1929: Inside the Greatest Crash in Wall Street History

Andrew Ross Sorkin

Let’s start with the obvious: this was a great book, and I recommend you give it a read. Everything we have thought and heard about the Great Depression has been somewhat exaggerated or misstated about what it was and why. Not that it was a very bad financial time, but the how and why have been very misleading as portrayed on the surface.

The author did a great job of detailing the key players, dates, and issues that led to this event in history. One interesting part, since I read The House of Morgan, some of this time period was covered in that book; this book put more of the details in place and the specific people and dates, while also calling out external factors like Germany struggling to pay back loans from World War 1 and their financial issues that made this event worse. Here is a link to that review – https://beingkevin.com/2026/03/26/book-review-the-house-of-morgan-how-a-family-of-bankers-built-lost-and-rebuilt-global-finance/

Let me start with the President at the time, Herbert Hoover. The fault always lies here, but he was a very smart man, known as a brilliant engineer, a hero in World War I, and a rebuilder helping people after that war. He was also a Commerce Secretary under Presidents Warren G. Harding and Calvin Coolidge and helped address the post–World War I recession of 1920–1921. His two biggest mistakes are on the surface very minor, but the guy at the top gets blamed. First, the crash of 1929 was called a panic (a common historical term for financial crashes). Hoover called it a “depression,” which sounded much worse and set the tone for people’s behavior.

Second, in 1932, he was still the frontrunner for reelection. By 1932, Hoover was politically weakened, and Franklin D. Roosevelt was already a strong and serious challenger. The issue people had with Hoover was that he refused to roll back prohibition, and in late 1930, a poll, the first of its kind, was taken, and over 80% of 5000 respondents indicated it was prohibition that they wanted removed, though historically, the economic crisis itself had become a major issue by that time, not a minor one. Prohibition was more of an issue for his political success in the next election.

As for the 1929 crash, nobody actually did anything terribly wrong or illegal. While a few laws were broken (minor and with legal counsel), there was widespread speculation, weak oversight, and risky lending practices. There were no strong federal banking laws or trading laws to prevent what happened. In fact, it was led by an emotional and psychological high that the good times would never end. Banks and investment houses would lend money to anybody off the street to buy stock on margin; it was framed as your way to get rich and live the dream. People were just overleveraged.

Months before the crash, Hoover tried to warn people, but, as a true hands-off business Republican, he did not take active steps himself; he did ask that the Fed tighten money and curtail loans for stock buying and speculation. At the time, banks and investment houses were so powerful and times were so good that the warnings were ignored.

The market prior to Black Tuesday saw several drops, and it was at times supported by major bankers attempting to stabilize prices, but on Black Tuesday, there were runs on banks and margin calls that people could not meet. Bank runs became more widespread after 1929, especially between 1930 and 1933, rather than primarily on Black Tuesday itself. Over the next few years, the market briefly recovered in 1930 before declining again, and most bank failures were indeed concentrated in smaller, rural banks, not in the strong banks of Chase or investment houses like the House of Morgan.

The main issue after that major day was public trust in banks and investment houses. Lending dried up as consumers pulled back spending, and money was pulled out of banks as people grew nervous. In the end, the crash was momentary; the recovery was temporary, but the people’s trust and mindset were not.

From this, new trading laws were enacted, banking laws such as the FDIC (Federal Deposit Insurance Corporation, created in 1933 under the Glass–Steagall Act) were implemented, and banking was broken up, with commercial and investment banking required to separate. That is not the case anymore (largely repealed in 1999), but this led to things like the tariff Smoot–Hawley Act of 1930 (which actually came before many banking reforms and is widely seen as worsening the depression) and the Glass–Steagall Act of 1933.

What we think was a one-day catastrophic event and a very bad economic cycle that lasted years actually did not have to happen. The crash was self-inflicted, but the recovery was more about the mindset of the people who turned one panic into a depression, though historians also point to structural economic weaknesses, global conditions, and policy mistakes as contributing factors alongside psychology.

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