Preet Bharara:

From CAFE and the Vox Media Podcast Network, welcome to Stay Tuned. I’m Preet Bharara.

Andrew Ross Sorkin:

Most of us have seen pictures of all the sort of thousands of people that look like throngs of people outside of the New York Stock Exchange on those days. You’d see those front pages of the paper from the crash. They had all come down there from all parts of the country, frankly, to try to understand what was happening to their money.

Preet Bharara:

That’s Andrew Ross Sorkin. He’s a financial columnist for The New York Times, co-anchor of Squawk Box on CNBC, and the author of Too Big to Fail, a sweeping account of the 2008 Financial Crisis. Last month, he released his long-awaited second book, 1929: Inside the Greatest Crash in Wall Street History – and How It Shattered a Nation. Drawing on eight years of research and access to never-before-seen historical documents, 1929 is a vivid, deeply reported account of the most devastating financial crash in history told through the eyes of the bankers, policymakers, and investors who lived through it. Then I’ll answer your questions about the legality of potential US military action in Venezuela and explore the history of the oath of office. That’s coming up. Stay Tuned.

What can the 1929 stock market crash teach us today? New York Times columnist and author, Andrew Ross Sorkin, says the lessons are more relevant than ever. Andrew Ross Sorkin, welcome back to the show.

Andrew Ross Sorkin:

Great to be back. Nice to see you, sir.

Preet Bharara:

Do we still use all three names? Because I know you as Andrew Ross Sorkin.

Andrew Ross Sorkin:

Sure. The truth is it’s my mother’s maiden name. And when I was 18 years old-

Preet Bharara:

Oh, shit. That’s great.

Andrew Ross Sorkin:

… I was a intern at The New York Times and I was going to get a byline. And I went out to lunch with my grandfather, who was still alive, and he said, “Andrew, this is going to be the first and last time you’re ever going to get our name in The New York Times, so you got to use the whole thing.” And that’s why I did it.

Preet Bharara:

So congratulations on your book.

Andrew Ross Sorkin:

Thank you.

Preet Bharara:

I have it here for the YouTube watchers. Very simply titled 1929: Inside the Greatest Crash in Wall Street History – and How It Shattered a Nation. Substantial book. It’s a real book, Andrew.

Andrew Ross Sorkin:

That’s what I was going for.

Preet Bharara:

You’re going … No, look, I want to congratulate you on it. It’s a tremendously useful addition to an area that quite surprisingly doesn’t have as much by way of definitive biography of an incident as you might expect. Because I had assumed, not being a historian of the economy or of Wall Street or of Wall Street crashes in particular, that there may have been many over the course of time. Describe what the landscape was when you decided to undertake this eight years ago.

Andrew Ross Sorkin:

So I became obsessed with doing this in part because I thought there was a white space, if you will, in the history. There was a great book that was written in the 1950s by John Galbraith called The Great Crash. It’s sort of the classic famous book about this period. It was written by Galbraith. And he was an economist. And so it sort of has an economist perspective. He looks at what happened in the context of economic cycles and systems and the like. And he does mention characters, but I always love those stories. Den of Thieves, Barbarians at the Gate, where you really felt immersed like you were in the room.

And I’d read a lot of great biographies of people from this period, but I had never seen them fully populated throughout the entire story, if you will, so that you could actually be there with them as this was all taking place. John Brooks, who’s a famous and wonderful reporter for The New Yorker, wrote a book called Once in Golconda, which really spans early 1920 through 1940, but really approaches this whole period in sort of a different way. There was a great book in the 1970s called The Day the Bubble Burst that was very much focused on the October period and the year of 1929 more than anything else.

Preet Bharara:

Do you remind people it was October 28th, 1929?

Andrew Ross Sorkin:

Well, it’s funny. People always say, “What’s the date?”

Preet Bharara:

What’s the date?

Andrew Ross Sorkin:

It’s not … And that was actually maybe one of the great myths that I was trying to burst once I appreciated it. People talk about Black Thursday, Black Friday, Black Monday, Black Tuesday. It was all of those things. It really wasn’t just one day. In fact, it was sort of a slow motion crash. And the market ultimately fell about 50% from its highs into November of 1929. But interestingly, by the end of the year, the stock market was only down, oddly enough, by about 17%. And The New York Times used to keep a list of its most important stories of the year. And the Great Crash was not on it.

Preet Bharara:

So interesting. Did Warren Buffett buy in the dip?

Andrew Ross Sorkin:

I think Warren Buffett would’ve liked to buy on the dip.

Preet Bharara:

He was probably like 40.

Andrew Ross Sorkin:

But the truth-

Preet Bharara:

In 1929.

Andrew Ross Sorkin:

He’s now 95 years old.

Preet Bharara:

I know. I’m kidding.

