PDF Summary:1929, by Andrew Ross Sorkin

In October 1929, the most powerful bankers in America pooled $240 million to stop a stock market crash—and failed. What followed was a decade of economic turmoil known as the Great Depression. In his book 1929, New York Times financial journalist Andrew Ross Sorkin argues that this disaster is widely misunderstood. The crash didn’t happen in a single catastrophic day, and it needn’t have led to what came after. It was just the first in a chain of policy failures and human miscalculations, each making the next one worse.

At the center of Sorkin’s analysis is the idea that when an entire culture embraces debt with few rules, the system looks invincible right up until it shatters. Our guide reorganizes Sorkin’s narrative of the 1929 crash to examine his arguments about its causes and effects and test them against competing perspectives on the 1920s’ boom and what followed. We’ll also connect his analysis to research on where the next crisis is most likely to come from.

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(Shortform note: Interest rates are such a powerful but blunt tool for the Fed to wield because virtually everything in a modern economy runs on borrowed money: Manufacturers borrow to invest and expand, homeowners borrow to buy houses, farmers borrow to plant crops, and governments borrow to build roads. When the Fed raises its benchmark interest rate—the rate banks charge each other for overnight loans—it raises borrowing costs for all of these actors simultaneously. This is why, when the 1929 Fed contemplated raising rates, it faced a dilemma: Cooling the market would have meant cooling everything else too, including an agricultural sector that was already struggling and a manufacturing economy that was still growing.)

Mitchell, the head of National City Bank whom we mentioned earlier, defied the Fed’s warning against lending money for stock market speculation. In March 1929, when the Fed’s public campaign spooked the market, Mitchell announced that his bank would step in and lend money directly to investors, and the market immediately recovered. His message was unmistakable: The central bank’s warnings didn’t matter. Senator Glass was furious, coining the term “Mitchellism” to describe Wall Street’s defiance of the public interest.

A Collective Action Problem

Glass’s fury at “Mitchellism” was, in part, directed at the wrong target. When Mitchell said that National City would keep lending, he was doing what any competitive banker would do. This is what political scientists call a collective action problem: a situation in which individually rational choices produce outcomes that are bad for everyone. Even if Mitchell personally believed that margin lending was getting out of hand, stopping his bank would simply have transferred those customers to competitors who were still lending. Garrett Hardin’s 1968 essay “The Tragedy of the Commons” noted that when a shared resource is open to everyone, rational actors will overuse it, even when each can see the damage being done.

In the late 1920s, the shared resource being depleted was the stability of the financial system itself. Each bank lending on margin added a small amount of fragility to the whole, but the costs of that fragility were distributed across society while the profits went to the individual lender. Political scientist Elinor Ostrom, who won the Nobel Prize for her work on this problem, showed that voluntary collective restraint can work—but primarily in small, tight-knit communities where bad actors are quickly identified and socially sanctioned. The 1920s credit boom was the opposite: It involved thousands of lenders and millions of borrowers, and there was no mechanism to hold someone like Mitchell accountable for ignoring the Fed.

By the fall of 1929, every element of the tinderbox Sorkin identifies was in place. The economy was genuinely growing, and the technological innovations were real. The optimism that sustained it all wasn’t irrational—but Sorkin argues that leverage turns even rational optimism into a source of catastrophic risk. The only question was what would happen when confidence broke.

The Crash: Why the System Broke

In the popular imagination, the crash of 1929 was a single catastrophic day: The stock market collapsed, fortunes were lost, and the Great Depression followed. Sorkin argues that virtually every element of that picture is wrong. The crash unfolded over weeks, not hours. It was driven by structural forces, not just panic. And it did not, by itself, cause the Depression. In this section, we’ll look at the three forces Sorkin identifies as driving the crash: a spiral of forced selling created by leveraged borrowing, a technological breakdown that left investors unable to make informed decisions, and the failure of every institution that tried to stop the bleeding.

