Author: Andrew Ross Sorkin
_Andrew Ross Sorkin_
Reading time: 23 minutes
Synopsis
1929 (2025) looks at what happened before the worst stock market crash in modern times. It shows how too much risky buying, people feeling too rich, and rules that were not strict enough made the crash possible. The book explains how people wrongly believed growth would never stop. This stopped them from seeing the danger.
What’s in it for me? What’s in it for me? Pull back the curtain on Wall Street’s greatest crash
The crash of 1929 is something we all imagine. In our minds, we see movie-like pictures of bankers jumping from windows and boys selling newspapers to worried people on old, black-and-white streets. The order of events also seems clear to us: people rushing to buy so they didn’t miss out, the crash, the Depression, the Nazis, and the War.
People often asked Andrew Ross Sorkin about similarities to 1929. This was after his book Too Big to Fail, about the 2008 money crisis, became very popular. He admitted he didn’t know much more than anyone else. But when he started reading about the 1929 crash, he felt parts of the story were missing. Most books focused on numbers and systems. They didn’t show the human side of the story.
Sorkin’s own study of the crash of 1929 wants to fix this. It also wants to correct some wrong ideas. He shows that those strong images are often not true. For example, bankers rarely jumped from windows. In fact, fewer people took their own lives after 1929. Even if the order of events is right, it can make things seem like they had to happen. For example, the crash did not cause the Great Depression, which lasted ten years.
But Sorkin’s book is different because he focuses on *why* the men (mostly men) made the stock market bubble grow. In this summary, we will see that bad deals on Wall Street were part of the problem. But a crash needs more than just risky money tools. It also needs a common human fault: too much pride.
Blink 1 – The crash of 1929 punctured the illusion of a decade
Big business and money problems often went together in America in the 1800s. In 1819, 1837, 1857, 1873, and again in 1893, huge stock bubbles suddenly burst. People got scared and took their money out of banks. This caused money shortages, bad times, and slow economies. Economists, who studied this “sad science,” expected bad things to happen. They said that what goes up must come down. They believed this was true for markets, just like for real objects.
By the 1920s, people stopped thinking things would go wrong. It was a time when people felt very positive about the economy. In early 1929, a government group said that America’s growth had barely started, even after 11 years. Herbert Hoover, who would become president, was one of them. In New York, Governor Al Smith told investors they didn’t need to worry. He said the future was full of “eternal sunshine.” Economist Amos Dice praised the country’s “positive mindset.” He thought this was smart, given how fast things were improving.
People believed that good times followed by bad times were a thing of the past. These hopeful people said this century would only see constant, growing progress. But this was a dangerous mistake.
This false idea ended on a day known as “Black Thursday.” By the end of trading on October 24, 1929, 13 million shares were sold. Scared investors quickly left the falling markets. This lost $4 billion in stock value. Another $14 billion was lost on October 29, known as “Black Tuesday.” Rich American families, like the Rockefellers, tried to help. They bought bad stocks to make investors feel safer. It did not work. Prices kept falling. The Great Depression was about to begin.
Economist JK Galbraith, who wrote a big book about the crash, said Americans had often been cheated by others. But in the 1920s, people cheated themselves on a huge scale. This shared false belief is as important as understanding how people traded stocks. Why did smart people stop seeing risks? Why could they not tell good ideas from bad ones? Finding the answer helps us learn lessons from 1929 for today.
Blink 2 – Debt is a powerful optimistic force
People had good reasons to feel hopeful in the 1920s. Things were getting better everywhere. Electric lights made dark streets bright. Cars took the place of horses. New machines like vacuum cleaners and washing machines became normal in homes. New technologies changed life and made a lot of money. Look at radio. From 1921 to 1928, the Radio Corporation of America (like today’s Nvidia) saw its stock go from $1 to $85.
But an idea, not a product, changed things the most. For a long time in America, borrowing money to spend was seen as bad. Many people thought it meant you were desperate or a bad person, both with money and in general. General Motors first broke this rule in 1919. They started selling cars where you paid over time. Soon, Americans used these “instalment plans” to buy many things. These included toasters, coats, and even holidays. Paying later became very important for the economy.
As borrowing became more normal, people’s views of Wall Street changed. People never really liked Wall Street. It was linked to money scandals and unfair bankers who tricked new investors (called “dumb money”). So, it was not popular. But as borrowing became okay, Wall Street seemed more attractive.