Andrew Ross Sorkin:

But I think the truth is actually most people couldn’t buy on the dip. And the reason why the crash was so devastating was that so many people had bought on margin. This was really the first time that ordinary investors had the opportunity to buy into the stock market. And so many of them were doing it with borrowed money, 10 to one. They’d go into a brokerage, put down a dollar, someone would hand them nine or 10 bucks back. And so when the market fell 50%, it wasn’t just that their equities had gone down by 50%, and so they owed 10 times that. And all of a sudden, they were mortgaging and selling their homes.

Preet Bharara:

One of the reasons why the book is so thrilling and a pleasure to read, because it reads like a novel. And as you said, it’s a story or it’s a series of interwoven stories. Let’s start with the story first. I’m going to ask you a very easy question for me to ask. Who’s the dude with the most blame for the crash?

Andrew Ross Sorkin:

The dude who gets the most blame, whether fairly or not, is a guy named Charlie Mitchell. Charlie Mitchell ran a bank called National City, becomes Citigroup. They used to call him Sunshine Charlie. He really invented and popularized the idea of credit and in particular ordinary Americans being able to buy stock on margin through lending, effectively. And he believed that finance should be democratized. And that he used to talk about actually stock should be sold the way we sell a necktie. So he was that guy. For those of you who know New York, his home was where the French Consulate is today on Fifth Avenue between 74th and 75th Street. That was his house and that’s where he lived. And he was this sort of larger-than-life figure during that period. He was probably as famous as a Jamie Dimon of that era, though clearly a lot more risk inclined perhaps than the way Jamie approaches the world.

And on the other side of the story, and it’s actually really one of the reasons I thought that there was a sort of through line that I could propel the story forward with, is a guy named Carter Glass, who I think a lot of people do know, who was a senator in Virginia who ultimately wrote the bill that broke up the banks in 1933. But he really was the Elizabeth Warren of his time. And for so many years in the ’20s, he was railing about this thing called Mitchellism and how Charlie Mitchell was going to upend America because he was creating this speculative of fervor. And you could see these two sort of egos going at it. And so those are sort of two of the main players. And then there’s a couple of others, including Thomas Lamont, who was running JP Morgan. He worked under Jack Morgan, so he didn’t have the CEO title, but he effectively was the ultimate client guy.

He knew every CEO in the world. He would dine with Mussolini and Hitler. And when the US government decided they needed to renegotiate the German reparations after World War I, instead of sending politicians, they sent Thomas Lamont and a bunch of CEOs, which really just demonstrated how finance had eclipsed politics in terms of the import. And then two of my other favorites, one is a guy named John Raskob. He was the Elon Musk of his era. Created the Empire State Building, got super involved in politics, ended up paying off journalists to go after Hoover and undermine his reputation. And to some degree, was a bit of a philosopher king.

He wrote about this idea of trying to create a five hour, five-day work week. Back then, we had a six-day work week. Wall Street was open even on Saturdays. And he had this idea that … Not to be nice to people. But if you had two days off, more people would buy cars and guarding equipment and all sorts of other things. And then of course, there’s Jesse Livermore, who was a short seller. He was maybe … I don’t know if he was the Bill Ackman of his time, but he was a bit of a recluse. And-

Preet Bharara:

Did they have long format Twitter back then?

Andrew Ross Sorkin:

But he was actually … I should say he was more of an emotional wreck than most. And in the end, without giving away the whole book, he ends up killing himself.

Preet Bharara:

What is the ultimate responsibility and accountability for whoever the President of the United States is when the economy turns south? What do you have to say in defense of the President of the United States, Herbert Hoover, upon whom much blame and scorn has been heaped?

Andrew Ross Sorkin:

So I have a bit more empathy for Hoover having undertaken this endeavor over all these years. And Hoover is a big character in this story. And I was able to get access to all sorts of both memos and notes and importantly diaries of some of his close confidants and assistants in the White House during this period. It’s clear to me, A, that would’ve been very hard for Hoover to have prevented the crash unto itself, which is to say he got into office, I think, in March 4th of 1929, so he would’ve had to jump in front of the train pretty quickly. So it’s hard to believe that someone would’ve necessarily been able to do that necessarily. Now, he does make a series of policy errors on the other end that shouldn’t be discounted. Tariffs were among them in 1930, the Smoot-Hawley tariffs. But he also, at one point, raised taxes at possibly one of the worst times.

We were talking about austerity measures and the like. But there’s also the question of just how much latitude he would’ve really had to do anything given the fact that the Federal Reserve was mostly sitting on its hands. And one of the reasons it was sitting on its hands is because it couldn’t really flood the system with money either. We still were on the gold standard, which was another issue that hung over this whole situation. So it wasn’t like you could just go print money tomorrow. And maybe if Hoover, along with the Federal Reserve, had pushed harder to do that sooner, 25% unemployment, which we got to in 1932, and 9,000 banks going out of business in 1933 could have been either prevented or at least made less, less bad.