The Leverage Spiral

By the fall of 1929, some of the economic signals that had sustained investor optimism had turned negative. Factory output declined, freight shipments fell, and a few experts warned that stock prices had risen beyond what the underlying businesses could justify. But seven years of nearly uninterrupted growth had made investors dismissive of bad news, and reassurances drowned out the skeptics. (Shortform note: A stock’s price reflects what buyers and sellers collectively agree a company is worth at any given moment. If more people want to buy a stock than sell it, the price rises; if more want to sell than buy, it falls. Stock prices therefore shift constantly based on new information, expectations, and emotion.)

Prices began to slip in October as more investors started selling than buying. Ordinarily, this might have been a healthy correction, but the lending that had powered the boom turned it into a catastrophic chain reaction. As stock prices fell, brokers issued margin calls, asking investors for cash to cover their loans. Most couldn’t pay, so brokers sold their stocks at whatever price they could get. The selling pushed prices down further, which triggered more margin calls, which led to more selling. Each round of liquidation made the next one worse. Sorkin emphasizes that investors weren’t selling out of fear—many had borrowed to the maximum to fund their investments and had no choice.

From Margin Accounts to Crypto: The Forced-Selling Problem Persists

When a broker issues a margin call, the clock starts ticking, and if the cash isn’t there, your stock must be sold. In stock markets, US regulations now cap borrowing for ordinary investors at a one-to-one ratio, mitigating this problem somewhat. But institutional traders can access higher leverage, and margin debt in US brokerage accounts reached $1 trillion for the first time in mid-2025. This figure understates the true scale of borrowed money: Regulators can only count loans made by the brokerages they oversee, not loans that banks extend directly to hedge funds. One analysis estimated these untracked loans at an additional $4.5 trillion in early 2024.

In cryptocurrency markets, the situation is more dramatic. Some exchanges offer leverage of up to 125 times a trader’s own capital, more than 10 times the ratios that seemed reckless in the 1920s. Crypto largely falls outside the rules that govern stock brokers, because while stocks and bonds are “securities”—investments in a company’s future profits—most major cryptocurrencies, including Bitcoin and Ethereum, have been classified as “commodities.” This category also includes gold, oil, and wheat, and it sits outside the SEC’s jurisdiction. A significant share of crypto leverage trading—particularly on offshore platforms—falls under no margin rules at all.

What happens when prices fall is analogous to a margin call: When a leveraged position drops to a threshold, the exchange automatically closes it, creating a cascade that moves faster than any human can respond. For example, on a single day in October 2025, a tariff announcement triggered a massive liquidation: $19 billion in leveraged positions were closed within 24 hours, and 1.6 million accounts wiped out. But there is one difference worth noting: Crypto exchanges typically liquidate positions automatically before they go fully underwater. This means borrowers lose their collateral but don’t generally owe additional money on top of it, as 1929 investors sometimes did after losing their homes to cover stock loans.

Trading Blind

Sorkin argues that a widely overlooked factor made the panic far worse than it needed to be: the technology of the stock exchange itself. In 1929, stock prices were transmitted by ticker tape: an electromechanical system in which clerks on the floor of the New York Stock Exchange manually recorded each transaction—noting the stock, the number of shares, and the price—and transmitted the data by telegraph to ticker machines in brokerage offices, hotel lobbies, and private homes across the country. The machines printed the information on a narrow, continuously scrolling strip of paper. The entire system depended on human beings recording and transmitting data fast enough to keep pace with trading.

When trading volume exploded during the crash, the clerks couldn’t keep up, and the tape fell three to five hours behind actual trading. This information blackout made rational decision-making essentially impossible: Sorkin explains that if you couldn’t see what a stock was currently worth, you couldn’t properly weigh whether you should hold it or sell it. The only safe assumption was that things were worse than the tape showed, which made selling feel like the only prudent option and added to the pressure that was driving prices down. Thousands of people gathered in the streets outside the Exchange during the crash—not to protest, but because they had no other way to find out what was happening to their money.

