With earnings rising, so would the price of individual stocks. When credit was used to buy stock, it pushed up the prices even more. "Leverage" was the magic word on Wall Street. Buying stock on "margin" was the latest rage. An individual could borrow 90% of the stocks value just as readily as borrowing 90% of an automobiles value. The funds used to purchase these leveraged stock transactions was referred to as "call money." By the late 1920's it was also common to purchase shares of investment trusts, which were highly leveraged. When leveraged trusts bought other leveraged trusts, a fragile "house of cards" was built even higher. Some leveraged shareholders were literally getting rich over night. A one dollar increase of share price could produce more than 100 dollars of profit per share of ownership.

Speculative activity was also fueled by the Federal Reserve lowering interest rates in 1927. This was done primarily to aid European countries. Due to post war indebtedness to the United States, the European countries needed to attract investment capital. This could be accomplished if these countries had higher interest rates than the United States, thereby attracting investment capital that was seeking a higher rate of return.

By 1928, the demand for "call money" was staggering. The interest rate on these funds continued to rise to levels exceeding 20%. Large corporations could not resist the lure of easy money. If they could receive 20% return on a loan, there was no incentive to use the money for expanding plant and equipment. It was much easier to loan it to brokerage firms. Corporations like Chrysler and Bethlehem Steel loaned millions. By October of 1929, major corporations loaned almost 7 billion dollars to brokerage houses. Almost 2 billion dollars were also loaned by major banks. Since banks were closely related to brokerage houses, it was easy to shift "deposited funds" into "call money" loans. This kind of activity was later made illegal by the Glas Stegal Act.

The "house of cards" was made even less secure by the rampant manipulation of the markets. Today, such activity is illegal. A timely leak of information would send a stock soaring. If it was "known" that a certain individual was backing a stock, the masses would rush in to buy it. Once the stock moved dramatically, the instigators of the rumor would cash in for huge profits.

All of the prominent figures of the time were quite bullish. Whether walking across college campuses or down the sidewalks of Wall Street, it was difficult to find anyone speaking ill of high stock prices. Irving Fisher, one of America's leading economists was reported to have said "Stock prices have reached what looks like a permanently high plateau." The Saturday Evening Post published this poem: "Oh, hush thee, my babe, granny's bought some more shares, Daddy's gone out to play with the bulls and the bears, Mother's buying on tips, and she simply can't lose, And baby shall have some expensive new shoes!"

As time went on in late 1928 and into 1929, an occasional prominent figure would give a warning of excessively high stock prices. But many were afraid to make their statements public, and sold their shares secretly. Bernard Baruch was reported to be one of these. He would later write, "When beggars and shoeshine boys, barbers and beauticians can tell you how to get rich, it is time to remind yourself that there is no more dangerous illusion than the belief that one can get something for nothing." This advise was supposedly given to him by a lowly street beggar.

In late 1928, the Federal Reserve began to be concerned about the excessive use of credit and, subsequently, raised the discount interest rate three times to a level of 5%. They hoped to curb the speculation but were unsuccessful. The demand for "call money" kept growing.