Preet Bharara:

An impression I get from reading this book and from thinking about other seminal economic events, we kind of had to learn the lesson the hard way. Is that true? Is that true subsequent to 1929, or not?

Andrew Ross Sorkin:

Look, there’s a quote. It’s the epigraph of the book, which is Albert Einstein. And it was a quote that I found that he actually said aloud October 26th, 1929, where he really talks about the idea that every generation has to learn its lesson anew and that actually you can’t learn the lesson just on your own. You actually have to live it. So I do think there’s some truth to that. I think there are certainly measures and lessons that can be taken away from these periods to lessen the impact. So I’ve been asked the question almost every day since this book came out. Are we going to have another crash like 1929?

Preet Bharara:

Yes. I haven’t asked you that question.

Andrew Ross Sorkin:

No, no, but I mentioned only because I like to believe not that it can be avoided completely, but that it’s not preordained that we have to have a crash that’s as painful as what happened in ’29. I think there were things that we learned from that period. I think Ben Bernanke, by the way, learned them when he did his PhD at Princeton on the Great Depression. Ultimately, then took those lessons into practice after 2008 by flooding the system with money, pursuing bailouts as politically as unpopular as they were. But that sort of Keynesian lesson came out of what happened in America in the early ’30s.

Preet Bharara:

Part of what I mean by it’s important to have happened, for us to think about how to deal with the world in 2025, is that to the extent there are people in the world who think regulation in all shapes and sizes and in all forms is bad. It’s useful to remember a time when there was almost no scaffolding of regulation, almost no lattice. Maybe you can sort of remind folks. In 1929-

Andrew Ross Sorkin:

Oh, good. Nothing.

Preet Bharara:

… all these alphabet soup agencies, maybe we have too many of them, we can debate that at some point, but none of them existed. The SEC had not yet been invented. How little was there, Andrew?

Andrew Ross Sorkin:

Like zero. When you were running the Southern district, I don’t even know if there were rules that would’ve allowed you to bring some of the cases. There really were no insider trading laws. There was no SEC. By the way, talk about bank capital requirements or banking laws. Those didn’t exist either. So it really was the Wild West. And the truth is there was enormous amount of manipulation also taking place in the market. The elites were banding together to pursue this thing called investment pools, which were effectively pump-and-dump schemes. And it’s funny because I think now a lot about that. I’m actually curious where you would land on this. I try to put myself in the shoes of these people 100 years ago and think, “Was it immoral? Was it illegal?” With retrospect, obviously, it all looks horrifically terrible, but at the time, there were no rules. And I always wonder about it because I think the markets are a funny place. And the stock market is people who think they’re trying to outwit another person, right?

So the buyer of a stock thinks they’re smarter than the person selling them the stock. And the seller always thinks they’re smarter than the person … Than the buyer. And whether they would think about these pump-and-dump schemes and manipulation getting together was just another form of outwitting the other side, if you will. And that’s not to take away from the immorality of it all, but it seemed like it was such the normal sort of course back then.

Preet Bharara:

On the one hand, and you hear it in recent debates as well, and I’ve heard you talk about it, look, ordinary Americans should be able to participate in the market and should be able to participate in interesting new lawful mechanisms to make money and to lose money. That’s on the one side. Democratization. On the other hand is someone would say paternalistic desire, I guess I was formerly on the paternalistic side, to protect people from being ripped off and from scams and from crashes, right?

So even as modern a thing, which has now faded from interest from your network, SPACs, right? Lots and lots of people thought that was a get rich quick scheme. And why do I need to qualify to become an investor and that sort of thing? There’s a lot of talk about who should or should not be able to invest in crypto. There are rules and regulations regarding who can put their money in a hedge fund. How do you think about this issue, which consumes a lot of your reporting and your coverage? But in light of having written the book, how do you balance this idea of fairness to people and democracy versus protection?

Andrew Ross Sorkin:

Well, look, I’ve been probably more on the paternalistic side as a journalist. And I think also because so many of us journalists have felt … Don’t want to say burned. But I remember after 2001 and the dot-com bust, there was a lot of blame about why didn’t the journalists uncover what some of these companies had done. After the 2008 crisis, there was a sense … I thought we had blown the whistle, but by default, you could argue we didn’t blow loud enough. So I feel when it comes to meme stocks and crypto and SPACs, that I’ve been … I don’t want to say super paternalistic, but to some degree. And the interesting part has been the reaction to whatever caution I’m pushing out there, which is a lot of people come back to you and say, “Sorkin, what are you doing? Stop trying to protect me, man. And by the way, you’re not really protecting me. You’re protecting the man. You’re protecting the system.”