Why Uncertainty Produced Selling, Not Stillness

Psychologists who study decision-making draw a distinction between risk—where you know the odds of the possible outcomes of a situation—and ambiguity—where you don’t know the odds. Research going back to economist Daniel Ellsberg’s 1961 experiments has consistently found that people don’t respond to ambiguity by waiting for more information, but by taking whatever action feels safest given what they can’t know. In a falling market with unreadable prices, that action is to sell. What made the ticker delay so destructive was that it converted ordinary risk into ambiguity, and ambiguity into a systematic pressure to exit.

While Sorkin contends that the ticker delay prevented rational decision-making, investors’ response to the ambiguity wasn’t panic in the irrational sense: A 2019 study found that people facing unknown odds actually make more careful, calibrated choices than those facing known ones, suggesting that the 1929 sellers were reasoning carefully from the information they had. Instead, the problem was structural: Each person’s individually rational decision to sell became a signal to the next trader. This creates what researchers call an information cascade—a chain reaction in which traders abandon their private assessments in favor of what they see others doing, until no new information enters the system at all.

The Failed Rescue

On October 24, 1929, the selling became so intense that some stocks had no buyers at any price. A senior partner at J.P. Morgan (then the most powerful private bank in the country) convened a meeting of the heads of the five largest banks and convinced each bank to commit millions of dollars to a coordinated rescue. A representative went to the trading floor to make theatrical purchases: At the post where traders bought and sold US Steel—the stock seen as a bellwether for the market—he placed an order for 10,000 shares at a price well above the current bid. He continued from post to post, intentionally overpaying to send a public signal that the most powerful institutions in the country still believed these stocks had value.

(Shortform note: Steel’s centrality to the 1920s economy has no modern analogue. US Steel was founded in 1901 as a merger of the Carnegie Steel Corporation and nine other companies. At its peak, it dominated steel production, accounting for nearly two thirds of everything the US made. Steel formed the literal skeleton of industrial life: It went into skyscrapers rising over Manhattan, railroads knitting the continent together, automobiles filling the new roads, and bridges spanning the rivers. Of all the major industries, iron and steel posted the sharpest production gains in the first half of 1929, so by purchasing shares of US Steel, the most powerful bank in America was declaring this industrial economy was sound.)

The effort worked—briefly—and the selling slowed. But the relief lasted only days. On Monday, October 28, and Tuesday, October 29, selling picked up with even greater force. The bankers’ rescue fund, which had grown to roughly $240 million, accomplished almost nothing. Sorkin argues that the financial system had outgrown the scale at which any private rescue might be feasible: The market now involved millions of participants and billions of dollars in leveraged positions. Once confidence broke, no group of bankers could restore it. By mid-November, the market had lost roughly half its value from its September peak, erasing approximately $50 billion, equivalent to about half the country’s annual economic output.

Too Big to Bail Out

Sorkin argues that by 1929, the financial system had grown too large for any private group of bankers to stabilize it. A useful way to see this is through the market-cap-to-GDP ratio—a measure of the total value of all publicly traded stocks relative to the size of the overall economy. When that ratio is high, the stock market has grown far larger than the productive economy underneath it; when it falls, it signals that stock prices have contracted relative to real economic output. Before the 1929 crash, the ratio stood at roughly 115%. In January 2026, it exceeded 200%—meaning the US stock market, at approximately $69 trillion, was for the first time worth more than twice the entire annual output of the American economy.

Against that backdrop, the math of a private rescue no longer works. When Morgan died in 1913, his estate was valued at $118 million—about 0.3% of US GDP at the time. That fraction was enough to matter in a financial system concentrated among a small number of New York institutions. By 1929, the ratio of market value to GDP had more than doubled, and the $240 million the five-bank coalition assembled was dwarfed by the billions in leveraged positions it was trying to stabilize. Today’s wealthiest people—with fortunes in the range of $100 to $200 billion—command more in absolute terms than Morgan ever did, but the market they’d need to rescue is thousands of times larger. No private intervention is mathematically feasible.

