# Andrew Ross Sorkin on the Crash of 1929 & The Parallels We See Today | The Real Eisman Playbook

Markdown copy of https://realalpha.app/v/Yp6EggtUBYI/ on Real Alpha, the best minutes from long interviews with the people building AI. Cite and link the page, not this copy.

Andrew Ross Sorkin says leverage and fear of missing out can turn speculation into a crash, and sees new investment structures worth watching today.

- Show: The Real Eisman Playbook
- Hosts: [Steve Eisman](https://realalpha.app/people/steve-eisman/)
- Guest: [Andrew Ross Sorkin](https://realalpha.app/people/andrew-ross-sorkin/) is author of 1929 and Too Big to Fail.
- Published: Oct 27, 2025
- Length: 51 min

## The best minutes

- [42:22](https://realalpha.app/v/Yp6EggtUBYI/?t=2542) [Fed political pressure worsened the Depression](https://realalpha.app/s/fed-political-pressure-worsened-the-depression/) (4 min)
- [45:50](https://realalpha.app/v/Yp6EggtUBYI/?t=2750) [New investment wrappers can recreate old leverage risks](https://realalpha.app/s/new-investment-wrappers-can-recreate-old-leverage-risks/) (3 min)

Skip the archive-research setup, the extended Wall Street character profiles, and the Glass-Steagall and Pecora history.

## Full analysis: Andrew Ross Sorkin says 10-to-1 margin fed 1929 crash

- Sorkin says brokers lent ten dollars for each dollar a customer put down.
- He ties that leverage to FOMO, but offers no comparable exposure measure for today.
- Finance teams should test how structures behave when prices fall or funding stops.

Its 6 sections, what it means for you and what to watch are on [the page](https://realalpha.app/v/Yp6EggtUBYI/#analysis), free with an account:

- [6:32](https://realalpha.app/v/Yp6EggtUBYI/?t=392) Ten-to-one margin amplified a market already surging
- [25:23](https://realalpha.app/v/Yp6EggtUBYI/?t=1523) Leverage and FOMO made a fall contagious
- [29:14](https://realalpha.app/v/Yp6EggtUBYI/?t=1754) The Depression followed more than October’s crash
- [43:20](https://realalpha.app/v/Yp6EggtUBYI/?t=2600) Political pressure left the Fed reluctant to act
- [46:15](https://realalpha.app/v/Yp6EggtUBYI/?t=2775) New wrappers deserve scrutiny for embedded leverage
- [48:01](https://realalpha.app/v/Yp6EggtUBYI/?t=2881) The modern parallel is a risk test, not a date

## Summary

Andrew Ross Sorkin wrote Too Big to Fail and his new book, 1929. He says it took eight years to assemble 1929 from material in dozens of archives.

Sorkin says he wrote 1929 to tell the human story behind the crash: the people, incentives and decisions that shaped it. He describes a market with little oversight, easy credit and 10-to-1 margin lending, where investor pools manipulated stocks such as RCA. Sorkin argues that leverage combined with fear of missing out can turn speculation into a panic, while the crash and subsequent policy failures helped deepen the Depression. He sees new investment vehicles today as echoes of the 1920s, though he says he is not predicting another 1929.

### Minute by minute

- [32:53](https://realalpha.app/v/Yp6EggtUBYI/?t=1973) **Glass sought to split banking.** Sorkin describes Carter Glass as a forceful critic of speculation who pushed to separate banks from their brokerage businesses. He says Glass wanted to restrain firms such as National City but was protective of J.P. Morgan, which he viewed as unusually honorable.
- [36:07](https://realalpha.app/v/Yp6EggtUBYI/?t=2167) **Pecora's hearings exposed Wall Street.** Sorkin says Ferdinand Pecora, a little-known lawyer paid $250 a week, led investigations into banks and drew public attention to their practices. He says that publicity helped build support for Glass-Steagall and the SEC; he also notes that the SEC's first head, Joseph Kennedy, had been involved in investment pools.
- [39:03](https://realalpha.app/v/Yp6EggtUBYI/?t=2343) **Wash sales hid investment losses.** Sorkin says some investors sold shares to relatives or friends to claim tax losses, then arranged to buy the stock back in wash sales. He names John Raskob and Pierre DuPont among those who did this, and says Thomas Lamont's son was also involved.
- [40:41](https://realalpha.app/v/Yp6EggtUBYI/?t=2441) **Fed inaction worsened the collapse.** Sorkin says the Federal Reserve should have tried to restrain speculation before the crash and flooded the system with money afterward. He argues that political pressure made the Fed reluctant to act, while Eisman says the government also failed to provide the deficit spending needed to revive demand.
- [45:50](https://realalpha.app/v/Yp6EggtUBYI/?t=2750) **New investment vehicles echo the 1920s.** Sorkin sees parallels between 1920s investment trusts and today's private credit, private-market stakes, crypto funds and Strategy, which he describes as a leveraged vehicle for buying crypto. He says this is not a prediction of another 1929, but argues that investors should watch how these structures develop.

## Transcript

The Real Eisman Playbook, hosted by Steve Eisman, with Andrew Ross Sorkin.

