54 The Stock Market Crash—dAnd After 
that actually the short interest in the market was 
very small at a time when inevitably it would have 
been extensive had considerable short selling occurred 
earlier. This, in fact, was one great reason for the 
‘air pockets’ in the market. One must always 
remember that a short seller, when he sells, is forced 
to become a compulsory buyer of stocks. In panics, 
frequently the short interest provides the only effec- 
tive demand for shares, since margin purchasers are 
frightened or financially crippled, while investors 
wait for the bottom of the decline before invest 
ing. In 1914, when war broke out, the New York 
stock market was fortunate in possessing a very 
large short interest, and this fact accounts for the 
remarkable resistance shown by the stock market 
prices before the Exchange was compelled to close. 
In 1929, the situation was very different. For years 
bear traders had been very severely punished, and 
there had been little short selling in the market and 
practically no short interest. If we had had more 
short selling during the summer, it would have of 
course restrained the undue rise in share prices at 
that time, and would have provided bids in the 
market during October and November. The reason 
for the organization of the so-called ‘bankers’ pool’ 
arose from just this fact of an inadequate short 
interest in the market. Of course the Stock 
Exchange questionnaire was not aimed to halt short 
selling, although this perhaps was its psychological 
effect.” 
But as the panic proceeded, in part, at least,