There’s also a structural problem: Most billionaires’ wealth today is concentrated in the stock of one or two companies, the very assets that would collapse in a crash. Selling billions in shares to buy the broader market would itself accelerate a panic. And in practice, today’s ultra-wealthy are already moving in the opposite direction: The wealthiest investors have been reducing their public equity exposure and shifting into private markets, real estate, and alternatives. When markets sell off, these investors’ advisors look for tax benefits in the decline—not opportunities to prop up prices. In other words, the same market that mints billionaires is one they can’t be called upon to rescue.

The Aftermath: How a Crash Became a Catastrophe, and How America Responded

Sorkin argues that the crash of 1929, devastating as it was, needn’t have led to the Great Depression. By the end of 1929, the market had partially recovered and closed the year down 17%. A comparable decline in 1920-1921, when the market fell 33%, had been followed by years of growth. What made 1929 different was what came after the crash: a chain of policy failures, some born of ideology, some of political paralysis, and some of ignorance. In this section, we’ll trace the decisions that turned the crisis into a catastrophe, examine how regulatory reforms emerged, and consider Sorkin’s argument that the crash is instructive about financial systems in general—and those of the 2020s in particular.

(Shortform note: For most of the 20th century, economists assumed that a crash as severe as 1929’s would naturally produce a depression. That changed in 1963, when Milton Friedman and Anna Schwartz published A Monetary History of the United States, arguing that what turned a recession into a catastrophe wasn’t the crash but a series of avoidable mistakes by the Fed. The 1920–21 comparison Sorkin invokes is the strongest piece of supporting evidence for this view: That downturn saw industrial production fall by over 30%, wholesale prices fall by nearly 46%, and the stock market drop by 47%—all worse than the early months of 1929—yet the economy recovered completely within 18 months and launched the Roaring Twenties.)

The Policy Failures

The first mistake that deepened the crisis was a fundamental misdiagnosis at the top. President Herbert Hoover thought the economy was healthier than people felt it was, and that their confidence could be restored. He also saw downturns as natural corrections that the market would resolve, and his Treasury Secretary took this to its extreme, urging Hoover to let businesses fail, let wages fall, and let the economy find its own bottom. Hoover did act—he cut income taxes, increased public works spending, and asked business leaders to pledge to maintain wages. But the federal budget Hoover could influence was tiny relative to the economy, and his efforts were too small to offset a collapse in private spending and lending.

(Shortform note: When Hoover responded to the Depression, he wasn’t naive or indifferent, but deploying the playbook that had made him the most credentialed crisis manager in America. When the Great Mississippi Flood of 1927 devastated seven states, six governors requested Hoover to lead the federal response. His performance justified their confidence: The relief operation he orchestrated became a model of large-scale emergency coordination. But where the flood was a logistics problem—visible, bounded, and solvable by coordinating resources, projecting confidence, and rallying volunteers—the Depression was a different kind of crisis: invisible, systemic, and made worse by the very confidence-projecting Hoover was so good at.)

The second policy failure was the tariff disaster. Sorkin explains that in June 1930, despite fierce opposition from economists, bankers, and many in his own party, Hoover signed the Smoot-Hawley Tariff Act, which raised import duties on more than 20,000 foreign goods to nearly 60%. Sorkin reports that even Hoover considered the bill extreme, but he signed it under pressure from congressional Republicans who wanted to protect domestic industries. The consequences were swift and devastating. Other countries retaliated with their own tariffs, international trade collapsed, and American farmers—who depended on export markets—were hit especially hard. The tariffs choked off one of the few remaining sources of economic vitality.

How Tariffs Work—and When They Don’t

A tariff is a tax on imported goods, paid by the importer when those goods cross the border and typically passed along to consumers in the form of higher prices. The appeal of tariffs is straightforward: By making foreign goods more expensive, they encourage people to buy domestic ones instead, which can protect jobs and industries at home. But Smoot-Hawley illustrates the most reliable danger of aggressive tariffs: retaliation. The US raised import duties in 1930 across thousands of product categories, and within two years, world trade had contracted by two thirds as country after country imposed retaliatory tariffs of their own.