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

[0:01](https://realalpha.app/v/Yp6EggtUBYI/?t=1) to do once it happened to get out of it? And I wanted it to feel intimate. And it's interesting that you say everybody was dead and how challenging that proved to be. I remember being up at Harvard at Baker Library with an archivist early on. And I said, explained to her what I wanted to do. And she said, I've read Too Big to Fail. What you want to do is impossible. And you said, why? And I said, why? And she said, because it's going to be very hard to find those kinds of intimate details. And the truth is, there's not one or two or three archives where you can go. I remember her explaining to me, because I'm not a historian, He said, you know, most historians, they find an archive or two and they excavate the archive.

[0:51](https://realalpha.app/v/Yp6EggtUBYI/?t=51) But the information is typically in one or two or three places. And you can really understand where it is. And then if you can find that material, you can go. This was not that. One of the reasons that this book took me eight years. Eight years. Eight years to complete was because it was dependent on effectively dozens of archives. And how did you find them? There wasn't one or two or three places. The – Charlie Mitchell, who's one of the main characters of this book, he ran a bank called National City, which becomes Citigroup. Right. And all sorts of fascinating and crazy things happened to him, which I don't totally want to give away, but maybe some people will know.

[1:38](https://realalpha.app/v/Yp6EggtUBYI/?t=98) There is no Charlie Mitchell archive. His family never donated all of his papers to some library somewhere. It doesn't exist. So how did you find out about him? And so what I ultimately had to do was actually think about, almost as a storyteller would, okay, well, who was Charlie corresponding with? Who was Charlie talking to? And I made lists. In some cases, it might have been 30, 40 people that he might have been interacting with. And then I would go to try to find, do they have archives? And in their archives, do they have letters? And did they? And some of them did. And once you started to match up almost like puzzle pieces, you would find one letter from here.

[2:23](https://realalpha.app/v/Yp6EggtUBYI/?t=143) It was like a treasure hunt. It was like a treasure hunt. And the truth is that books like the Galbraith book, which is fabulous, were treasure maps for me. because I saw the outlines in a way of the kind of story you'd want to tell, but without that sort of that detail. And so could you go find that detail? And look, there were moments when there were aha moments along the way where I'd find some letter and go, oh, my goodness, this explains everything that I was missing. I didn't understand what was really happening here. And then there were other times where a year or two would go by and I couldn't – I didn't have – there would be a gap.

[3:04](https://realalpha.app/v/Yp6EggtUBYI/?t=184) There would be a gap in the story in terms of being able to explain where they were on this night and what happened the next morning. And there's nobody to call. And so you – it's almost – it's like a needle in a haystack. So it took you eight years? And it was an eight-year project. Sometimes you'd open boxes that had never been indexed at a library. So that's something I learned. Some boxes are indexed because they think there's good stuff in there. And some are not. And some they actually think is all lousy. Right. Did you ever find any good stuff in those unindexed boxes? Yes, but I will tell you, from an efficiency perspective...

[3:45](https://realalpha.app/v/Yp6EggtUBYI/?t=225) Not so great. It's not so great. Right. Right. But when you land on something, the feeling of it is like magical because you think you've discovered something. Well, I will say this is a very intimate book, just like Too Big to Fail. So let's talk about these people, because in some ways, these people from our time are alien. And I think you did a great job in sort of describing that world. I mean, this is, for lack of a better term, this is old wasp world. When the WASs ran this country, and nobody questioned that. So let's set the stage. Let's talk about, even before we get to some of the personalities that are wonderful, like this, when I was reading this book, and I knew a lot about, you know, some of the stuff that happened before, the markets are like the Wild West here.

[4:38](https://realalpha.app/v/Yp6EggtUBYI/?t=278) So why don't you set the stage about how little rules existed? You know, eventually 9,000 banks failed. Were there any bank capital rules? Like lay the groundwork of what this world was like just from a regulatory, pragmatic way. This truly was the Wild West. There were no rules. The SEC didn't exist. You know, somebody recently asked me about one of the investment trusts that I mentioned in the book. They said, do you ever see a prospectus for that? And I said prospectus. What's that? They didn't have a prospectus. So at best, they might have had a flyer that they would hand out trying to sell you whatever it was.

[5:20](https://realalpha.app/v/Yp6EggtUBYI/?t=320) I would even take one step back and say, you know, the 1920s really was this unbelievable period of innovation in America. But one of the great innovations was credit. I mean, I think people forget that prior to 1919, it was almost a moral sin for Americans to borrow money. Right. People did not borrow money. And it was in 1919 that General Motors created a credit agency effectively. GMAC. GMAC effectively to finance vehicles. Right. And that was the first time that the American public thought it was OK. And then Sears Roebuck said they're doing it with cars. We can do it with appliances. Right.

[6:07](https://realalpha.app/v/Yp6EggtUBYI/?t=367) And then it was people like Charlie Mitchell on Wall Street who said, now we can do it with stocks. So today, if you're going to go on margin, you know, for every – I mean the most you could do is two to one. Right. So if you have a million dollars you could borrow, you could have a portfolio of two million dollars. That's it. How much leverage were people allowed to get on margin back then? Ten to one. Ten to one. And by the way, you could walk in. There were brokerages that were popping up on the corners of New York City like they're Starbucks today. Right. I mean, you walk into a hotel. There was a brokerage there.

