eir overly speculated prices. Instead, The Fed raised rates furiously in 1929, hoping to slow down inflation. By August of 1929, people were only beginning to see the effects of the rate increases on the economy since the Federal Reserve was not required to announce decisions on interest rates. By this time, the stock market was already coming off of its highs, but the people were selling to pay off their short-term debts on credit cards and loans since the Federal Reserve had hiked rates so drastically. This left no money from the selling to buy stocks back as they sunk. Money was also disappearing from the government treasury markets as the Fed had increased rates so dramatically they had effectively turned the liquidity in the debt markets into a standstill operation. With no liquidity on the market, people were forced to sell their stocks in order to pay off brokers, who were becoming worried about the fact that people had bought stocks on margin and wanted to make sure they would be repaid. They also had to pay off debts on things that had been bought on credit as payments were rising and credit providers were becoming worried. This selling would culminate on October 29th, 1929, when stock prices on the Dow fell over 14% on frantic volume and lost $10 billion to $15 billion in value. By mid-November almost all of the gains of the previous two years had been wiped out, with losses estimated at $30 billion. (Encarta 4) The sell-off continued until the Dow hit its bottom in 1932, of 40, that was nearly 7% below the price at which the index began trading at in 1896 and 44% below the July 1929 highs. All of this was the result of lazy policy by the Federal Reserve. There is another correlation between the Fed and the stock market crash.
             The Federal Reserve is most publicly known for its control over the Federal Funds and Discount rates, but they also control a rate that was just as, if not more essential to the markets in 1...