And they all … I think there really is a sense, especially when you get into these moments, of a real inequality. I think it was true in the 1920s and it’s true now where people really think that they want access to the lottery ticket. They want that lottery ticket. The conundrum is that most people who buy the lottery ticket lose. And I think that was true in the SPAC boom, the meme stock sort of roller coaster with GameStop and all of this. So I think it’s incumbent upon people in my role to be preaching caution and to be pushing for more transparency. I’m always convinced that transparency is sort of the- We talked about debt being the issue that causes a panic. I think transparency, that’s sort of the singular issue that can prevent things from going super haywire if people actually really understand the risks. But it’s oftentimes where people don’t understand the risks because too much of it’s in the fine print.

Preet Bharara:

Describe how you think about … Based on the narratives you tell in the book, how much of this was a function of people just were blind to the problems and the pitfalls and the risks? Or I think is applicable to AI, where people are not so blind to it. They’re just not sure how much weight to give certain risks. But they’re powerless to stop. Once you unleash something on the world, you can’t put it back in the bottle. Was this more like that or more like the other thing?

Andrew Ross Sorkin:

I never wanted to say it’s completely black and white. It’s probably somewhere in the middle. And you think about some of the transformative technologies in the 1920s, whether it was automobiles or telecommunications or radio. All of those things had a future. Here we are on a podcast. Radio has had a long life. The internet in the late ’90s continues at pace even though we had a pop in that bubble in 2000. And I think that’s probably somewhat similar to the AI boom. I think everyone can identify moments where things seem historically … The valuations are high. It’s just a matter of timing in terms of getting either out of the market or trying to time it. I do think oftentimes of Charles Merrill, who is a very … He plays a cameo part in this book. He was the founder of Merrill Lynch. And in 1928, he told people to get out of the market. And in retrospect, it sort of looks right, but sort of wrong because between the beginning of 1928 and September of 1929, the market went up 90%. So you can be a Cassandra, but you have-

Preet Bharara:

Which is very hard.

Andrew Ross Sorkin:

You have to be totally right on the money about the timing. So here we are with this sort of AI boom. And it’s possible this could go on for a very long time before there is some kind of meaningful correction. And I don’t think we know what that ultimately looks like. And so there’s a little bit of the Chuck Prince, who used to be the CEO of Citigroup, sort of, I guess, a successor 100 years later basically to Charlie Mitchell, who used to say when the music’s playing, you have to dance.

Preet Bharara:

When the music’s playing, you have to dance, or at least sing. Sing along. Okay. So going back to the crash that didn’t happen on any particular day, describe … This is what’s so fascinating about your book, as we were saying, because it’s a narrative and it’s about people. And you put people, the reader in the minds and in the personalities of the folks. So talk about that day or days and what it was like for the various players and what it was like in America because it’s so vivid in the book.

Andrew Ross Sorkin:

Well, here’s maybe just a very broad way to explain it with some detail. Most of us have seen pictures of all the thousands of people that look like throngs of people outside of the New York Stock Exchange on those days. You’d see those front pages of the paper from the crash and you’d see all the thousands of people in the street. And I don’t think I ever understood what they were all doing there until I started working on this project. The truth is that they had all come down there from all parts of the country, frankly, to try to understand what was happening to their money because the technology was so bad that even inside the New York Stock Exchange, you could look up on the wall at the stock prices, and they were often behind by five or six hours. And that was on location if you were there. If you were at a brokerage firm uptown or let alone across the country or on a steamboat somewhere, you could be two days behind.

And so you were looking at numbers, trading on information that was just fundamentally wrong. So all those people had come in a true panic to find out what had happened to them and are … The main character of this book, Charlie Mitchell, happens to have gotten himself in a real pickle, or frankly a lot more than just a pickle, which is that his bank, because of actually some of the technological issues with the pricing and not knowing what was really happening in the moment, they had actually been trying to buy back their stock to try to actually keep it up at a certain level. And in the end, they actually bought so much stock, they bought too much stock that they couldn’t afford it and it was going to ultimately topple the entire bank.

Preet Bharara:

Do you think that the crash was actually contained in part because there was limited communication? Or did it exacerbate the problem? You think today, with the possibility of a rumor spreading like wildfire across the internet and on social media, that you would more easily get a poorly timed run based on something ephemeral? [inaudible 00:22:53] like that. What do you think?

Andrew Ross Sorkin:

That’s a great question. Maybe I’m an optimist on this. I like to believe that the real-time nature of information today, while it can create a bad rumor, I like to believe it can get snuffed out pretty quickly. Whereas back then, a bad rumor could linger for days because there was just no way to get that new news or communication. So I want to think it’s better today, but I’m cognizant that you could have the equivalent of maybe a … What they’d call a flash crash where a rumor goes around. And for half an hour, people go out of their minds. But I’d like to think that the record could get fixed pretty quickly. Having said that, in sort of an AI generated universe where people are making fake videos and this and that, it’s hard to know how far it could go.