Buying stocks became like buying a car: you did it “on margin,” meaning you borrowed money. Wall Street leaders pushed this in the news. So, middle-class Americans opened “margin accounts.” It was simple. You paid 10 or 20 percent yourself. You borrowed the rest. If the market went up, you paid back your loan with interest and kept the profit. When the market was strong, and you could easily make 100% or more, it felt like free money. Groucho Marx’s stockbroker told him something many Americans heard then: “Don’t worry how. You will become very rich.”
Marx’s broker was not a cheat. He also invested his own money in the stocks he told clients to buy. But he was caught up in a powerful idea: hope for the future. You can’t have debt without hope. We borrow because we think we will be richer later. Debt lets us use some of the money we expect to have in that good future. The problem is, sometimes we borrow too much. Money problems usually start when we find out the future is not as good as we hoped.
Blink 3 – Charles Mitchell helped bring Wall Street to middle America
Normal Americans didn’t just decide one day to open a margin account. Someone had to put the idea in their minds first.
Enter Charles E. Mitchell AKA “Sunshine Charley.”
Mitchell was the son of a mayor in a small town in Massachusetts. He began as a salesman selling telephone parts for $10 a week. That was in 1899. Twenty years later, he was the head of National City Bank, which is now Citibank. Under his lead, it became the biggest seller of stocks and bonds in the world. Mitchell quickly became famous. Magazines like Time and Forbes wrote good stories about him. One historian called these magazines “new guides for wanting money.” Many smart university graduates wanted to work for him. Reporters listened carefully to everything he said.
His nickname “Sunshine Charley” showed he was a very hopeful person. When his salesmen at National City said they couldn’t find more buyers, Mitchell took them to lunch. It was in a restaurant high up in a Manhattan skyscraper. “Look down there,” he said, pointing to the streets. “There are six million people down there. They earn millions of dollars. They are waiting for someone to tell them what to do with their savings.” “Look carefully,” he finished. “Eat well, then go down and tell them.”
Mitchell said stocks were like other new things and useful items of the time. Like vacuum cleaners and cars, investments were meant to make life easier. If you could buy those things by paying later, why not stocks? Mitchell made a strong argument to people new to investing. Imagine you put in ten dollars of your own money. Then you borrow ninety more. Now you have a hundred-dollar share in a good company. What if its price doubles in a year? That’s actually a safe guess. Even if you pay twenty percent interest (which you wouldn’t), you still make an $82 profit. That’s an 820 percent return! Who wouldn’t want that?
It worked. By late 1929, National City had sold about $12 billion worth of stocks. Of course, this only worked if everyone believed stock prices would keep rising. But Sunshine Charley’s goal was to make people feel good and share the idea of American money-making chances.
Blink 4 – Cheap credit, boosterism, and a stalling economy created the perfect conditions for the crash of 1929
Today, investors must pay 50% of the cost when they borrow to buy shares. But in the 1920s, if you went to a National City broker, you only needed to pay five percent.
We know what happens when prices go up: borrowing money makes your profits much bigger. The problem is, it also makes your losses much bigger when prices fall. If a $100 share drops to $80, an investor’s $10 is all gone. Then, his broker sends a “margin call.” This means he must repay his loan or give more money. If he can’t, his shares are sold. When brokers sell many shares in a falling market, it tells others to sell too. In short, this is what happened in late 1929. But there is more to the story than just prices falling fast.
The big trouble for Wall Street started in 1927. The Bank of England made it cheaper to borrow money. They thought cheaper loans would help people buy more and encourage companies to invest. Britain’s economy was weak. It was still a big producer of goods, and it really needed more spending and investment. But lower interest rates also meant less profit from money held there. So, gold and money moved from London to New York. To stop a dangerous money problem around the world, the US Federal Reserve also lowered its rates. This made borrowing cheaper in the US as well.
Americans felt less against borrowing to buy things. This happened at the same time as a lot of cheap loans were available. Add a strong stock market and famous people pushing it, and you get a perfect mix for a bubble. From 1927 to 1929, the Dow Jones stock index grew by 250 percent. But factory output stopped growing, car sales went down, building work stopped, and company profits fell. Stock prices expected fast and constant growth. But the economy was not growing that fast. The Fed tried to calm the stock market. It raised interest rates on business loans. It also told banks to stop lending money to people buying stocks to make quick profits.
The solution made the problem worse. The market, which relied on cheap loans, could not handle a sudden rise in borrowing costs. Stock prices reached their highest point on September 3, 1929. Then they started to fall. At first, a few people sold. Then more and more sold. Investors knew prices had to fall. On October 24, many selling orders hit Wall Street. Brokers asked for more money (margin calls). Investors had to sell shares to get this money. This made prices drop even more. The whole problem started again.