There’s also a less visible cost embedded in any tariff: Protecting one industry raises costs for every other industry that depends on it as an input. A Harvard analysis found that steel-consuming jobs outnumber steel-producing jobs by as much as 80 to 1, meaning the workers put at risk by higher input costs can far exceed those the tariff was designed to protect in the first place. This asymmetry—concentrated benefits for a specific industry and diffuse costs spread across the rest of the economy—is precisely what makes tariff policy so persistently controversial, and so difficult for governments to get right.

As the tariffs strangled international trade, the Fed made what Sorkin sees as the biggest mistake of all: doing nothing. The Fed could have flooded the system with money. But it sat on its hands, constrained by the gold standard, which tied the dollar’s value to a fixed amount of gold and limited the money the government could create. Without support from the Fed, thousands of small banks ran out of cash. When one bank failed, depositors at other banks rushed to withdraw their savings before the same thing happened to them, an event known as a bank run. By 1933, more than 9,000 banks had failed, wiping out millions of people’s savings. Unemployment reached 25%, and the nation’s money supply contracted by a third.

(Shortform note: When the Federal Reserve was established in 1913, Congress wrote the gold standard into its rules: Every dollar the Fed put into circulation had to be backed by a share of gold, and anyone could demand gold in exchange for their dollars. Expanding the money supply would undermine confidence in the dollar’s gold backing, and the lower interest rates that would follow would prompt investors to move funds abroad. That said, some experts agree with Sorkin that the constraint wasn’t as absolute as it appeared: The Fed had substantial gold reserves in hand, and Congress would show in 1932 that the legal constraints weren’t unavoidable, passing legislation that freed additional collateral to allow a significant monetary expansion.)

Finally, a dangerous interregnum occurred between Hoover’s defeat in the November 1932 election and Franklin Roosevelt’s inauguration in March 1933. Hoover wrote to Roosevelt, urging him to make a public statement of reassurance. He believed that only a joint commitment from the outgoing and incoming presidents could restore enough confidence to stop the bank runs. Roosevelt refused: He held that anything that went wrong before inauguration day belonged to Hoover. But Hoover didn’t want to tarnish his legacy by declaring a bank holiday, which would have forced every bank to halt withdrawals and transactions, stopping the panic. The result was weeks of paralysis during which the banking system slid toward collapse.

The Panic That Proves Itself Right

Bank runs are dangerous because they don’t require a bank to be insolvent—they just require enough people to believe it might be. Banks don’t hold all their deposits in reserve: They lend most of them out, so no bank can satisfy a sudden demand for cash from all its depositors. Douglas Diamond and Philip Dybvig formalized this logic in 1983, showing that a bank run is triggered not by financial reality but by expectations for other people’s behavior. People withdraw their money based on the fear that everyone else is doing the same conclusion, and their collective action produces the very insolvency they’re trying to avoid.

This is what made the four months of inaction between Hoover’s defeat and Roosevelt’s inauguration catastrophic. Congress later recognized the length of the interregnum as a vulnerability: The Twentieth Amendment, ratified in 1933, moved inauguration day from March 4 to January 20 to ensure no future crisis would fester in a leadership gap of that length. But bank runs can and do still occur, and they move more quickly than ever thanks to social media. Silicon Valley Bank collapsed in March 2023 when customers attempted to withdraw $42 billion, more than twice what Washington Mutual’s depositors pulled out over 10 days during the 2008 crisis.

The Reckoning and Reform

Roosevelt’s inauguration marked a turning point: In his inaugural address, he cast blame squarely on Wall Street. Two days later, Roosevelt declared a national bank holiday, which shut down every bank in the US and gave regulators time to determine which institutions should reopen. Meanwhile, the political momentum for reform had begun to build, driven by Senate hearings led by a former prosecutor, Ferdinand Pecora. Pecora zeroed in on Charles Mitchell (the former head of National City Bank) as his primary target, realizing that exposing misconduct at the country’s most prominent bank would grab the public’s attention.

