“Chaos, Fear, and Confusion”: Looking Back at the Disastrous Wall Street Crash of 1929 | books

AAndrew Ross Sorkin’s first book, Too Big to Fail, was a bestseller about the 2008 financial crisis and was published the following year. His second book, 1929, out this week, takes readers “inside the greatest crash in Wall Street history — and how it shattered the nation.”

It’s been 16 years between books, but Sorkin hasn’t been idle. New York Times columnist, founder of DealBook Newsletter and Summit. He is co-anchor of CNBC’s Squawk Box; After Too Big to Fail was picked up by HBO, he co-created Billions, a hit for Showtime starring Damian Lewis and Paul Giamatti.

After his book Too Big to Fail, Sorkin said, “I was often asked about 1929. I actually didn’t know much. I had read J. K. Galbraith.” [The Great Crash, 1929, published in 1955] And two other books. And most of the people I know, we all talk about 1929 as this terrible disaster, but no one knew what actually happened — who the people were, what they said to each other, what the motives were, what the incentives were, what the lessons were actually learned.

The short version of what happened in 1929 is that a stock market built on rapid credit and wild speculation suffered a series of declines that culminated in the Black Thursday crash on October 24, in Galbraith’s words, “a day of chaos, fear, and confusion.”

Combined with factors including protectionist tariffs and high unemployment, the collapse was a major sign of a devastating global depression.

About a decade ago, looking for a way to understand the story, Sorkin went on vacation and “like a geek, downloaded some books onto my Kindle…and I remember reading them, and thinking, ‘Wow, this is more interesting than I knew,’ but I also felt like most of the books about this period were written in the 1930s, some in the ’40s and ’50s. I think there was a book that was probably in the 1970s. Many of them are written by economists… told through charts, data, and economic systems. And I wanted human drama.

“One of the lessons from Too Big to Fail was that we often talk about business and economics in terms of big numbers, structures and systems, but ultimately it’s about people and the decisions they make. So I thought: ‘Maybe there’s an opportunity to write a book like this.’”

A visit to Harvard provided a look at the papers of Thomas Lamont, a partner at J.P. Morgan, including transcripts of White House conversations with President Herbert Hoover. Given the myriad obligations and challenges of pandemic-era research, Sorkin’s book is a success.

As influences for a book that draws on first-hand sources found in countless archives, Sorkin cites business classics: Den of Thieves by James P. Stewart, about insider trading; “Liar’s Poker” by Michael Lewis, about bond traders; Barbarians at the Gate by Brian Burrow and John Hilliar, about the fall of RJR Nabisco.

“Wide the hatch,” a phrase Sorkin uses to describe a project encompassing the earlier panics (1907, 1921) and the long aftermath of 1929. He also viewed Walter Lord’s A Night to Remember, from 1955, as “the definitive in-room description of the sinking of the Titanic” and “actually a bit like a mental model… [for] “In a way I wanted the reader to feel.”

The 1929 crash was truly a shipwreck. Livelihoods were lost when the market flipped, though Sorkin maintains that one image in the popular imagination, of ruined brokers jumping out of Wall Street windows, is not what actually happened. For a while, it looked like the economy might recover. It took other factors, most notably the Smoot-Hawley Tariff Act of 1930, to cause the depression.

With the release of Sorkin’s book, Donald Trump’s tariffs and their effects were in the news. Sorkin said he wrote with an emphasis on current events, but preferred not to over-hype such parallels, instead seeking mainly to present relatable characters.

“I always try to understand where the impetus comes from, where the motivation comes from, whatever decision people make,” Sorkin said, citing experience gained “in the context of Billions and the making of the film Too Big to Fail” as well as “what I try to do in my journalism every day.”

“Often the goal was to try to understand: ‘Well, what drives Charlie Mitchell?’ … Or: ‘What drove Carter Glass in his childhood to be such a unique character?’” Likewise with Lamont, John Raskob, and many others.

Mitchell, CEO of National City Bank, the victim of the accident, was taken to Congress and to court on tax charges. Glass was a state senator from Virginia and led reform to protect ordinary Americans from the excesses of Wall Street. Raskob, an executive at DuPont and General Motors, chaired the Democratic National Committee.

