(Viking, 449 pages)
Wall Street wasn’t always glamorous. Until the early 1900s, “The practice of buying and selling stock was disdained by polite society as a grubby endeavor, the handiwork of gamblers and social benefits,” writes Andrew Ross Sorkin in his new nonfiction book 1929.
But in a couple of decades that had changed, to the point where brokerages dotted New York City streets like Starbucks cafes do today, thanks in part to Americans’ new, lenient attitudes toward credit.
It was an ominous setup to the 1929 stock market crash and the Great Depression that followed. Most contemporary Americans know little about these events, says Sorkin, who has set out to change that and to convince us that there are alarming parallels today.
Sorkin is the business journalist and CNBC personality whose 2009 book Too Big to Fail chronicled the 2008 financial crisis and was made into an HBO movie. That book was the kind you call both exhaustive and exhausting, coming in at more than 600 pages. In comparison, 1929 is a mere 456, not including footnotes. It is, let’s be honest, a lot, and I didn’t have “refresh my knowledge of the Glass-Steagall Act” on my to-do list for 2025.
But Sorkin does his research and wants us (or the future writer of the film script) to know every detail of this story, largely written in narrative style, with the players’ dialogue, surroundings and daily life recreated from diaries, memos, oral histories and private letters — as well as court records, depositions and lawsuits.
The cast of characters is large: presidents and partners of major banks, assorted business leaders and politicians. Some of the major players are largely obscure today (apologies if you are a fan of Russell Cornell Leffingwell) but many are names we know well, if only by their business legacy: Walter Percy Chrysler, Charles M. Schwab and Louis-Joseph Chevrolet among them. There are also cameos by people such as Groucho Marx and Winston Churchill.
Sorkin opens his story with a prologue set just after the market closed 13 points down on Oct. 28, 1929. A 13-point drop is nothing today, but it was worrisome then, particularly after a turbulent week. We follow Charles Edwin Mitchell — a banker known to the press as “Sunshine Charlie” — back to his office after emergency meetings at the Federal Reserve Bank of New York. At his office, he learns that in his absence, his colleagues at National City Bank had been purchasing shares trying to inflate the bank’s value despite the volatility. They’d purchased 71,000 shares, at a cost of about $32 million — a risky scheme that could take the bank out if the market continued to fall. Mitchell envisions people lining up at National Bank’s 58 branches: “A run on the country’s largest bank. There was nothing bankers feared more.”
To make matters worse, the market downturn was occurring on the heels of one of the most optimistic times in America. Ten years earlier, Sorkin explains, General Motors started letting Americans buy its cars on credit. Sears, Roebuck & Co. joined in, offering credit plans for appliances. And before long, Wall Street let people buy stock “on margin” — putting up a percentage of the stock’s value and paying the rest over time. “Borrowing became a habit, born along with optimism,” Sorkin writes. “… And individuals became spectacularly rich. The wealthiest in the nation amassed fortunes in excess of $100 million, which, in today’s dollars, would be nearly $2 billion.” For the first time, businessmen were becoming celebrities, like performers and athletes.
Sorkin then takes us back to February 1929 and leads us month-by-month through that fateful year, exploring the mindsets that kept most of the business leaders from seeing what now seems inevitable in hindsight. “Across the country, speculating in the stock market had become so widespread and profitable that it seemed almost as if everyone were leveraged, committed, and in on the action.”
One Philadelphia banker suggested that women should be prohibited from the market “as a way of keeping in check the public enthusiasm for speculation.”
“So many women had started investing that brokerages had installed specially designed lounges and galleries where they could watch the fluctuations of the market safe from the rowdiness of men buying and selling,” Sorkin writes.
When President Herbert Hoover was inaugurated, he told Americans, “In no nation are the fruits of accomplishment more secure … I have no fears for the future of our country.”
There were a few Cassandras, among them Roger Babson, an economist who started a college by his own name in Massachusetts. He had been predicting a market crash for two years. But the majority of New York bankers in their stately Upper East Side homes would not and could not see it, as they had too much riding on the market. Besides, the economy had been up and down over the past few decades — the country had, after all, recovered from the Panic of 1907 and other more recent volatility.
Sorkin recounts the clashes between Washington and Wall Street as the point of crisis neared. Hoover, becoming worried, was starting to listen to Babson, but the powerful bankers countered Babson’s warnings with relentless optimism. One banker, 10 days before the crash, sent the president an 18-page letter saying that the American future “appears brilliant” and that it would be folly for the president to interfere with the market with “corrective action.”
All too soon we arrive at the last week of October 1929 and see why Charles Mitchell was having such a meltdown in the prologue 200 pages ago. In the days to come, there will be those crowds lined up outside banks and brokerages (16 pages of photos and images of New York Times front pages are a nice addition), suicides (though not as many as have been reported) and eventually criminal charges against Mitchell. There would be “Hoovertowns” (homeless encampments named after the president), breadlines and periods when nearly a quarter of Americans were unemployed. This is a story, after all, that did not end in 1930, but affected many people throughout the next decade and resulted in changes that still govern banking today.
Could the crash have been avoided? Sorkin says yes, with caveats. He also believes Hoover deserves a better grade as president than history has given him. The lessons he offers to us are simple: “we need to remember how easily we forget,” he writes.
And also: “No matter how many warnings are issued or how many laws are written, people will find new ways to believe that the good times can last forever. They will dress up hope as certainty. And in that collective fever, humanity will again and again lose its head.” B
Featured Photo: 1929, by Andrew Ross Sorkin