[6:46](https://realalpha.app/v/Yp6EggtUBYI/?t=406) And you would walk in, tell them who you were, and they would literally loan you $10 for every dollar that you gave them. Sight unseen. Sight unseen. No underwriting. I mean, it was such a different universe. And for so long, I mean, people forget this, the market went up 48% in 1928. By September of 1929, it was up from the beginning of 1928 to September, it was up 90%. So if you were buying stocks and only putting down $1 and they were giving you $10, it was like $0. free money? Yes. And no one had ever experienced what the flip side looked like. Let's talk shenanigans. Okay. Because there are a lot of shenanigans. A lot of shenanigans. And you mentioned them. To my taste, you don't go into them as much detail as I personally would love because I know a lot about this stuff. So give us a couple of shenanigans that went on in the 20s, which like if you told someone today, like, I'm going to do this, they would say, what are you talking about? You're going to go directly to jail if you do go do that. So give me some shenanigans.

[7:54](https://realalpha.app/v/Yp6EggtUBYI/?t=474) I mean, the most pronounced shenanigan of 1929 was the idea of an investor pool. OK, let's talk about that. You mentioned that a lot. This would be a group of investors, usually wealthy financiers, who effectively collude. They come together. They say, you know what? I'm going to put in a couple hundred thousand dollars. You're going to put in a couple hundred thousand and we're going to run a pump and dump scheme. A true pump and dump scheme typically run, by the way, literally on the floor of the exchange by the specialist. By the specialist himself. Who was in charge of the stock. So the meme stock of 1929 was RCA.

[8:32](https://realalpha.app/v/Yp6EggtUBYI/?t=512) Right. The ticker was radio for obvious reasons. This was one of the great technologies. This is the NVIDIA. Of its day. Of its day. And this was a stock that was being manipulated, you know, for weeks on end. It would almost be like if there were actors on the floor of the New York Stock Exchange and each broker going, I'm in for $100, I'm in for $120, I'm in for $140, I'm in for $160. And they would drive the price up. And they would drive the price up. Meantime, they'd be oftentimes paying off the journalists to write positive articles about what was going to happen to this stock. And then, of course, they would pull the rug.

[9:13](https://realalpha.app/v/Yp6EggtUBYI/?t=553) Now, it was all done, I don't want to say not, I don't want to say in the open, but there were articles. People would actually write about the investor pools. So people did know that this whole thing was bizarrely going on in the public to the ones who even understood what was happening. Some of them were trying to ride it. In the same way that people were trying to ride GameStop, where they were all telling everyone they had their diamond hands, They needed to get in, but they also knew they needed to get out before the rug was pulled, but they didn't know when the rug was going to get pulled.

[9:43](https://realalpha.app/v/Yp6EggtUBYI/?t=583) Right. So the people who are in these pools, let's mention some names because this is not like, you know, my grandfather, Max Lieberman, was not in these pools. This would be like if the pools were run by James Gorman and Lloyd Blankfein. Oh, I was going to say it would be like if Elon Musk was running the pool and was an investor in it along with, you know, Jamie Dimon and, you know, every major, Bill Gates. They would all – the biggest guys would get together. It would be like, you know, the guest list at Davos if they had all gotten together to pump and dump a stock. Right. And they thought this was all normal.

[10:23](https://realalpha.app/v/Yp6EggtUBYI/?t=623) This was all normal. Right. They would actually – they had circulars about what they were doing. they would send to each other right they weren't necessarily walking on the street handing them around but uh by the way some of them actually were what handing out circulars yes so it's entirely different by the way were there any bank capital requirements back then i don't believe there were any genuine bank capital requirements like regulatory back from a regulatory perspective i think what was happening and one of the things that was fascinating for me was I got access to the New York Federal Reserve's bank minutes.

[11:05](https://realalpha.app/v/Yp6EggtUBYI/?t=665) Okay. And it actually underpins a lot of the book. You don't see them in the book itself, in large part because it sort of helps the narrative or helped me be able to clarify the points in time. But the minutes are not like transcripts. And a lot of the conversations that they were having and discussions were actually about little banks that were not the big ones in the story. But one of the things you did see was conversations that they were having about effectively, you know, whether this bank could fail. Well, how much capital did this bank have? How much, you know, what kind of lines were they asking for? But they had no rules to base anything on. They just kind of knew maybe what was happening. They knew what was, they might have known what was happening. I don't think they fully knew what was happening because it was dependent in on the banks telling them what was happening. And they were usually trying to understand what was happening by seeing how much money a bank was asking for at any one moment.

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[13:59](https://realalpha.app/v/Yp6EggtUBYI/?t=839) Give the gift of quality this holiday season. Download the Quince app for app-exclusive offers or go to quince.com. Get free shipping on your order and 365-day returns. Now available in Canada and the UK too. And when Quince asks where you heard about them, let them know it was the real Heisman playbook. It's the best way to support the show. Let's talk about some people because these are fascinating people. That's the best part of the book. So let's talk about the head of Nat City, Charles Edwin Mitchell. Tell us about him and his role in The Great Crash. What was he like? Who was he? So Charlie Mitchell was like, from a fame perspective, probably like almost like a Jamie Diamond kind of character.

