96 Years ago, the Stock Market Crashed. It Broke the Nation

The task of financial history is to tell the story without being dry. A few have done it well: Liaquat Ahamed in Lords of Finance (2009) is one. Andrew Ross Sorkin’s new book, 1929: Inside the Greatest Crash in Wall Street History and How It Shattered a Nation, (567 pages, Viking), tells a human story around the stock crash of October 1929, which began the Great Depression.

At 449 pages of text, 1929 is an easy read. It is not about finance really. It’s about the financiers, speculators, regulators, and politicians. “This is not a story about those who endured the fallout,” the author writes. “It’s about those who helped set it in motion, because that’s where the responsibility lies, and where the lessons remain.”

 “Responsibility, Lessons”: I suspect Sorkin’s editor put that in there. Sorkin, a financial columnist for The New York Times, did not write the book in search of lessons. He’s not arguing for an economic theory, and he is no muckraker out to scarify the “robber barons.” He wants to tell a story, a narrative, through the eyes of his characters. “Who were the people caught up in it, [and] what did their lives look and feel like?” he writes. And he finds — no surprise — that his players “are often no different than anyone else — flawed, self-interested, complicated.”

Sorkin began his research in the collected papers of Thomas Lamont, a key partner in the private bank of J.P. Morgan. The letters and diaries allow him to climb into the mind of a man long dead, so he can describe meetings and scenes in fine detail. Starting in early 1929, the reader is led through the lives of with investment banker Lamont, short-seller Jesse Livermore, Democratic money man John Raskob, gold-standard Senator Carter Glass, and the intelligent but aloof President Herbert Hoover. It is all quite a tale, particularly the first half of the book, when all these players are rushing toward a cliff that a few can sense but no one can see.

All the chapter names are in chronological order, so that the reader can spring effortlessly from one lily pad to the next. But with all the scene setting and personal touches, there is too little about the economic and political essence of what’s going on.

Here’s an example. In 1929, Germany insists that it can’t pay the reparations Britain and France imposed after World War I. Germany is in economic pain. Millions have been thrown out of work. The payments to the Allies need to be lowered, fast. Representing the Hoover administration is a team of businessmen: Thomas Lamont of J.P. Morgan, Owen Young of General Electric, and David Sarnoff of RCA. Representing Germany is Hjalmar Schacht, head of Germany’s central bank. Schacht, writes Sorkin, “adamantly refused to give an inch, insisting the demands by the Allied creditor nations were impossible for Germany to meet.”

Sorkin spends nine pages (138-146) describing the meetings, including Schacht throwing a fit when he is disinvited to a French dinner because of the anti-German prejudice of a central banker. RCA’s Sarnoff, who is Jewish, replies to Schacht that he knows something about prejudice in Germany. Schacht denies there is prejudice in Germany (this is before the rise of Hitler) and begins reciting the Book of Genesis in Hebrew. Schacht’s rapport with the American breaks the ice, and the men go to work on the Owen Young Plan.

After the two sides agree on the essence of the plan, which will be ratified a year later, the American negotiators are lauded in the U.S. press. Newspaper columnist Walter Lippmann plies them with praise. Mayor Jimmy Walker of New York offers to honor them with a ticker-tape parade up Broadway. Lamont says no, fearing that too much celebration will annoy the German government.

The account is colorful and easy to read, but it provides only a few sentences on why Germany can’t make its payments, what the Young Plan actually does, and why Germany’s convulsions matter to the U.S. stock market. We don’t learn that Schacht subsequently denounces the Young Plan and becomes the central banker for Adolf Hitler. Sorkin keeps his focus on Thomas Lamont.

He does this through much of the book. He opens the next chapter by describing a lunch at New York’s Plaza Hotel. Several of Sorkin’s cast of characters are there. He writes, “Amid the bull run of stocks, all these wealthy men — all in the same room — had become the new boldfaced names of the nation.” He writes of the financial and political thoughts in each of their mighty minds — their merger deals, their thoughts about Federal Reserve policy, and so on.

Sorkin also includes the curious fact that a celebrity Wall Street astrologer, Evangeline Adams, is also in the Plaza’s dining room. “The sixty-one-year-old prognosticator had her own reserved table, which was usually surrounded by several starstruck young men,” Sorkin writes. When a waiter asks the seer for a stock tip, she brushes him off, saying she doesn’t work for free. Sorkin has added a light touch, which a skillful writer will do. The reader might also notice after four pages on this luncheon, that nothing actually happened there.

Much of the book is better than this. Sorkin continually refers to the financial and political events going on in the background. But most of the time that is where they are — in the background.

Bruce Ramsey recently published a book, Seattle in the Great Depression.