Preet Bharara:

When did people begin to appreciate the fact that this crash that you talk about was the greatest crash in Wall Street history?

Andrew Ross Sorkin:

So interestingly, it was not appreciated in the moment at all because by the end of the year, strangely enough, the stock market’s only down 17%. I think that really the fingers started to point, if you will, only once we got to 1932 when unemployment really hit 25% and you started to see these tented camps, they called them Hoovervilles, emerging around the country, even in Central Park, across the street from where Charlie Mitchell lived. I think that’s when you started to really feel it. And then of course, Roosevelt comes into office in 1933. And he really, from a rhetorical perspective, though not privately, but more publicly, starts taking the Wall Street and banking community to task.

Preet Bharara:

Was that a failure of scholarship or insight? Or is that, again, one of these things that just we don’t know the significance of things until later?

Andrew Ross Sorkin:

What’s so interesting is you go back and read a lot of the diary entries of some of the people who today we would call victims. And they actually didn’t blame the brokers or the banks. In fact, so many of them blame themselves because I think this really was the first time that these ordinary folks were participating in all this. And for whatever reason, even when brokers or bankers were suggesting this or that, there wasn’t the same kind of blame. There were people who were upset and angry obviously at others, but it was different than the sort of backlash that came almost immediately after the crash of 2008, for example, and sort of the rise of Occupy Wall Street down in Zuccotti Park and all of the rest.

Preet Bharara:

I’ll be right back with Andrew Ross Sorkin after this.

Could you digress for a brief moment into your process? How the hell does 97 years go by? And some of these really sort of interesting, fascinating insights into these hugely important people and transformational people in history, how do they go unexcavated?

Andrew Ross Sorkin:

Well, I’ll give you one reason. For reasons that are still inexplicable to me today, the New York Federal Reserve had never disclosed to anybody its board minutes from that period. They had kept them secret. So for many years, actually during this process, I was trying to persuade them, convince them to give me the board minutes. And in fact, when I finally got them to agree, they had a lawyer go through them and redact materials from the board minutes before giving them to me. I went back to them and ultimately had the redactions removed. And by the way, the redactions were not that provocative underneath. But I think part of it was that kind of thing, which was a treasure map for me, ultimately. Part of it … And again, I’m learning a lot of this on the job because as a sort of amateur historian. Interestingly, a lot of the families and individuals who lived during this period donated archives or donated their archives to libraries.

But oftentimes, 20 or 30 years after the crash, and not a lot of folks were focused on the crash at that point. There were some that actually donated their materials and then had embargoes on them for 10 years or 20 years after the relatives had died and things. So as a result, there was sort of some additional material that I was able to access that hadn’t been touched. And then I got lucky. I found somebody whose grandfather was actually engaged in a meaningful way with a lot of the main characters. And he had written a unpublished manuscript that I was able to access. And so it was finding lots of these sort of different pieces of material and effectively knitting them together.

Preet Bharara:

I want to go back to this theme that we started with and your insight that credit slash debt is a through line for crash after crash after crash.

Andrew Ross Sorkin:

Always.

Preet Bharara:

Can you start just with the premise of debt? Society has not always been structured such that you can buy something that you can’t afford in that moment, right? I think you have a great phrase. Bringing future wealth, drawing future wealth into the present is a startling human capitalistic innovation that did a lot of good, right? It’s what allowed people to buy cars that were too expensive to buy at once. Can you talk a little bit about just sort of the origin of that concept?

Andrew Ross Sorkin:

Well, I think it’s worth mentioning that actually prior to 1919, for the most part, it was almost considered a moral sin in America, in most parts of the world, to take on debt in a meaningful way, to take a loan, to take a mortgage. It was not something proper people did. And it was when General Motors, and actually this guy John Raskob, who was running General Motors, who I described as sort of the Elon Musk of his time, when he sort of had this thought, “Okay. How are we going to sell more cars? Well, we’ll loan you money so you can buy the cars.” That was a transformation. And that really did bring forward the future in some ways. And then you saw it get used over and over again for all sorts of both products, for infrastructure to build cities, to build buildings. So much of New York that we lived through today was built in the 1920s on the back of debt.

I was just over at the Waldorf Hotel, has just been redone. And they got their financing for that building in the weeks prior to the crash of 1929. Had they gotten it three weeks later, there would probably be no Waldorf in that location. So debt really played a huge role in powering so much of our society. And then you can fast-forward to the 19 … Late ’70s, early ’80s. And Michael Milken and he did that with what are called junk bonds, which then propelled telecommunications industry and so many other things.