[14:48](https://realalpha.app/v/Yp6EggtUBYI/?t=888) Given what you do for a living and what you went through in 2008, you might even think of him as like a Dick Fould kind of character. Yes. He definitely was the funny thing about these guys is they all saw themselves as like the most upstanding members of society while they were doing things that, from our perspective today, are completely criminal. Totally. But like they were sitting in the front pew of whatever church that they go to. They're in the papers. They're viewed as like the best of the best, the cream of the cream. So let's talk about Charlie Mitchell. What was he like? So Charlie had become the most probably famous banker besides J.P. Morgan in America.

[15:36](https://realalpha.app/v/Yp6EggtUBYI/?t=936) J.P. Morgan at this point is dead. His son is not running J.P. Morgan. Jack Morgan is ostensibly running J.P. Morgan. But there's a fellow named Thomas Lamont who we'll talk about in a moment who was really running the deep state that was JP Morgan. It was a deep state. And but Charlie, they used to call him Sunshine Charlie. OK. And he was one of the great optimists. I mean, this guy, whenever he was quoted and he and by the way, reporters would seem to find him all the time, typically on docks because they were always getting on boats and yachts to go across the ocean on vacation. And he would always tell you about how great the economy was. He was always talking up the stock market. But he was somebody who really almost invented the idea to some degree of providing credit to these brokerages all over the city and all over the country. So that they could put people on margin. So that they could put people on margin. Did his own bank put people on margin? And his own bank put people on margin.

[16:32](https://realalpha.app/v/Yp6EggtUBYI/?t=992) His own bank had two units. There was the bank. Right. And then effectively, there was a second piece of National City, the National City Company, which was like the brokerage. But it was all part of the bank. It was all owned by the bank. It was all owned by the bank. And there became questions later about whether that was even legal, technically legal later on. But he was a proponent of all of this. He was on the cover of magazines. And the other thing that was happening during this period, this was really the sort of explosion of media for the first time in the 1920s. Hence RCA being such a hot stock.

[17:06](https://realalpha.app/v/Yp6EggtUBYI/?t=1026) And so, you know, all of a sudden, you know, before it was, you know, Babe Ruth and Charles Lindbergh on the cover of these magazines. And now it's Charlie Mitchell, Charlie Mitchell, the financiers, the Wall Street CEOs have become celebrities. I think I heard this story before. You've heard this story? Yeah, I think I heard that story before. I mean, who were on the covers of all the magazines before the Great Crash? Sandy Wilde. Same thing. History rhymes. It sure does. And sometimes it doesn't rhyme nicely. That is very true. So Charlie, by the way, if you know your New York geography, his home was what is today the French embassy on Fifth Avenue and 74th and 75th Street.

[17:51](https://realalpha.app/v/Yp6EggtUBYI/?t=1071) Have you ever seen that? That was his house. That's his house. That's where these people lived. Yeah, the mansions. That's some house. Right. Like the Frick. I don't want to give too much away about Charlie, but Charlie also happens in 1929 to get an opportunity to be on the board of the New York Federal Reserve. Yes. And that becomes an important component of the total story. Because? Because at one point in March, after the Federal Reserve actually does try to tamp down speculation, not by raising interest rates, by the way, but by sending out notices to banks to effectively tell them to stop lending to speculators, which nobody really understood.

[18:34](https://realalpha.app/v/Yp6EggtUBYI/?t=1114) And some people took in one direction as, you know, I can't lend at all and others didn't even listen. Right. He did something, again, I don't want to give it all away, that effectively defied the Federal Reserve and put a target on his back from a man who was probably the Elizabeth Warren of his time. Carter Glass. Carter Glass. And Carter Glass had spent a good portion of the 1920s railing about this thing that he called Mitchellism, which was Charlie Mitchell and debt and credit and how he believed that this was all going to end in ruin. OK, so let's talk about the relationship between Jack Morgan and Thomas Lamont at J.P. Morgan.

[19:17](https://realalpha.app/v/Yp6EggtUBYI/?t=1157) What was that like? Who were these guys? He's a fan. Fascinating people. I got to tell you, I was so fascinated by these guys. So Jack Morgan, obviously son of J.P. Morgan. Who's dead at this point. Jack Morgan is... By the way, Jack Morgan, you know, with all due respect to him, wasn't the brightest human being in the world. But he was bright enough to know that he wasn't the brightest person in the world. Yes. And he needed someone to take on the role of his father while he was the figurehead. Exactly. Which is, you know what? Good for him. There was some genius to that. There was genius to that.

[19:52](https://realalpha.app/v/Yp6EggtUBYI/?t=1192) He was humble enough to understand he couldn't do what his father could do. And he needed somebody to do it. And that person that was chosen was a guy named Thomas Lamont. Right. And Thomas Lamont was an old line wasp, former journalist, by the way, who was a guy who had a lot to prove or I think he thought he had a lot to prove. And he was somewhat of a – This is a behind-the-scenes kind of guy. He was always behind the scenes, quiet, was never trying to take attention away from others. But he was a true client guy. He thought of himself as a diplomat in many ways. There was a great biography of him, by the way, called The Ambassador of Wall Street.

