Penny auction at foreclosed Michigan farm (1936). At penny auctions farmers would conspire to offer low bids, resulting in a low return to the creditor. The final buyer would then return the property to the destitute farmer. Hangman nooses served as a warning to squirrely bidders.
The term arose during the foreclosure of farms during the Great Depression in the United States: neighbors would gather in large numbers at the auction and place bids of only a few pennies, while intimidating anyone who attempted to bid competitively. In the end, the bank that owned the farm would get whatever was bid and the neighbors would return the farm and its contents to the farmer.