So debt plays a huge role in our economy. It also plays a huge role with our government, which is to say that we’ve been living beyond our means, as you know, for a very long time. By the way, that’s a major distinction between 1929 and today. Back then, there was a budget surplus in America. We hardly had any debt in our country. Today, it’s a much different story, which actually makes the possibility if you actually do have to bail people out in the future that much more complicated because we have so much debt. There could be a time when bondholders raise their hand and say, “Excuse me. We like you. We’ll continue lending you money, but you’re going to have to pay us a much higher rate because you got to pay us for the risk.”

Preet Bharara:

So is it as simple an aphorism as debt is okay, debt is responsible, debt is good, just not too much.

Andrew Ross Sorkin:

Just not too much. I think that’s the answer.

Preet Bharara:

Not too much.

Andrew Ross Sorkin:

Just not … No. That’s-

Preet Bharara:

So what’s the right amount, Andrew?

Andrew Ross Sorkin:

Well, I think that when you see it go two to one, three to one, is I think historically probably just fine. Four, five, six to one, 10 to one, 20 to one, you’ve got your problems. And that’s really … history has shown … In the same way you could look at price to earnings ratios and the valuations over the years when things get super expensive or super cheap, you could look at debt in the same way. Any time people have really levered themselves up, there often becomes a problem. And the problem is that when there’s a downturn, all of a sudden, they have to pay out and pay out usually quite quickly. And so that is the conundrum. It was the margin loans in 1929. It was the subprime loans in 2008.

Preet Bharara:

I don’t even know. Were there laws against usury in 1929?

Andrew Ross Sorkin:

I don’t believe there was meaningful laws against usury. In fact, most people were walking into brokerages basically, by the way, signing away their home because they were told that there was just no chance that this would ever happen. Also, that’s because the stock market, as I was mentioning, had gone up for so much for so long. And this was such a first time situation for most folks. They didn’t know the difference.

Preet Bharara:

Right. But their bank deposits were insured by the FDIC, right?

Andrew Ross Sorkin:

There was no FDIC either. That was also an invention of 1933.

Preet Bharara:

I have a memory of being with my parents when my dad was a longtime pediatrician in New Jersey. And we banked at the local bank where my mom and dad knew everyone at the bank. And he would, in actual hard form, he’d get checks from his patients and he’d total them up and do the bookkeeping and we’d go to the bank. And I, for some reason, remember those big decals on every door. FDIC insured. I don’t know. It made me feel a little bit more comfortable. Maybe that was a harbinger of what was going to happen to me in the future on the paternalistic side.

Andrew Ross Sorkin:

Sure. But interestingly, both Hoover and Roosevelt, for the most part, though he gets credit for it now, were against the FDIC. There was a view that if you had such insurance, that was both a responsibility issue for the individuals, but also for the banks. They thought that that would sort of allow banks to take risks that they shouldn’t otherwise take. It was going to be the great equalizer. And so it wasn’t really until 1933 that that was implemented in large part. Not because of Carter Glass, but because of Steagall, who was the other name-

Preet Bharara:

Yeah. The other guy.

Andrew Ross Sorkin:

… on that bill. Never gets enough credit.

Preet Bharara:

Here’s where your name comes second. It’s not the same. Here’s a question that I’m sure I’ve asked you before and that bears repeating, and I’ve asked certainly every economic journalist or economist who’s been on the show. I hear people on TV and elsewhere say the stock market is not the real economy. And I want to re-ask the question in the context of your having written this seminal book because people make that remark today because the stock market does not have universal participation, but it’s pretty wide. In 1929, it was like two or 3% of Americans own stock. How could this have been such a big deal if such a tiny percentage of Americans own stock? And how do we think about the stock market versus a, quote, unquote, “Actual,” economy today?

Andrew Ross Sorkin:

So I think they’re different, but they’re super related. In fact, by the way, your point’s a fascinating one because Herbert Hoover had that take. That was his take. And it was wrong insofar as he kept saying, “Look, the stock market’s different than the real economy. I don’t need to deal with this,” basically. But there’s a psychological impact on the country and those who participate in what might be described as the wealth effect, meaning folks who see their stock prices go up and, therefore, their wealth go up, then of course spend more. It was a little bit different in the late ’20s, but it had a sort of scarring effect because so many people knew people who had lost all of their money. And famously, there were these stories about suicides and all sorts of things. So interestingly, there were actually less suicides in 1929 than there were in 1928, but sort of an out-sized remembrance of those that were because they often were people who had lost everything. So I think that they’re related. I do think that they are quite related.

And I think we sort of make a mistake when we say that they’re two wholly different things. And I make this point about today’s economy, interestingly. So much of today’s economy is the AI boom. Jason Furman, I don’t know if you saw, he wrote a paper. He’s an economist at Harvard. He wrote a paper couple of weeks ago where he looked at what would happen if you xed out, meaning you basically removed all the spending on data centers for AI in America. And the truth was you’d have basically flat GDP in this country. I think it was up 0.1%.