[20:41](https://realalpha.app/v/Yp6EggtUBYI/?t=1241) He was that guy. And he would go to meetings with Mussolini and he would go to meetings with Hitler. I mean – and he was involved in everything and it was a really just fascinating kind of human being who believed because of his experience with the father, the true J.P. Morgan in 1907, that if you could just get the right people around a room and at a table – You could settle anything. You could settle anything. We could solve anything. A typical banker. Typical banker. Right. And the lesson for him, again, without giving away all of the wild things that happened to him, is, of course, when October of 1929 rolls around and he attempts to get everybody in the room, they can't control anything.

[21:28](https://realalpha.app/v/Yp6EggtUBYI/?t=1288) It's too late. Yeah. Let's talk about someone near and dear to my heart. Good old Jesse Livermore. Jesse Livermore. Who is he? What role did he play? Jesse Livermore was the eisman of his time, was he or no? He's a lot crazier than me. He's a gambler. He's a gambler. So I'm actually curious what you think of Jesse Livermore. I think this is a type of guy who made and lost fortunes constantly. He'd make a lot of money. He made a fortune shorting the market, which is what he's famous for. Couldn't keep it. Loved the action. He had to be in the action. He could not be in the action. He needed the action almost like in a manic way.

[22:14](https://realalpha.app/v/Yp6EggtUBYI/?t=1334) It was like a drug. It was a drug for him. I think this is a man who was bipolar. That's what I think. Or some variation of that because eventually he killed himself. Tell everybody what role he served during the crash. Jesse Livermore was one of, frankly, the few, though a quiet one, Cassandra's in the room in 1929. Right. You could look at Carter Glass as a Cassandra. Later on, we could talk about a guy named Roger Babson, who's a Cassandra, if you will, saying that things might fall or falter. By the way, Charles Merrill of Merrill Lynch was a Cassandra, interestingly, during that period. But when you think about Jesse Livermore, he was a guy who had actually at that point become a bit of a recluse in 1929.

[23:05](https://realalpha.app/v/Yp6EggtUBYI/?t=1385) his ability to short the market had become so difficult that he almost stopped being a short seller because the market just kept going up kept going up right this was a losing game a lot of this reminded me of in terms of this in terms of the market you know in 1990 In 1999, you know, all these people were shorting internet stocks and they were getting carried out in coffins. Yes. And all of a sudden in 2000, the thing collapsed. Exactly. But you had to be there at the right time because otherwise they'd carry you out. And that's exactly what happened with him. He almost got carried out, almost.

[23:36](https://realalpha.app/v/Yp6EggtUBYI/?t=1416) And yet he somehow had a premonition in the late summer into September of 1929. And boy, did he call the whole. And how much did he make in the crash? It's a very good question. there's a couple of different estimates right one estimate is that he made a hundred million dollars in october of 1929 whatever he made eventually he lost it all and he committed suicide 1941 i hate giving away so much of the story oh please he ends up walking into the sherry netherlands yeah walks into the coat closet puts a gun to his temple and shoots himself shoots himself yeah all right so let's talk about the crash you know you tell you tell this in a very very very intimate way but let's take a step back please by the way that's the only the first half of the whole story oh i know we haven't even gotten to the rest of the half we're coming to that is what happens afterwards which is also which to me is actually oddly more interesting because why do you think it's more interesting because i think watching all of the different characters and what happened to them afterwards they didn't see it coming and so let's let's let's hold off on that we're at a cocktail party we're at a cocktail party this is like a cocktail party like a cocktail with water in my mouth and i i say to andrew

[25:03](https://realalpha.app/v/Yp6EggtUBYI/?t=1503) i just read your book give it to me shorthand i read all the book i got all the characters i got all the intimacy. But if you had to explain to like a high school class in two paragraphs, what caused the crash? What would you say? What caused the crash in 1929, to be honest, is what causes almost every crash. It is debt, credit, leverage, plus FOMO, fear of missing out. Those are the two main ingredients. In fact, without the leverage piece. You can have all the FOMO you want, and it doesn't matter. Right. So everybody's levered 10 to 1. Market starts to go down, panic selling. Always. And by the way, I think that was true in 1929. I think that was true in 2008. I totally agree. I think we can go back and look even at the dot-com bust. I think every major crisis that we've had has been a function of too much leverage in the system. You can have all the bad actors you want on stage doing all the bad things you could possibly imagine.

[26:06](https://realalpha.app/v/Yp6EggtUBYI/?t=1566) You could tell me the bankers are too greedy. The investors are speculating. The regulators aren't minding the store. Everybody's doing all sorts of wild things. But unless there's enough leverage in the system, it's hard for it to turn into a giant panic. So I've given lectures on the financial crisis and I say four causes. Too much leverage, big asset class goes bad, systemically important firms own the asset class and derivatives. And the only difference between the financial crisis and every other crisis is derivatives. So this had, like you said, too much leverage. Big asset class stocks stocks, equities get killed.

