1929: Inside the Greatest Crash in Wall Street History--and How It Shattered a Nation

by Andrew Ross Sorkin

He linked human progress directly to the invention of newer, smarter financial instruments. Weeks earlier his own bank had come up with an innovative scheme to finance building construction through the sale of stock instead of through traditional mortgages. For his peers on the board of the Fed, ideas like these were too radical.

He linked human progress directly to the invention of newer, smarter financial instruments. Weeks earlier his own bank had come up with an innovative scheme to finance building construction through the sale of stock instead of through traditional mortgages. For his peers on the board of the Fed, ideas like these were too radical.

“Dr. Schacht, don’t take this exceptional incident so seriously,” Sarnoff told him. “I can offer some comfort in this matter. After all, you’re an amateur in the area of prejudice, but I have had two thousand years of experience with it. Besides, your people are not free from such feelings, either.” Schacht bristled. There was no racial prejudice in Germany, he insisted. The conversation had become a minefield, threatening to undo their hard-won progress. But Sarnoff didn’t back down. “Germany is the cradle of anti-Semitism,” he said, citing the burgeoning Nazi movement. As they argued, Schacht suddenly stopped and stared at Sarnoff. “Do you speak Hebrew?” he asked. “No,” Sarnoff replied, “but I understand it, because I studied the sacred books in my boyhood.” “Well, I’m not a Jew,” Schacht said, “but I do speak it.” In excellent Hebrew he began to recite the opening verses of Genesis. Astonished, Sarnoff learned that Schacht had earned his doctorate not in economics, as most people thought, but with a thesis on the Hebrew language.

“One of the most dangerous aspects of the new order: great numbers of talented men and women spend their days and nights thinking only of statements about cigarettes, deodorants, sanitary paper, automobiles and movie actresses,” Josephson wrote in a typical passage. “The progressive cultural stupefaction of such a numerous educated class is itself a major tragedy.” That article was published on June 5, 1929, when the stock market was on one of its last sprints. By 1930 such rueful sentiments were starting to appear everywhere in the press.

Eventually, Hoover settled on the position that outside remedies would only make the financial situation worse. “Economic depression cannot be cured by legislative action or executive pronouncement. Economic wounds must be healed by the action of the cells of the economic body—the producers and consumers themselves,” he said. Yes, the 1929 crash had revealed serious flaws, but the fixes for those flaws lay within the market itself. The uptick in production numbers in the fall of 1930, followed by the revived stock market, served to validate the laissez-faire approach. After the dreadful Bank of United States spectacle, the banking system appeared to be holding steady…at least for now.

As a fellow Democrat, Glass had duly supported Roosevelt—what choice did he have, really?—but he found dealing with the man was a frustrating experience. You never knew where he stood. Everything was political. Glass wasn’t even sure he could convince Roosevelt to support his bill. But he knew he had to try.

Even the wife of the Fed chairman, Agnes Meyer, now believed the bankers with whom her husband interacted were practically criminals: “Certainly the New York bankers have proved they are no heroes. The wealthy classes as I have learned to know them through the depression are not much to be admired. They are overcome by fear and selfishness,” she wrote in her diary. And that wasn’t all: “If the general public realized the ignorance, smallness, futility and greed of the average New York banker, I think they would certainly hang a few of them,

congregants, “The people of our day need a keener sense of moral direction to keep them from drifting,” decrying the oft-cited explanation “Most everybody does it, therefore it must be all right.” The reverend, a slender man who spoke deliberately, concluded with a message: “Many of us achieve self-approval by cheap and superficial methods, concocting clever excuses to make what we want to do seem admirable,” he said, “so that we can condone our actions and like ourselves.”

The case ensnared the studiously careful Lamont, who had managed to maintain his impeccable reputation until that moment. (Years later, his reputation took a hit thanks to his friendship with Mussolini.

His attraction to men in power reportedly even caused him to ask a senior German official, “Just what sort of fellow is Hitler? Is he the sort you’d go fishing with?” The reply: “My dear Lamont, he is the nicest fellow in the world—always making jokes. You couldn’t ask for a more delightful companion.”)