One way Sorkin seeks to make such characters relatable is to depict their use of technology to control fast-moving markets – analogue telephones lined up on desks above Wall Street that are now home to computers. He’s also happy to compare key players to their counterparts today.

Looking at Glass, a conservative from Virginia, Sorkin looks to the current senator from Massachusetts, who is decidedly more progressive, and the force behind the Consumer Financial Protection Bureau, which was formed after 2008 to protect ordinary investors.

“If Elizabeth Warren is a racist, she is [Glass] “It would be,” Sorkin laughed. “But what was interesting to me?” [Glass] It was also that it was cited after the 2008 financial crisis as one of the world’s greatest regulatory strongholds. I think the liberals really liked it. They thought he was really trying to hold Wall Street accountable.

“And I went into this project thinking about this narrative, and…as the story progresses, it becomes much more complicated than that. I’m not sure Elizabeth Warren would be citing Carter Glass today if she really understood the whole dynamic of how the Glass-Steagall bill was created.”

“I thought about Glass-Steagall [also named for Henry B Steagall, a congressman from Alabama] Like the famous bill that broke up the banks and was really supposed to end the casino [gambling on the markets]And then you realize that the real movers weren’t even politicians, but to some extent they were bankers who were trying to screw each other. And maybe this just represents how this world is actually no different than it is today, in many ways, in terms of how sausages are made.

Among these bankers, Sorkin found Mitchell “kind of sinister, but not really” and compelling because “I like characters that aren’t black and white. He was interesting to me because he was as famous as Jamie Damon.” [CEO of JPMorgan Chase] It will be today. But there were aspects [Mitchell] “He would have been more like Michael Milken,” the insider trader who was imprisoned in 1990 and then pardoned by Trump in 2020.

“Charlie Mitchell created the credit and leverage in the system to lend money to ordinary investors, which pretty much led to the collapse. Michael Milken revolutionized the debt and credit markets in the 1980s by lending high-yield bonds, or what people call junk bonds, to lower-quality credits. Both were caught. The result was a little different, but “They were both hated.”

And because he knows today’s giants well — it was his question that prompted Elon Musk to memorably tell critics to “go to hell” — Sorkin is well-placed to draw comparisons. Regarding another key figure in 1929, the owner of Tesla, SpaceX and X duly enters the chat.

“To me, John Raskob is like Elon Musk. Think of an entrepreneur who was involved in everything. Cars, obviously, General Motors, and [Raskob] He got involved in politics…and started trying to damage Hoover’s reputation by doing all these backdoor projects. He then builds the equivalent of a spaceship, the Empire State Building. He also happens to have 13 children.

Among the supporting cast is Hoover, the technocratic president who renamed the “panic” that followed the crash as the “Depression,” inadvertently sealed his reputation as a failure, and stayed to watch Franklin Roosevelt save the day. Sorkin also depicts Winston Churchill, a decade away from his finest moment as British Prime Minister, indebted to his shirtmaker, playing in the Manhattan markets anyway, and strolling down Fifth Avenue, there to be hit by a car.

Financial disaster brings political repercussions. In the second half of 1929, Sorkin’s story moves to Washington and he tries to hold Wall Street accountable. As in 2008, most major players avoided serious sanctions.

Sorkin will clearly receive more questions about what 1929 might teach us about 2025 and an American economy that is showing signs of shock, whether caused by Trump or not.

“There are a lot of similarities that I imagine people are able to draw. I mean, look at the idea today and the idea of ​​democratizing finance back then,” he said.

In 1929, “democratizing finance” meant opening markets to ordinary Americans through unregulated credit.

“Today, what are they talking about democratizing finance? They just passed a bill that Trump signed that will allow private equity and venture capital and private credit in a 401(k) plan,” Sorkin said. “It’s all about democratizing finance. Cryptocurrencies are now something about democratizing finance. And obviously the tariffs are almost A very direct parallel.”

Sorkin’s book also foreshadowed another of Trump’s obsessions: bending the central bank to his will.

“There’s a debate going on around the Fed in the spring of 1929 about whether interest rates should be raised or lowered,” Sorkin said. “to some extent, [there are] Even the discussions about the independence of the Fed…so I think there are a lot of things that look familiar.