[26:53](https://realalpha.app/v/Yp6EggtUBYI/?t=1613) And systemically important firms, big banks are involved in the asset class. Story over. That's the story. With all the details. I should have just done two pages and called it a day. So let's talk about – okay, so there's the crash. We're going to talk about Carter Glass in a second. But I think – one of the things I've always said is that one of the hardest things that any human being has to go through when – god forbid they go through it is living through a paradigm shift because the guys in this book who are all dead lived in it with a certain paradigm of we are the masters of the universe sound familiar yes you know we went to the best schools we are the uber wasp we belong to the best clubs we we the president i i can call the president united states and talked about what's going on at any time i want we rule the world by the way that was a true feature of 1929 yeah i mean the idea we could call harbert hoover talk about talk about the parallels to where we are today interestingly enough yeah there's very few times where the ceos of america could just call up the seat call up the president united states and he picks up and in 1929 it was happening every morning yes so they were calling hoover yep all the time okay crash people you know it's worse

[28:17](https://realalpha.app/v/Yp6EggtUBYI/?t=1697) than a crash eventually 9 000 banks fail um what was the unemployment rate at the peak 15 percent 25 25 25 25 25 25 percent hoovervilles people of 1932 yeah people i mean it just got worse and worse and worse and worse. And then Roosevelt comes in. So let's talk about – okay. I actually remember when I went to law school, one of the professors when we were talking about the Great Depression said that the 1933 Act was written by three Harvard Law School professors over a weekend. So let's talk about how the world changed. Let's talk about Carter Glass and what happened to these guys because a lot of stuff happened to these guys i think it's first worth mentioning that here we are we're going to bring us to our bring us to 1933 but the crash in october of 1929 was like the most powerful domino in a series of dominoes that then cascade in 1930 1931 and 1932 it didn't end a lot of people have an impression that somehow there was a terrible thing that happened October of 1929 and that was it right but it was really that plus plus plus the confluence of Smoot-Hawley tariffs and what that did to global trade big questions and the end of the peg to the the gold gold gold peg to the dollar I mean there was there was so many component parts

[29:50](https://realalpha.app/v/Yp6EggtUBYI/?t=1790) of this bank failures you know bank failures I mean bank failures bank annihilation annihilation A thousand banks failed all of the United States. And so – and then obviously unemployment and it just turns into this vicious cycle. And so there's – I only mention that because I do think the story keeps going. When I first began writing this, I thought I was going to write about – effectively from January 1st, 1929 to the end of 1929. By the way, there are a lot of – some people who have written these books or books about this period, that's the period. But the truth is this book starts in February of 1929 and goes to the summer of 1933.

[30:30](https://realalpha.app/v/Yp6EggtUBYI/?t=1830) Why? Because that's really the sort of full spectrum of when the true action that changed America happened. So let's talk about that. Yep. Hi, Steve Eisemann here. You don't need me to tell you that rent and mortgages are only getting more expensive. That's why Bilt created three credit cards designed to offer the richest rewards on rent, mortgage, and everything else you spend on. Whether you rent or own, you can earn up to 1.25 points on every housing payment without the transaction fee, no matter where you live. Points can be redeemed for flights, hotels, lift rides, a future housing payment, and much more.

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[33:05](https://realalpha.app/v/Yp6EggtUBYI/?t=1985) Let's talk about Carter Glass, who eventually created Glass-Steagall. Glass-Steagall. So I mentioned earlier that Carter Glass was the Elizabeth Warren of his time. But by the way, this is about Carter Glass. He was a racist Elizabeth Warren. Yes, a racist. If Elizabeth Warren knew how racist Carter Glass was, I don't know if she actually liked Glass-Steagall ever. This is an old school Southern – people don't realize that Southern Democrats were completely racist, but in the 30s were also progressive. Yes. About economic policy. It's a very weird combination. And Carter Glass was the ultimate of that.

[33:34](https://realalpha.app/v/Yp6EggtUBYI/?t=2014) He was the ultimate version of that. He was also embedded and enmeshed in the world of finance because he had actually helped create the act which invented, if you will, the Federal Reserve of 1913. Of 1913. He then becomes the Treasury Secretary, by the way. Oh, what was he Treasury Secretary? In the late 19—1917, 1918. OK. For a brief moment, I believe. I hope I'm not wrong on that. Now my— Too many facts. Too many facts. And then becomes a senator in Virginia. Right. And really one of the most vocal senators as it relates to the world of finance. As I said, he had sort of made Mitchell his whipping boy for a lot of this.

[34:24](https://realalpha.app/v/Yp6EggtUBYI/?t=2064) But even once we had gotten into the 1929, he was looking for ways to slow down what was going on in the market. Right. He was thinking about taxes on trades. He thought maybe if you implemented something like that, you could do something. And then as things progressed, he started to think about could you separate effectively the banking side – From the brokerage side. From the brokerage side. Could you take the casino piece of this out of the bank? Right. But interestingly, he really only wanted to do that to the public big institutions like Charlie Mitchell. He wanted to protect J.P. Morgan.

[35:06](https://realalpha.app/v/Yp6EggtUBYI/?t=2106) I was shocked by that. And so he had a great friend in Russell Leffingwell who worked at J.P. Morgan. worked for Thomas Lamont and Jack Morgan. And I believe partially because of that relationship, he had his own ideas about J.P. Morgan. He also thought J.P. Morgan was this, you know, the most patrician, honorable place in the country. Wrong, but okay. And therefore was somewhat protective of them. That becomes a controversy later on in the story. But he pushed and pushed and pushed for this bill. Again, I don't want to give too much away because I actually think that was one of the great surprises for me.