Blink 5 – Wall Street caused the crash but policy made the Depression
The crash destroyed a lot of people’s money and wealth. This included much of the $12 billion in stocks National City sold under Mitchell. People lost trust, which is vital for business. There was not enough trust. But this alone was not enough to cause a ten-year economic slowdown. The choices made after the 1929 crash turned it into the Great Depression.
Both the government and the central bank (Federal Reserve) made errors. One big mistake was not giving people insurance for their bank savings.
When banks failed, people lost all their savings. It only took a few times for people to understand the danger. People who could, took their money out of banks and hid it at home. Banks that still had money stopped lending it. They kept it instead. Between 1929 and 1933, the total money in the US went down by one third. Less money meant people spent less. Prices began to fall. This made debts worth more in real terms. Soon, people could not pay their debts. Many businesses across the country closed. This led to fewer jobs and even less economic activity. This falling spiral could have been stopped. But President Hoover’s government believed in letting the market fix itself, without much help.
The Fed’s policy to keep the dollar tied to gold made the Depression worse. With the gold standard, one dollar always had a set value in gold. If gold left the country, the Fed could not keep that value steady. When gold started to leave in 1930, the Fed raised interest rates to bring it back. But these higher rates stopped people from borrowing, lowered investment, and made people buy less. This caused the economy to shrink even more.
It was strange that the stock market was up 50 percent by spring 1930. The worst year for US stocks was not 1929. It was 1931, when the Dow fell by 50 percent. The United States did not fully recover until World War II. Wall Street caused the crash. But US leaders pushed the country into the Depression.
Blink 6 – Post-crash regulation tamed Wall Street, but only momentarily
After the crash, America faced a crisis of trust. A senator said: “People do not trust the Government. They don’t trust business leaders, bankers, or even themselves.” Ferdinand Pecora, a lawyer, was asked to bring back some trust. He led an investigation into Wall Street in 1932.
Pecora was the son of a shoemaker from Sicily. He worked his way through law school. Then he joined the New York District Attorney’s office. He was a determined investigator of crimes by powerful people. He became known for going after corrupt politicians and rich people who felt above the law. Because he went after these rich people, he was called “the Hellhound of Wall Street.”
Pecora started his investigation on March 4, 1932. He quickly showed Wall Street’s common problem: people used their positions for their own gain. Important people, like former president Calvin Coolidge and a Supreme Court judge, got cheaper stocks. They also received secret information from banks like JP Morgan. Companies often hid their losses. Meanwhile, their bosses received very large bonuses. National City hid bad loans to South American countries. They put these loans with good stocks and sold them to investors who didn’t know. Bankers, including Charles Mitchell, gave themselves loans from their banks without paying any interest.
In 1933, the new Roosevelt government started new rules to control Wall Street. The Glass-Steagall Act of 1933 separated regular banks from investment banks. This stopped banks from taking people’s savings and then using them to make risky investments. The new Securities and Exchange Commission (SEC) had to watch over public markets. It made sure companies shared all important information. For the first time, small investors had real protection. Also, deposit insurance was introduced. This protected Americans’ savings if banks failed.
But our story does not end there. In the late 1900s, the rules made after Pecora’s investigation were taken apart. In 1999, important parts of Glass-Steagall were removed. This freed the financial world from the old Roosevelt rules. This led to too much borrowing and weak control. These were two main reasons for the 2008 money crisis.
In the year before the 2008 crash, top stocks went up by over 40 percent. Today, the Nasdaq stock market, full of tech companies, can go up 30 percent in a year. Like in the late 1920s, today’s strong stock market is due to a lot of cheap money. This cheap money comes from the dollars, pounds, and euros printed after 2008 to boost the economy. New technologies in the 2020s, and the hype around them, also remind us of that earlier time. From one point of view, it looks like a bubble. The big question is, will it crash?
Final summary
In this summary of Andrew Ross Sorkin’s 1929, you have learned about the hopeful 1920s. The stock market was strong, new technology appeared, and the economy was busy. This made millions of Americans believe good times would last forever. Wall Street leaders and famous bankers told normal people to join in. Lots of cheap loans let them buy shares using borrowed money. This created a stock market bubble. When investors saw that prices were not real, the market crashed. Wall Street caused the crash. But bad decisions by leaders afterwards pulled America, and the rest of the world, into the ten-year Great Depression.
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