1929

“How did you go bankrupt?”

“Two ways. Gradually, then suddenly.”

1929 by Aaron Ross Sorkin was not what I had anticipated from reading the book jacket. I thought it would be a retelling of the stock market crash and the factors that caused it from a traditional historical lens. Sorkin tells more of a narrative with characters having feelings, motivations, and arcs. It would be very difficult for me to summarize the stories of the more than a dozen characters the book follows in the same fashion Sorkin did. Instead, I want to summarize the crash as presented in the book and then break down some of the characters and the events that were most notable.

The Crisis

On October 19^th, 1929, a Saturday, the market closed with the DOW 8% down. Because of this, brokers issued margin calls to investors and those that were short on cash sold their stock to pay their debt. This caused a cascading effect that made shares go down even further. $1 billion of equity was gone. There was a slight bounce back but then on Tuesday blue chips stocks sold in a panic making the DOW fall another 7%. On Thursday, the 24^th, bankers formed a coalition to attempt to stop the bleed. They each put in $40 million to stabilize the market. Richard Whitney, acting on behalf of the group, bought decided stocks to raise prices. Losses went from $6 billion to $3 billion and Richard was termed the white knight of Wall Street.

Financial voices said that everything was fine and that the panic had ended. Friday was uneventful and the market seemed to agree. That was until Monday when the market fell 13%. The Big 6 were out of ideas at this point. Black Thursday was followed by Black Tuesday when there was more mass selling. By November, the market had fallen by half. $50 billion dollars, half of the US GDP, was gone. The markets continued to deteriorate. Hoover, wanting to avoid calling it a panic, coined the term depression. While people called the state of Wall Street, “Hoover’s Market,” the government had practically no regulation over trading at the time. Financial voices insisted that government intervention would only hinder the market and that things would work themselves out.

By February of 1932, stocks were at 80% of the 1929 peak and bank runs led to 11,000 banks being closed. Once Roosevelt won the election Norbeck, the chairman of the Senate Committee on Banking and Currency, relaunched a previously unsuccessful investigation into Wall Street’s role in the crash in attempt to bring up negative news on the Democrats before he was kicked out of office. Ferdinand Pecora was selected to lead the hearing primarily due to nobody else wanting the job. The hearing exposed the world to the practices of Wall Street, starting with Charles Mitchell.

On March 5^th, 1932, Roosevelt declared a bank holiday to stop bank runs. On the 13^th, banks that were determined to be sound started to reopen. Roosevelt also passed bills to leave the gold standard and guarantee deposits for citizens so it wouldn’t be possible for people to lose their life savings in banks in the future. In 1934, Roosevelt signed a law establishing the SEC and there hasn’t been, and will not be, another financial crisis like 1929.

The Characters

Jack P. Morgan- The son of J.P. Morgan Sr., Jack was in control of J.P. Morgan & Co., a private investment bank. He was a reserved person and referred to Lamont for running the day to day. He was a man of principle and ran his bank with the same code his father did. After Senator Glass called the Pecora Commission a circus, a reporter brought in a tiny person to the hearing and had her sit on Morgan’s lap.

Thomas Lamont- Partner at J.P Morgan & Co. He, along with Jack Morgan, helped negotiate the German reparations plan in early 1929.He consulted with Hoover on the stock market. On October 19^th, when the stock market fell one billion dollars, Hoover received an 18-page letter from Lamont saying that the stock market should be left to its own devices. He lent Charles Mitchell money to buy National City Bank stock during the crash and later helped get Richard Whitney out of a “jam” when he stole securities.

Charles Mitchell aka Sunshine Charlie- President of National City Bank and fought for buying stocks on credit. His target customer was the everyman. During a mini crash in 1929, he began lending at low rates to sustain the market and publicly bashed the Federal Reserve which he was a board member of at the Federal Bank of New York. He was poised to buy Corn Exchange Bank to make National City the world’s largest bank when the crash happened. Desperate to keep his bank’s stock above $450, which was necessary for the deal, he borrowed money from Lamont to purchase 58,300 shares of National City stock. He later sold some of this stock to his wife at a loss to avoid paying taxes. This was revealed to the public during the Pecora hearing and he was tried for tax evasion. He resigned as president of National City and was acquitted during the trial. Before his death, he repaid his loan to Lamont and was able to get employment in the banking space where he made millions more dollars. The face of evil Wall Street, he wasn’t especially bad.