[35:43](https://realalpha.app/v/Yp6EggtUBYI/?t=2143) how that bill came together in that most people think that Carter Glass and Congressman Stegall were responsible for that bill. You might even give more credit these days to Stegall, but you would also have to give credit to Rockefeller and the folks at Chase who actually were pushing behind the scenes to do this. Because they wanted to get J.P. Morgan. As a way commercially to hurt J.P. Morgan. Right. And so there were all of these sort of fascinating. And most people don't know that – so J.P. Morgan had to split between J.P. Morgan and Morgan Stanley. That's the origin of Morgan Stanley. Let's talk about one of my favorite people in the book, Ferdinand Pecora.

[36:25](https://realalpha.app/v/Yp6EggtUBYI/?t=2185) What a guy. I mean the funny thing about Ferdinand Pecora – well, tell us about who Ferdinand – I think Carter Glass must have hated his guts. I think that Carter Glass hated his guts, but Carter Glass hated his guts because Ferdinand Pecora got a lot of attention. And Carter Glass was desperate for attention at almost all times. So tell us about Ferdinand Picard because he was the investigator. So in 1933, there was an investigation that had actually originated with Hoover, interestingly, that was a bit of a charade originally. that then there was a view politically they needed to start looking into the banks and at least look like they were trying to figure out what was going on.

[37:12](https://realalpha.app/v/Yp6EggtUBYI/?t=2232) The Republicans were going to try to look into the bankers. Right. I've heard this before. You've heard this before. And they hire this little-known lawyer who was willing to take the gig. He was going to get paid $250 a week, which was like nothing compared to all of this. Some Italian guy from Queens, basically. to go do this and meanwhile he's sitting with these uber wass and this italian guy from queens is leading the show he's leading the show and boy does he do his homework and he really uses these these inquiries not necessarily to uh put them in jail because he doesn't in the end but what he does do is he he shines i heard that before too yes then nobody went to jail nobody went to jail But what he does do is he shines a light on all of this.

[38:05](https://realalpha.app/v/Yp6EggtUBYI/?t=2285) And it is that light and all of the attention and publicity that ultimately led both to Carter Glass getting his bill passed. It led ultimately to the creation of the SEC. I mean, it really led to the grand – to the extent there was any groundswell – Let's talk about the SEC for one second. Well, it didn't exist. But the first person to run it was an uber crook. Was an uber crook. Joseph Kennedy. Completely. He was in all those trusts and pools. And by the way, he was shorting stocks too. Right. Interesting. I thought you would appreciate this point because I was surprised by that maybe I shouldn't have been.

[38:40](https://realalpha.app/v/Yp6EggtUBYI/?t=2320) Yeah. One of the first things they did in 1930 or 31 was they started investigating the short sellers because they were convinced. I've heard this before. That's what I thought you'd appreciate. So even back then, there was this view that politically it was the short sellers who were doing it. The shorts did it. The shorts did it. Of course we did. History rhymes, man. It just rhymes. So Glass-Steagall has passed. Yes. None of these guys go to jail. No. Tell us what happened to Charles Mitchell. Tell us about – this is one of my favorite parts of the book. Tell us about the shenanigans they pulled by selling – stocks to their wives i love this okay i will tell you about this part but then you're gonna have to read the book to find out what i read the book no but i want the listeners to because the this is to me the this is so juicy it's unbelievable it's the finale of the whole story so we'll leave the finale for the finale but okay but what does happen uh one of the things that actually a lot of people were doing at that time is they had made to the extent that some of wealthier people had made money in 1929 and then also lost a fortune on paper, they were desperate to reduce their taxes. Well, how do you reduce your taxes? You got to sell stock. You got to

[39:57](https://realalpha.app/v/Yp6EggtUBYI/?t=2397) sell stock. But a lot of these folks, two things, they were wrong in one way, which was that they thought the stock was going to come back. Right. And what they ended up doing was what was called a wash sale. They would oftentimes try to sell the shares so they could sort of declare the loss to their wives, in some cases to their friends. By the way, John Raskob, who created the Empire State Building, was doing this with his friend Pierre DuPont. They did the same thing. By the way, Thomas Lamont's son was involved in these shenanigans. Everybody was trying to figure out a way to create a wash sale of their of their stock and i will i will leave you the reader to find out what happens to charlie mitchell because it is to me one of the wildest things i had ever seen and i didn't know fully the the whole story because it becomes almost like a family drama yeah uh about all right what happens we'll leave that to people to read all right so after i read your book i decided to do some research on all the theories about the great depression yes so I'm going to – I'm going to list them.

[41:08](https://realalpha.app/v/Yp6EggtUBYI/?t=2468) OK. OK. So number one, Keynesianism. By the way, I happen to think that one of the problems as to why the crash eventually became a depression is that there was so little understanding of economics at the time. They literally didn't know what to do because they didn't understand what it was really all about. Today we have a much better understanding, thank God. So Keynesian argues the crash caused underconsumption. The people did not have the Keynesian theory for the government to supplement it. So it just collapsed. That's one. And there's the monetarist one. Fed screwed up and did not flood the system with liquidity after it happened.

