Evan Hughes
In his new book about the stock-market crash of 1929, the journalist Andrew Ross Sorkin recounts a scene from a summer day that year in Manhattan. The dining room of the Plaza Hotel came to attention, he writes, when top figures from Wall Street and the business world trickled in for Saturday lunch. The presence of such a crowd might not have created a stir at another historical moment, but these were not typical times. The nation was infatuated with the market, which was showering wealth on investors big and small.
Several of these boldface names, including the esteemed leaders of big banks, had a history of joining forces in market-manipulation schemes that were not a well-kept secret. Together, major players would form a pool and bid up a stock through “wash trades” with one another, creating the appearance of high demand, before they all sold, cratering the price and devastating the dupes who had followed their lead.
One might think that some of these men would have faced consequences, or at least lived in fear of exposure, even though their conduct was technically legal at the time. But they were well connected. One of them, John J. Raskob, was the chair of the Democratic National Committee and a prominent political donor; his biggest beneficiary, the former New York governor and presidential candidate Al Smith, was dining with him that day. Another, William Durant, had secretly met with President Herbert Hoover earlier in the year, to lean on him to stop the Federal Reserve Board from curbing Wall Street’s excesses.
In his book 1929: Inside the Greatest Crash in Wall Street History—And How It Shattered a Nation, Sorkin refers to “remarkable parallels” between the run-up to that crisis and today’s political and economic climate, but he doesn’t elaborate on the notion; his account is essentially a straight history, written in a journalistic register. Yet some revealing parallels do emerge from beneath the surface, and they don’t reflect well on our current path. In addition to the greed and “this time is different” hubris that precedes every stock-market tumble, the 1929 collapse was powered, it seems to me, by a more insidious and pervasive force that is in fact everywhere in evidence today.
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