Panic on Wall Street: A History of America's Financial Disasters

by Robert Sobel

The financial panics analyzed in this book illustrate the complexity of such events and that the causes are political, military, economic, and even psychological.

Genres: Business, Banking, History, Finance, Nonfiction

480 pages, Paperback

First published January 1, 1968

About the author

Robert Sobel was an American professor of history at Hofstra University, and a well-known and prolific writer of business histories. He was also a chess Master, who represented the United States at the 1957 and 1958 Student chess Olympiads; he defeated thirteen-year-old future World Champion Bobby Fischer at Montreal 1956.

Despite his prolific writings in business history, he is most famous for his single novel, For Want of a Nail, an alternate history of the United States.

Reviews

[Jon · Rating 3 out of 5]

It seems that the story of Wall Street has remained the same since it started around 1790: There've been a lot of people who've lose their wits at the prospect of striking rich quick. It's the nature of speculation, isn't it, and it's perhaps the reason why we need more criticism of the root of Wall Street.

Panic on Wall Street starts out by explaining that root. Men like Washington, Jefferson, and Madison all invested their money in land, commerce, and joint stock companies, but they weren't interested in trading securities for the sake of trading securities. "Paper speculations," they called it. Essentially, they liked the idea of investing in projects they thought were important and beneficial, but they seemed to think it was immoral to just move paper around in the hope of striking it rich. I think there's something to that.

The book details 12 Wall Street panics since 1792, and nearly every panic showcases the lives of rich or (supposedly) brilliant men who were devastated in the panics, William Duer, Nicholas Biddle, and Philip Hone among them. It's amazing to see so many people so assured of their wisdom they think they can outguess the irrationality of crowds.

Three interesting tidbits:
1) The ship SS Central America was carrying 30,000 pounds of gold when it sunk in 1857, sparking a worldwide financial panic (black swan).
2) The ties between Washington and Wall Street were at times equally corrupt as today, which will probably always be the nature of a business where insider information equates to more money.
3) Sobel, the author, expressed dismay at the level of leverage in 1929, saying "It was conceivable that a buyer would put down $10 for $100 worth of stock, which itself represented $10 in equity and $90 in debt!" That is, the leverage would sometimes reach 10 to 1, stacked on 10 to 1. In the recent 2008 financial crisis (long after this book was published) leverage hit 30 to 1 and 40 to 1. Lesson, in a sentence: Wall Street seems incapable of learning from panics, thinking that this time is different.

[Paul Gibson · Rating 5 out of 5]

A very well written book that stays on topic. This is an older book; published in 1968. I chose this book because many more recent books were obviously written from a certain perspective, with the intent to prove a point. I didn't want to read a book that supports a certain perspective (even my own perspective). To read a book unaware of current history turned out to be a good choice for me.
One thing I didn't expect, but came to understand through reading the book, was that fact that almost nothing is said about the great depression. Keeping on topic, the author's main discussion was about the panic of 1929 and not the depression that followed a couple years later. The book speaks rather narrowly about the relation (or lack thereof) between the panic and the depression and doesn't go much beyond this. All in all, it is a very good book.