[41:48](https://realalpha.app/v/Yp6EggtUBYI/?t=2508) So they stood there and they let the banks fail. By the way, that's a great scene in It's a Wonderful Life. You actually watch a bank failure. Best bank failure in movies. That's two. Three is the Austrian view, which is the boom was credit fuels and then credit disappeared. Then you have my favorite man, Andrew Mellon, who we haven't talked about, who was secretary of the Treasury. He's the only guy who was standing there saying, this is good. Let everybody suffer. Let everybody die. Let everybody get liquidated and suffer, and then we'll come back. A true capitalist. A true capitalist. Let him eat cake, literally.

[42:25](https://realalpha.app/v/Yp6EggtUBYI/?t=2545) And if there is no cake, let him starve to death. Those are the big ones. Where do you think? 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. 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.

[43:18](https://realalpha.app/v/Yp6EggtUBYI/?t=2598) 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. 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.

[44:04](https://realalpha.app/v/Yp6EggtUBYI/?t=2644) 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,

[44:19](https://realalpha.app/v/Yp6EggtUBYI/?t=2659) **Andrew Ross Sorkin:** 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. 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.

[45:11](https://realalpha.app/v/Yp6EggtUBYI/?t=2711) 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. 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.

[45:52](https://realalpha.app/v/Yp6EggtUBYI/?t=2752) 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? i don't know how much i would draw between the two books so much as one of the things and this was not something i expected as i was working on this is how much i found things that were happening in 1929 that felt very 2025 ish like what so if you think about the 1920s as this sort of revolution in finance. And there were all of these new products, investment trusts, folks are creating the equivalent of mutual funds, investment pools. There's all sorts of things that are happening in the investment community. It seems to me, and I don't think I, again, this was not my intent, and I'm not suggesting we're on the precipice of another 1929. But

[46:52](https://realalpha.app/v/Yp6EggtUBYI/?t=2812) **Andrew Ross Sorkin:** But here we are in this moment where, you know, private credit has all of a sudden become the thing.

[47:00](https://realalpha.app/v/Yp6EggtUBYI/?t=2820) Private equity and venture capital are about to be made available to us in 401k plans. Right. People are tokenizing private company, you know, stakes in private companies. So they can trade them. So they can trade them. They're buying them in, you know, special purpose vehicles and then they're chopping them up and who knows what. But, you know, the crypto guys are creating these, you know, the equivalent of investment trusts. I mean, if you look at, you know, micro strategy now called strategy is kind of like an investment trust, designed to just buy crypto. They raise capital and they buy crypto.

[47:37](https://realalpha.app/v/Yp6EggtUBYI/?t=2857) And it's leveraged. Right. And back in the 1920s, that's what an investment trust was. And it became a Russian doll. Right. Because it was leveraged. Unleverage. Unleverage. Unleverage. Unleverage. Yeah. And so I look at those things. Again, I'm not suggesting we are there. I don't know what you'd be doing with your money these days as it relates to shorting the market or being long the market. But I think there are things that are happening that we need to pay attention to. And I'm actually hoping – again, this was not the goal of this book when I went into it. But I am hoping that as people think about some of these things that were happening then, they relate them to some extent to what's going on now and say, OK, we got to keep our eyes on this.

[48:23](https://realalpha.app/v/Yp6EggtUBYI/?t=2903) I just want to end with the moment in Too Big to Fail, which I thought was very important to me. And in some sense, if it wasn't so tragic, it was actually comedic. So the mistake that I made and my team made as investors in 2008 was we knew how bad it was. But we actually thought it's so bad that surely the government knows how bad it is and they're going to come in here at any point and deal with this. And that was our actual mistake, why we didn't short everything that moved. And there's a moment in your book when I read it, I said, oh, my God, I was wrong. And the moment is it's right after Lehman weekend.

[49:07](https://realalpha.app/v/Yp6EggtUBYI/?t=2947) So that's Sunday. Yeah. Market opens up like a sewer on Monday. It kind of stabilizes. And then Tuesday, AIG begins as AIG. I remember it. Like yesterday. You have a scene in your book. I'll paraphrase. It's sort of like all the important people are in the room where it happens. And somebody walks in the room and says, AIG's in trouble. Right. And everybody's like, what do you mean AIG's in trouble? And my reaction was, don't you morons read the research? It's like, you just pick up a cell site research, you know, immediately. but they didn't know they just said no they really didn't know they didn't appreciate the depth i think of the they had no clue the problem and i think unfortunately they were dealing with so many dominoes yeah that they were so focused you know on lehman brothers prior to that they were that same weekend they were dealing with uh merrill lynch i don't think they could have the bandwidth what was really happening they were focused on what was gonna happen with morgan stanley and goldman sachs next right the whole they would have been next right but the whole idea that there was like this insurance business that just didn't even like... They can compute it. Compute what was happening to them.

[50:15](https://realalpha.app/v/Yp6EggtUBYI/?t=3015) Andrew, thank you. That was a great interview. Thank you. It was a lot of fun. I really appreciate it. Wonderful book. Everybody should read it. Thank you. This podcast is for informational purposes only and does not constitute investment advice. The hosts and guests may hold positions in stocks discussed. Opinions expressed on their own and not recommendations. Please do your own due diligence and consult a licensed financial advisor before making any investment decisions.