And so so much of our economy is now tied in a very concentrated way to this AI boom. And it’s real money that’s coursing through our economy. It’s not fake money. And the stock prices are not fake. They’re real. You could sell those stocks tomorrow and someone will give you cash for them. But there is this sort of interrelated nature to what’s happening in AI, for example, in the stock market with what’s happening in our economy. And those folks who are benefiting from all this are spending that money buying cars and clothing and hotels and airfare and all sorts of other things.

Preet Bharara:

So now bookending the last 100 years with the period you cover in your book with your current on-the-ground reporting about the economy and Wall Street and everything else, what’s your assessment of how ordinary people view wealth and the ultra-wealthy? You use some parallels between some folks and people who are famous in America. How has the vibe changed towards people who are just colossally monumentally impossible to comprehend wealthy?

Andrew Ross Sorkin:

Well, I live in New York City, so we have a new mayor or a mayor-elect that-

Preet Bharara:

Affordability is the coin of the realm.

Andrew Ross Sorkin:

It is the coin of the realm. And I think that it’s not just affordability. I think it’s actually a direct shot at this very idea of capitalism, of the wealthy, of the sort of super elite wealthy that we see on the covers of magazines and folks who have billions, if not hundreds of billions of dollars. And people say to themselves, “What gives? Does it have to be this way? Why are they making all this money when the system isn’t really working for us?”

And I think for some people, the system unto itself feels almost oppressive. And I think that’s a super important thing that oftentimes the elite don’t necessarily appreciate or recognize. I think the solutions are more complicated than they’re often presented in the political realm in terms of how you change that. But I do think that we are in a moment. And it may be longer than a moment. It could be a decade-long period, if not longer, of not just populism, but a real questioning. And by the way, I don’t think this is truly just a lefty Democrat thing. I think even sort of a JD Vance of it all has some similar views about some of these issues.

Preet Bharara:

Or used to.

Andrew Ross Sorkin:

Or used to. Or used to. So yeah, I think we’re in a new period here when it comes to wealth and inequality and just how it all gets sorted.

Preet Bharara:

I guess what I was getting at was a little bit more particular question. And this impression is based on nothing at all other than a sort of a hunch I have that once upon a time, for right or wrong, and for lack of knowledge or with full knowledge, that ordinary people sort of looked upon those mega wealthy a little bit more benevolently a hundred years ago than they did now. And as time has gone on, some people have learned that those folks did very bad things. Some of it is excavated in your book. But also, some of the names that you associate with that kind of wealth adorn monumental philanthropic foundations and other sorts of things. Some would say they laundered their misdeeds through good works. I don’t know. Am I off base totally on that?

Andrew Ross Sorkin:

No, I don’t think you’re off base, but I think actually the real shift, at least the shift that I’m very cognizant of during my lifetime, was 2008, where I think a lot of this changed. I think this, I don’t know if it’s benevolent, but this sense that the experts, some of whom were quite wealthy and institutionalized, if you will, they were the establishment, were supposed to take care of everybody else, or at least were supposed to be making some of the right decisions for the country, for people, for communities and the like. And then I think 2008 really upended that and shifted the whole sort of dynamic because people said, “Maybe these experts really aren’t experts at all. And maybe these institutions aren’t what we thought.”

And I think that’s … I look at the crisis of 2008 and the politics of that crisis as sort of leading a lot to where we are today. A lot of the questioning of experts and even expertise happened during that period. And by the way, then was repeated and maybe exacerbated even during the pandemic as well, especially as we saw some of these other people get so wealthy during these things. So it wasn’t just that people felt misled or not taken care of. It was that there was a demonstrable problem that impacted people’s lives so meaningfully. And then the wealthiest somehow managed to get even wealthier.

Preet Bharara:

No, that chafes in a very real way against people’s intelligence, their brains, and also their hearts, and also their wallets. Is part of the issue here that only recently in human civilization has it become possible to get rich quick? Is that a problem?

Andrew Ross Sorkin:

So I agree. And I think that get rich quick American dream became a reality in the ’20s. And it’s sort of what now we live with sort of on the TikTok, Instagram scroll. I think prior to that, it really was a slower sort of Horatio Alger kind of rags to riches story. And I think there’s now such a sense that the divide between the rich and everybody else is so vast that the lottery ticket is the only way. It’s interesting that some of that lottery ticket sort of sensibility sort of drifted in the ’30s and ’40s. I think in part because things were so challenged in terms of the economy, that the chance to actually win a lottery ticket almost went out the window.

