CBR18 BINGO: Wealth because much wealth was gained and lost
“Temptation has driven human folly for centuries, whether the serpent in the Garden of Eden or the market manias of cryptocurrency or artificial intelligence. Each wave seduces us into thinking that we’ve learned from history and, this time, we can’t be fooled. Then it happens again.”
I’m old enough to remember the 1987 stock market crash. The dot-com bubble of the early 2000s dashed my hopes of getting rich off of the stock options I received when the company I worked for was bought by Intel. The subprime mortgage housing crisis and related Great Recession walloped my investment portfolio back in 2008. I have enough working knowledge of these events to vaguely understand what happened (though, under threat of torture, I doubt I could sufficiently explain any of them). But I really had no sense of what happened in 1929, the Crash to End All Crashes that led to the Great Depression.
My takeaway from 1929 by Andrew Ross Sorkin is that the story is a familiar one. At its simplest, the Crash can be explained by people making money on overinflated stock prices, which tempted them to invest more and more, until those in the know realized “This can’t last,” and started selling, leading to panicked selling, leading to disaster. Of course, it’s more complicated than that, but Sorkin has written 450 pages on it, and economics isn’t my strongest subject. I will say that after reading this book, I certainly don’t have any hope that this won’t happen again. And again.
Sorkin has set out to not just tell the story of the Crash, but the people involved. He helpfully includes a 9-page “Cast of Characters and the Companies They Kept” at the beginning of the book, but even with that, I found many of the people involved blended together for me (which wealthy banker are we talking about?). A few stand out: There was Charles Mitchell, CEO of National City Bank, who, one can argue, was largely responsible for the oncoming mess, but who also put his own money and reputation on the line to forestall disaster and was later arrested for tax evasion (he was miraculously acquitted). There was Roger Babson, a “frail-looking economist” who raised the alarm about an oncoming disaster for more than 2 years. Sadly for me and my brain cells, the most memorable is Carter Glass, the Virginia Senator who railed against Wall Street and who co-sponsored the Glass–Steagall Act in 1933, which separated commercial and investment banking and established the FDIC. Unfortunately, he was also a rabid racist, and when I say rabid, I mean he went on record saying he, “spit on the Fifteenth Amendment” and had no intention of letting black people vote.
I enjoyed the insights into the time period. One thing we take for granted is buying things on credit, but that really didn’t come about until the 1920s. Prior to this, taking personal loans to buy “stuff” would have been a shocking suggestion. General Motors broke the taboo in 1919 by offering loans to car buyers, and Sears, Roebuck & Co. followed by offering installment plans for appliances. This cultural shift had a huge impact on Americans’ relationship with money. Sorkin writes, “Americans no longer had to save for the goods they wanted. Borrowing became a habit, born along with optimism. So long as faith in tomorrow was maintained, debts could be rolled over endlessly into the future.”
Sexism was alive and well in the 1920s, but the expression of it here amused me. One Philadelphia banker, Edward Benedere, wanted to keep public enthusiasm for the stock market in check by excluding “clerks, stenographers, and women.” Benedere believed women were “temperamentally unsuited for trading.” Others (including Mitchell) took a “more the merrier” approach, installing “specially designated lounges and galleries where [women] could watch the fluctuations of the market safe from the rowdiness of men buying and selling.”
In the Afterword, Sorkin ponders whether the crash could have been avoided. “The short answer is yes. There were plenty of opportunities to arrest the forces of speculation before they got out of hand. The long answer is that it would have taken almost divine prescience to look beyond the short-term incentives for making money and focus instead on the long term consequences.” Medium answer: No, because people are short-sited and greedy.
This is a superb book on the 1929 crash and the people involved–my middling rating reflects that I struggled to keep track of all the players and I don’t have the best head for economics, making this probably not the best topic for me to tackle. That’s on me. I also felt that what I already suspected was true: the same greed that led to the more recent “bubbles” as well as the (probably) not-so-distant-future ones was what caused the 1929 crash. That’s on humanity.
