
From a Google Image Search – The Today Show
Given all the parallels between the stock market crash, the Great Depression, and today’s economy, Andrew Sorkin’s book 1929 seemed as if it would be a very timely read. So, I downloaded it in the haul of rewards books I had built up on Audible. It ended up being a good book to listen to because it’s complex but not overly academic and it’s interesting. “Andrew Sorkin is an American journalist and author. He’s a financial columnist for the New York Times and co-anchor of CNBC’s Squawk Box” (the internet tells me.)
I was most surprised to find Sorkin’s explanation of the events that relate to the Stock Market did not feature the famous names I thought were key players in the crash. His account begins with Charles Mitchell and National City Bank. Many investors had become wealthy by essentially gambling on stocks. The Stock Market at the time was the wild west in that there were few rules or limits on trading. Buying on margin (basically betting that a stock will go up in value and taking out a loan allowing the trader to trade on future profits, that may or may not happen) and short selling (an investor borrows shares of stock from their broker, then sells those stocks at the current market rate, buys them back at a lower rate, pays back the broker, and keeps the profits, if any) were some of the most speculative transactions and they were totally unregulated.
Thomas Lamont, Jr. was the acting head of J.P. Morgan on Black Thursday, 1929. He had an international footprint and helped Germany get better terms after WWII. He was attracted to Mussolini and secured a $100 million dollar loan for him in 1926 but later soured on him. Although Lamont talked his wealthy friends into putting millions back into the Stock Market, they could not stop the carnage. It was later revealed that J. P. Morgan had a preferred customer list to try to save big investors.
Charles Mitchell saw that only wealthy people “played” the stock market, so he began selling stocks to people with fewer financial resources, letting them buy on margin and even short sell stocks. Millionaires could accept loses and repay loans on stocks if they used some common sense. When stocks did well ordinary folks did well for a while, but they didn’t have any flexibility when stocks fell or did poorly. Too much credit was being extended. If it looked like market matters were putting banks in jeopardy, if the public decided that a bank would not be able to give people back their savings, then there could be a run on the bank. If the panic gets too great the bank will fail. In 1929, banks did not have enough money if all their customers wanted to cash out at the same time. The federal government did not insure deposits.
Calvin Coolidge was a Republican and US President in the years before the crash. He believed in very limited government and a totally laissez faire approach to the economy. Although Sorkin mentions Coolidge and his approach to the economy, he doesn’t place much blame on Coolidge’s policies. He stresses that opening an unregulated Stock Market to the public boosted credit debt to dangerous levels and weakened banks. Herbert Hoover was also a Republican and was President during the first four years of the Great Depression. Although Carter Glass, a Democrat, had been pushing a bill to separate traditional banks from investment banks for years, no one was listening until Steagall joined with Glass and FDR was the President. The Glass – Steagall law passed in 1933.
Sorkin does not mention political parties. He credits the actions of Charles Mitchell, and Thomas Lamont, Jr, but he doesn’t treat them harshly. He limits his analysis to the years just before 1929 and to some of the aftereffects on key players. Winston Churchill ended up losing his shirt in the Stock Market, but a contemporary bailed him out. However, this is not Dorothea Lange’s views of the Great Depression nor does Sorkin sing the praises of FDR. Still, well worth a listen.