William Durant- Founder of General Motors and co-founder of Chevrolet. He went from the automobile market to the stock market where he engaged in rug pulling like many others. With the assistance of Mitchell, he gained an audience with Hoover when he took office to try and convince Hoover that he should cut Fed rates and not meddle in Wall Street. Durant publicly blamed Hoover when the market crashed and said that the Fed should have prevented panic and stabilized money rates. Durant was completely bust by 1930 and officially declared bankruptcy in 1936 after sustaining his lifestyle by taking on debt. He had to ask his daughter, Magery, who still had GM stock for financial assistance. Shortly after his death, Magery and her husband were arrested for narcotics trafficking.

Jesse Livermore- Short seller that speculated with unreasonable levels of success. He made $8 million in 28 hours on March 25-26^th, 1929. He saw that the people making the most money knew the least about the market and played the market based on what he saw in people. He made $100 million from the 1929 crash. He lost it all and shot himself in the head in a hotel in 1940. The night before a photographer asked him if he minded taking a photograph. Livermore said, "Not at all, but it's the last picture you'll take because tomorrow I'm going away for a long, long time." He shares a gravesite with his parents because his wife couldn’t afford to store his remains in the mausoleum he was first laid to rest at.

Herbert Hoover- President of the United States who served one term starting in 1929. He succeeded Calvin Coolidge, another member of the Republican party, who was somewhat cold to him after he announced his candidacy. Hoover felt obligated to keep Coolidge’s Treasury Secretary Andrew Mellon because bankers did not approve of Hoovers proclivity to act and wanted the laissez faire Coolidge market to continue. Hoover let the banks sort out their problems like they asked and his image suffered for it while he was in office.

Evangeline Adams- The Stock Market Oracle. Predicted the market with astrology. I mean, come on.

John Raskob- One of the richest people in the country, Raskob was the leader of the Democratic National Committee. After Al Smith lost the election to Hoover, he decided that the party should fundraise continuously and use the media to discredit Hoover during his run. Raskob hired Charles Michelson to be DNC’s publicist that was in charge of writing negative narratives about Hoover. Some blamed Raskob for causing the depression by killing the people’s trust in the president. Raskob rallied for the five-day work week and moving government holidays to Monday so that there would be three-day weekends where people could spend more money and stimulate the economy. He also built the Empire State Building (not by hand) and argued against capital gains tax.

Richard “Dick” Whitney- Coined the “White Knight of Wall Street” for when he purchased stock to raise share prices during the crash. He was president of the New York Stock Exchange from 1930-1935.  He later stole millions of dollars worth of securities and was bailed out by Lamont with the assistance of his older brother George. He was arrested for stealing shares from the New York Yacht Club.

Franklin D. Roosevelt- Beat Hoover’s re-election by campaigning on removing prohibition. He declared a bank holiday on the second day of his presidency to prevent bank runs. He signed bills to leave the gold standard, guarantee bank deposits, and the second Glass Steagall Act which separated commercial and investment banking. In 1934, he signed a law to establish the Securities and Exchange Commission.

Carter Glass- Virginia Senator, frequent hospital visitor, and anti-hero. He despised speculators and was enemies with Charles Mitchell. He advocated for Jim Crow laws and banking regulation. He helped create the Federal Reserve and wrote the bill that let every region in the country have their own monetary policy to prevent New York from running the entire country’s economy. He blamed Michell for the stock market crash and was friendly towards J.P. Morgan & Co. He turned down the position of Secretary of the Treasury position under Roosevelt due to health concerns and knowing that he would disagree with the president. He wanted to separate commercial and investment banking but didn’t want this to apply to private institutions like J.P. Morgan & Co. He called the Pecora trials a circus when putting the men of Morgan on the stand. When it came out that neither Jack Morgan nor any of the 20 Morgan partners paid taxes in 1931 and 1932, he saw the light. He signed the second Glass-Steagall act separating all investment and commercial banking. When he returned to his hotel in Washington a few weeks after signing the bill, he found that while he was gone white girls had become waiters in the hotel’s restaurant. He demanded to have “his black boys” back to which the manager obliged.

Sorkin used the word scrum enough times that I noticed he was using the word frequently. The epilogue that went through the main characters of the book and what happened with their lives after the story ended felt almost comedic with how absurdly tragic some were.

Something that didn't fit the narrative enough to mention as its own character but was very interesting was that David Sarnoff, leader of Radio Corporation of America, was key to the WWI reparation negotiations in Paris. He was able to successfully relate to Dr. Hjalmar Schacht, the German negotiator. Schacht had a doctorate in Hebrew and Sarnoff was Jewish. This helped them form a bond.