. Then as now, the stock ticker tape….printed no news or comment – only the price and volume, along with the letters identifying the particular stock, of each transaction as it occurred…..”The tape doesn’t lie” was the sucker’s folk wisdom, but the tape could be made to lie. Even though it continued to record each transaction as faithfully and impartially as ever, the nature of those transactions themselves could be so arranged, by the people doing the transaction, as to make the watcher of the tape, in his innocence and greed, buy a gold brick.

The group of capitalists pooling their resources would first pick out a stock suitable for their purpose because it had glamour appeal to the public, and because there were comparatively few shares on the market, making for ease of manipulation. They would then accumulate a large block of shares…They would, if possible, make an ally if not an actual partner of the stock’s specialist on the Exchange floor….it was he who, holing in his had the supposedly secret book listing all outstanding orders to by or sell stock, had access, in Flynn’s metaphor, to the cards of all the players. Finally, they would hire their key man, an expert in manipulation called a pool manager….

On behalf of the pool, the pool manager, as broker, would begin buying and selling shares of the stock at frequent intervals, in no apparent pattern. Often he would buy and sell it back and forth among the members of the pool…..these essentially spurious transactions, accomplished with the sympathetic help of the specialist, would be so weighted that the price of the stock would begin to rise slightly. In speculators’ jargon, it would be “active and higher”…Thus the stock would be called to the public’s attention, and the notion of making a quick profit in it planted in the public’s mind. The eager tape-watchers would gradually begin to buy – cautiously and tentatively at first, then as the activity continued to increase and the price to rise, more and more boldly. Now the pool manager’s operations would become more delicate. On some days he would abruptly switch to the selling side, simply to create confusion; then just when the public was about to decide the picnic was over, he would come back in with a torrent of buying that would sweep all along with him. Finally, in a skillfully conducted manipulation, the thing would become self-sustaining; the public would in effect take the operation over, and in a frenzy of buying at higher and higher prices would push the stock on up and up with no help from the pool manager at all. That was the moment of the final phase….often spoken of indelicately as “pulling the plug.” With a mousiness in sharp contrast to the elaborate fanfare with which he had begun his buying, the pool manager would begin feeding stock back into the market. The price would respond by turning downward, gradually at first, then more rapidly as the pool manager’s trickle of sales mounted to a flood; and before the public could collect its senses, the retreat would have become a rout, the pool wold have unloaded its entire bundle profitably, and the public would be left holding the suddenly deflated stock….

Pool managers with some justification thought of themselves as artists…just as the best con men disdained to use violence, so the best pool manipulators disdained these artistically inelegant practices [of planting rumors or arranging for favorable research to be published]. Their medium was the tape; they took pride in their skill to make it and it alone create precisely the effect upon the public they wanted….

To repeat, for practical purposes, there was nothing illegal about the pools.