# Fed political pressure worsened the Depression

Markdown copy of https://realalpha.app/s/fed-political-pressure-worsened-the-depression/ on Real Alpha, the best minutes from long interviews with the people building AI. Cite and link the page, not this copy.

- Speaker: [Andrew Ross Sorkin](https://realalpha.app/people/andrew-ross-sorkin/) · Andrew Ross Sorkin is author of 1929 and Too Big to Fail. · Founded DealBook and co-anchors CNBC’s Squawk Box; wrote the bestselling books 1929 and Too Big to Fail.
- Host: [Steve Eisman](https://realalpha.app/people/steve-eisman/)
- Show: The Real Eisman Playbook
- Episode: [Andrew Ross Sorkin on the Crash of 1929 & The Parallels We See Today | The Real Eisman Playbook](https://realalpha.app/v/Yp6EggtUBYI/), Oct 27, 2025
- Moment: 42:22 to 46:12 of the episode (4 min), playing on https://realalpha.app/s/fed-political-pressure-worsened-the-depression/; the episode from there: https://realalpha.app/v/Yp6EggtUBYI/?t=2542

## Quote

> “there was an incentive to **sit on their hands** because they thought that politically it might not be palatable”
> — [Andrew Ross Sorkin](https://realalpha.app/people/andrew-ross-sorkin/) at [44:09](https://realalpha.app/v/Yp6EggtUBYI/?t=2649) · The Real Eisman Playbook

## Takeaways

1. Fed officials worried about political blowback from raising rates.
2. The Fed failed to flood the system with liquidity after the crash.
3. Eisman argues that large-scale government spending was also needed.

## About this segment

Andrew Ross Sorkin argues that political pressure made the Fed reluctant to curb speculation and that it failed to supply liquidity afterward. Eisman adds that the government also needed much larger deficit spending.

From “Andrew Ross Sorkin on the Crash of 1929 & The Parallels We See Today | The Real Eisman Playbook”, Oct 27, 2025. [Watch the full episode](https://realalpha.app/v/Yp6EggtUBYI/)

## Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

[42:34](https://realalpha.app/v/Yp6EggtUBYI/?t=2554) Well, look, if 2008 is any kind of parallel to think about and you consider what Ben Bernanke, who, by the way, did his thesis on Princeton on the Great Depression. Right. It's clear to me to some degree that part of it was a Fed problem, which is that the lesson was you needed to do two things. One is you need to try to wait, try to stop this from happening on the front end. And two, once it's happening, you need to flood the system with money.

[43:08](https://realalpha.app/v/Yp6EggtUBYI/?t=2588) In both cases, they didn't do it. Now, interestingly, and I want to raise this point about today because I think it's so important to thinking about then. You know, today we're having these. conversations in America about the independence of the Federal Reserve and the political pressure and how they shouldn't have any political pressure. There's actually a good reason for that. And I actually think it's evident in 1929. In 1929, the Federal Reserve was still in its infancy. It was just born in 1913. If you go back and read the letters of Benjamin Strong, who had died, passed away, he had been the chairman of the Fed.

[43:50](https://realalpha.app/v/Yp6EggtUBYI/?t=2630) of the New York Fed, and passed away in 1928. The conversations they were having then were they were so worried about what the public thought of them, what politicians thought of them. Were they going to get hauled up in front of Congress and have to explain themselves about whether they were if they were to raise interest rates and have killed the economy, what would happen? Or if they led more to speculation, what happened? And as a result, I actually think because of those pressures, I think there was an incentive to sit on their hands because they thought that politically it might not be palatable to raise interest rates.

[44:29](https://realalpha.app/v/Yp6EggtUBYI/?t=2669) I mean the conversation they were having in 1929 was they thought there was too much speculation. But rather than say, excuse me, guys, we're going to raise interest rates the way Volcker did, they couldn't even contemplate doing something like that because they thought they'd be terminated. Right, right. The whole institution wouldn't exist. Right. And so you have that on the front end and then obviously come 1930, 31, 32, 33 – They don't flood the system with liquidity.

[44:57](https://realalpha.app/v/Yp6EggtUBYI/?t=2697) They don't flood the system with liquidity. So I think that that was a huge component of the problem if you genuinely believe in this idea that credit leverage plus FOMO is the problem. Then I also think – I agree with that. But I think the other issue is just that – look, we all took Econ 101 when we went to college and we all remember C plus I plus G plus X minus M. That concept didn't exist. So the idea that – Roosevelt was the most activist president that we had ever had up to that point. But even he didn't understand that what he needed to do was have tremendous deficit spending.

[45:36](https://realalpha.app/v/Yp6EggtUBYI/?t=2736) So once the problem was created and the Fed allowed all those banks to fail, the next thing that should have been done was the government should have spent gabillions and they didn't. We didn't come out of the depression until World War II. We're in violent agreement, which is not fun for a cable show. I guess so. So what parallels would you like to draw between your two books?