(Shortform note: Pecora’s strategy worked not because he educated the public about finance, but because he gave people something simpler and more satisfying: a face to attach to their anger. Sociologist Émile Durkheim argued that when disaster strikes, we need to assign blame to someone to make sense of our shared suffering. Pecora’s achievement, as Michael Perino documents in The Hellhound of Wall Street, was an act of translation: He converted years of vague public fury about Wall Street into specific facts that anyone could understand and no one could dismiss. The public didn’t need to understand the mechanics of the economy or monetary policy to grasp that the people who had run the system had written its rules in their own favor.)

The hearings revealed a pattern of self-dealing that shocked the public. Mitchell had received compensation of $3.5 million between 1927 and 1929, a figure that landed with force in 1933, when millions of Americans were out of work. He’d engineered a sham stock sale to his wife to cut his tax bill. His bank had created a loan fund for executives to buy company stock at favorable prices after the crash, and when those executives couldn’t repay the loans, the bank quietly wrote them off. Pecora also turned the hearings on J.P. Morgan, showing that the firm’s partners paid zero income taxes in 1931 and 1932, and that the bank had offered discounted stock to powerful politicians and business leaders, a practice that amounted to bribery.

How Pecora Chose Who to Blame

Pecora’s strategy was to blame the crash on the most prominent people on Wall Street, subpoenaing bankers and relying on the scandal to dominate the news cycle and build pressure for reform. It worked, but it also meant his targets were chosen for their fame, not the uniqueness of their wrongdoing. His investigation found the same pattern across institutions: bankers enriching insiders, manipulating stock prices, and exploiting tax rules that rewarded losses. Mitchell was the face of the scandal, but he wasn’t the worst offender by Pecora’s reckoning, a distinction belonging to Albert Wiggin, head of Chase National Bank.

While Wiggin publicly joined other bankers to prop up the market, he privately used a Canadian shell company to short-sell more than 42,000 shares of his bank’s stock, pocketing $4 million. Yet Mitchell, not Wiggin, became the symbol of Wall Street’s corruption because Mitchell was more famous. Pecora’s treatment of J.P. Morgan was similarly expedient: Morgan’s partners paid no income taxes in 1931 and 1932, a fact that landed like a bombshell in the hearing room. But there was a mundane explanation—the crash had wiped out the firm’s profits entirely, cutting its net worth nearly in half, and there was genuinely nothing left to tax.

The outcry prompted by the Pecora hearings gave Congress the political impetus to pass sweeping reforms. The centerpiece was the Glass-Steagall Act of 1933, which did two things: First, it required banks to choose between commercial banking (taking deposits and making loans) and investment banking (underwriting and trading stocks and bonds). The logic was that ordinary people’s savings shouldn’t be put at risk by speculative trading. Second, the law created federal deposit insurance: a government guarantee that if a bank failed, depositors would get their money back, up to a set limit. Henry Steagall of Alabama had insisted on this provision, arguing it was the only way to end the bank runs that had devastated the country.

The Line That Keeps Moving

Glass-Steagall’s solution was to draw a line between the money people could afford to lose and the money they couldn’t, but economists and policymakers have debated how to hold that line. In 1994, Randall Kroszner and Raghuram Rajan showed that the conflict-of-interest story that Glass-Steagall’s firewall was built upon wasn’t supported by the pre-1933 evidence. The bill’s sponsors had argued that when a bank both made loans to a company and helped that company sell stocks and bonds, the bank had an incentive to push low-quality securities onto investors to pay off bad loans. But before 1933, banks doing both jobs had actually issued securities that defaulted less often than those issued by investment banks.

Congress ultimately concluded that the firewall, at least in the form Glass-Steagall envisioned it, was no longer necessary. In 1999, it passed the Gramm-Leach-Bliley Act, which allowed commercial banks and investment banks to affiliate under the same holding company. What followed—the 2008 financial crisis—divided economists. For example, Joseph Stiglitz said the merger of the two types of institutions allowed a culture of aggressive risk-taking to spread into what had been conservative banks, directly contributing to the 2008 crisis. Conversely, Ben Bernanke argued that the activities that precipitated the crisis were never regulated by Glass-Steagall to begin with, as Lehman Brothers and Bear Stearns were investment banks.

