Last week when I gathered with my old motorcycle buddies, one of them, a guy who makes his living managing money for others, brought a copy of Andrew Ross Sorkin’s newest book, 1929: Inside the Greatest Crash in Wall Street History and How It Shattered a Nation. Sorkin is an interesting writer. He is the NYC-raised son of a playwright and Wall Street lawyer. He has a BS in communication from Cornell University, my Alma Mater. He spent many years at the New York Times. He is an entrepreneur, having started DealBook, a well-respected financial news aggregation services on the internet — a daily newsletter covering deal-making and Wall Street that has grown into one of the most widely read financial publications in the country. He’s not just a narrative journalist, but has done policy-oriented financial reporting with real impact. His 2009 book on the financial crisis, Too Big to Fail, established him as the preeminent narrative journalist covering Wall Street. It spent over six months on the Times bestseller list, won the Gerald Loeb Award for Best Business Book, and was adapted into an HBO film that received eleven Emmy nominations. The book gave him access and credibility that few financial journalists have matched — essentially room-by-room, hour-by-hour reconstruction of how Lehman collapsed and how Washington scrambled to prevent a complete systemic meltdown. He is best friends with my friend, Bill Cohan, as both have covered the M&A landscape for many years. Given the Cornell and Cohan connections, I feel like I know Sorkin, even though I do not. What makes Sorkin distinctive is the combination of simultaneously being a beat reporter breaking M&A news in real time, a narrative nonfiction author doing multi-year archival research, a daily newsletter founder, a television anchor, and a drama series co-creator (Billions). Very few people operate credibly across all of those lanes at once, and that all makes him one of my heroes.
In Too Big to Fail, Sorkin draws some parallels to 1929 but is focused on the modern era. There are several notable books specifically about 1929 and the crash, including works by John Kenneth Galbraith (The Great Crash 1929), Liaquat Ahamed (Lords of Finance), and others, which are sometimes confused in attribution. But Sorkin’s 1929 is simply more readable and more relevant to today by virtue of his vast awareness and knowledge of the recent landscape similarities. It is a work of narrative financial history covering the Wall Street crash of 1929, the events leading up to it, and its aftermath. The narrative is chronological, structured around specific dates across a four-year period beginning February 1, 1929, about seven months before the crash began. Sorkin spent eight years researching and writing it, producing roughly a hundred pages of notes and references, many drawn from previously unpublished sources. The book outlines the pervasive optimism and unrelenting faith in the upward trajectory of stock prices on the part of investors, celebrities, government officials, and particularly bankers. By the middle of 1929, the major banking figures had too much at stake to contemplate anything other than optimistic scenarios for stocks. As Charles Prince, the head of Citibank famously said in the late 1980’s, “When the music is playing, you gotta get up and dance”. The core thesis Sorkin pursues is that the bifurcation of society into rich and poor was causally connected to the crash.
Sorkin tells the story through a cast of major figures rather than as an abstract economic history. They are Charles Edwin Mitchell, Chairman and CEO of National City Bank (today’s Citibank), Thomas William Lamont of the House of Morgan, William Crapo Durant, founder of General Motors, Jesse Livermore a famous speculator of the day who stands out as a notable exception by telling the New York Times that the market was overpriced and stocks were at ridiculously high levels (He proved correct, and made $100 million on the short side of the market), and Herbert Hoover. It was Hoover who coined the term “depression” in an attempt to lessen the perceived severity of the financial collapse that followed the Crash of 1929, arguably the worst rebranding effort in history. The crisis, which lasted over a decade and devalued many fortunes and lives, ultimately had a silver lining in that it spurred the creation of efforts to help the hermitage economy and population like infrastructure building (the interstate highway system), unemployment insurance, the five-day work week, FDIC insurance, and the minimum wage.
Sorkin frames the book around the seductive illusion that “this time is different” with disregarded alarm bells, financiers who fell from grace, and skeptics who saw the crash coming only to be dismissed until it was too late, and a global cabal of greed. Reviewers across the political spectrum have noted the eerie parallels to today’s market environment where elevated valuations, political tensions, wealth concentration, and the eternal human tendency toward speculative euphoria seem to be ruling the day.
I am doing the I do with lots of books these days…listening to it on Audible, where my subscription credits cannot keep up with my incessant purchases. I am still in the early stages of the book and loving it as a writer, a historian, a financier and a hopeless storyteller. One passage that really jumped out at me in the early chapters was about the Congressional testimony of J.P. Morgan when Senator Carter Glass (the namesake of the Glass-Steagall Banking Act of 1933) was questioning him about what he perceived to be over-executive lending practices. Carter Glass was a man who believed that Wall Street was the root of all evil and that the speculative practices which led to the great crash were about people of wealth exerting more and more excessive greed on an unsuspecting public. He tried to make the case in the hearing that lending was based solely on wealth and collateral, but J.P. Morgan was too shrewd to scantily that premise. He contended that the basis for all lending and the basis for all business success rested on character. This jumped out at me for many reasons. To begin with, it has always been interesting to me that real estate developers can so easily borrow against real estate collateral, regardless of their history of bad deeds and acts which have shown serious breaches of character.
I am reminded that when running the Bankers Trust Private Bank in the 1990’s, despite the fact that Donald Trump was a customer of the Real Estate Department of my bank, I turned down Donald Trump as a client on three occasions…based on his history of being unethical in his dealings with his banks…including our own. Trump and even people within my own bank tried to convince me that I was being Pollyannaish by allowing the issue of character to get in the way of potential business. I held firm to the belief that banking Donald Trump would have been an inappropriate risk, particularly to our reputation. I have always found it interesting that after we sold our bank to Deutsche Bank, the new head of Private Banking reversed my decisions and started banking Donald Trump, much to their eventual regret and reputational damage. Character is and should always be the basis for business and people like Donald Trump should suffer the consequences of their bad acts rather than be reinforced by having people look the other way for reasons of self-interest. It’s easy to see how this banking and business pattern of Trump’s has invaded our political sphere and now our global geopolitical universe. The 1929 Redux that we are living today is turning into the 1930-1945 Redux for the entire world.