Both the Glass-Steagall firewall and its repeal illustrate the difficulty Sorkin cites: The rules designed to protect ordinary people from speculative risk are subject to the same pressures that created the risks in the first place. Deposit insurance is no different. Henry Steagall insisted on it over the objections of Roosevelt and Glass, both of whom worried that guaranteeing deposits would give banks a license to take reckless risks, since neither the bank nor its depositors would bear the full consequences of failure. Steagall won the argument, but economists have since confirmed that deposit insurance tends to encourage risk-taking in good times, even as it prevents bank runs in bad ones.

Sorkin complicates the heroic narrative that typically accompanies accounts of the new reforms by explaining that key provisions of Glass-Steagall were shaped by rivalries among banks, not by legislators acting in the public interest. The head of Chase pushed for the strictest possible separation of commercial and investment banking not out of concern for depositors, but because it would cripple Chase’s chief rival, J.P. Morgan, whose business model depended on combining both functions. Sorkin also reports that Glass himself maintained a secret correspondence with a Morgan partner who helped shape the bill.

(Shortform note: The reforms that reshaped American finance may have been driven less by corruption than by something harder to guard against: sincere convictions that happened to serve the people holding them. Psychologists note that self-interest doesn’t override the reasoning process so much as bias it, shaping what a person notices, what they find convincing, and what sticks in memory—all without any subjective sense that something has gone wrong. The Chase executive lobbying for strict separation didn’t need to think of himself as sabotaging a rival. His concrete stake in the outcome could have made the conclusion that it was right to separate commercial and investing banking feel more available and more persuasive.)

The Warning: The Lessons of 1929

Finally, Sorkin steps back to ask what the crash and its aftermath reveal about financial systems in general and about the century that followed. He argues the parallels between the 1920s and 2020s are striking. In both eras, technology created excitement that spilled over into speculative frenzy, and the government’s posture was one of deregulation. Sorkin is concerned about leverage: Cryptocurrency investors are borrowing to buy digital assets, and private firms account for a large share of lending, operating without the disclosure requirements or capital reserves of banks. No one knows how much leverage has built up or how interconnected the risks are, an informational vacuum that echoes the opacity of the 1920s market.

(Shortform note: Sorkin’s concerns about crypto leverage and shadow banking are shared by major financial institutions, but are only some of the risks experts are watching. In October 2025, the IMF flagged three areas of concern: the possibility that valuations of AI-related companies—chip manufacturers, cloud providers, and AI platforms—could correct and drag markets down with them; the strain that rising government debt is placing on bond markets, where investors could demand higher interest rates and raise borrowing costs across the entire economy; and the increasingly close ties between regulated banks and their less-scrutinized nonbank counterparts, including private credit funds, hedge funds, and private equity firms.)

The financial system today has safeguards that didn’t exist in 1929—the SEC, deposit insurance, capital requirements for banks, and a Federal Reserve that has learned from its earlier passivity. But Sorkin argues that safeguards aren’t enough because the force that drives financial crises is human, not structural. During a boom that produces self-reinforcing optimism, people lose their ability to distinguish good risks from bad ones. Those at the top of the system—in government and in finance—are no less susceptible. The antidote he proposes is humility. Each era of prosperity makes us think we’ve learned from history and can’t be fooled again. Then it happens again—just as it happened in 1929.

(Shortform note: Sorkin’s warning points to a practice economists call regulatory arbitrage: Each time regulators close one avenue for risk-taking, the money finds another. The deeper problem, identified decades ago by economist Hyman Minsky, is that stability itself breeds the conditions for the next crisis. During long periods of calm, borrowers and lenders alike grow less cautious, and the financial system shifts away from types of borrowing that cash flows can service toward borrowing that depends on the assumption that assets will continue to rise in value. Sorkin’s proposed antidote of humility may be fighting against something structural: The success of safeguards like the SEC and deposit insurance makes it hard to see the next crisis coming.)