And then in the ’50s and ’60s in America, and maybe if you could argue parts of the ’70s, the US was booming really for the first time in a long time. And we were sort of a monopoly power, really the rise of unions. I think people felt a lot better actually about maybe a slower sort of American dream, sort of a leave it to beaver American dream. And then of course, the ’80s hit and the rest of the world is back online. We’re now competing against them. You could see what that competition ultimately then starts doing to unions and others in the ’80s and to wages. And as that sort of got worse and more complicated, I think we went back to the lottery ticket scheme.

Preet Bharara:

So here’s the other problem. I’m glad you’re letting me just give you the menu of problems.

Andrew Ross Sorkin:

Please.

Preet Bharara:

To the extent I have any money, and I’ve said this on the show many times, I don’t own any individual stock in part for conflict reasons. I find it an abomination that individual members of Congress buy individual stocks.

Andrew Ross Sorkin:

And I should say, by the way, as a journalist-

Preet Bharara:

You can’t either. I know.

Andrew Ross Sorkin:

Me, I’m the same place.

Preet Bharara:

You can’t be on CNBC and writing for DealBook and own individual stocks. It’s too much of a conflict. And if it’s a conflict for you and me, it’s sure as hell a freaking conflict for members of Congress, but we can fight that fight another day. And my advice, such as anyone wants to hear it, and it’s basically my children who are now coming of age with their eight bucks, is don’t buy individual stocks. Buy broad-based funds. All my money, such as it is, is in the S&P 500. We’re in money market and nothing fancy. And I think that’s great. And we do well over time.

I had a government retirement account that they lost my address. And you know what? A couple percent, and very old-fashioned, two, 3% during my period of time in government, it’s real money after a long period of time. Now, you don’t want all of the investing public to be like that because you need people who are going to invest and speculate. My brother is an entrepreneur. If everyone was like me, he would never get a business off the ground. So how do you think about that tension between arguably responsible conservative dollar cost averaging and the power of compounding interest versus we have an economy that needs to get off the ground?

Andrew Ross Sorkin:

So you’re actually speaking about an issue I grappled in my head with for most of the eight years I was working on this project. And by the way, you’re in the sort of … And I’m in the same place in sort of what I call the Warren Buffett School, which is this is what he tells his family to do, which is invest in the index and close your eyes and leave it alone. And for the most part, it seems to have worked out. I do wonder, by the way, whether indexes are shifting now that they’re getting so concentrated, but it’s also for another day. The thing that I grappled with is just this idea that you’re right. For America to work and actually why America has worked, you’ve always needed some semblance of speculation. You need somebody who wants to make a bet on Elon Musk when the whole idea seems completely crazy and absurd. And so it’s like you want the speculators, but you don’t want it to get too crazy. And how do you keep that?

Preet Bharara:

How many? How many speculators do you want?

Andrew Ross Sorkin:

How do you keep that line? Look, it’s very important that we have a vibrant venture capital industry, in my mind, because you need that money early to make these things even get going, but then you still do need public markets and others for those valuations to continue to rise and for those businesses to continue to grow and all of those things. So you are trying to thread this very delicate needle. And that one, I have not solved yet.

Preet Bharara:

Well, that’s a big one. But sort of related to this, I want to get into the issue as we’re winding down. Optimism is good, right? There’s optimism and there’s, what the famous phrase, irrational exuberance. What’s the role of optimism as a good or a … I think you’ve written about and spoken about it as a positive. But are we beating a dead horse here? Some is good, but not too much, like everything else.

Andrew Ross Sorkin:

I think some is good, but not too much. But I will say, and there’s … To me, one of my favorite moments when I was reporting and researching this book was reporting on Winston Churchill’s trip to New York during-

Preet Bharara:

He was there. He was there.

Andrew Ross Sorkin:

During October of 1929, oddly enough. He had not become the Prime Minister yet. And he, by the way, got bitten with the bug, like everyone else, and bought a lot of stock and lost his shirt. And yet, on his way home from the United States in that fall of 1929, he wrote about the optimism of Americans and actually how the sort of optimistic nature of Americans was so different than the optimism or lack of optimism in the UK and other parts of the world, but that culturally, this is one of the great benefits of the US. He didn’t look at our optimism as having gone too far. He looked at it as part of our resiliency. And so I wonder whether … I think our optimism is a feature ultimately and not a bug, even when it takes us over the cliff occasionally.

Preet Bharara:

This is unfair question. I don’t know anything about how the markets, the stock markets work in other countries. Is it better to have the one we have where we have these crashes and failures? Other markets obviously crash too. Do you have any thought about comparative markets?

Andrew Ross Sorkin:

Oh, goodness. For sure. Look, I think our market is clearly the most resilient, the deepest, all the things. And we’re running a natural experiment, which you can look at. The stock market in Asia, the booms and the busts in that market are remarkable and shocking. A lot of the develop-

Preet Bharara:

What’s different about them than us? That’s a big question, but [inaudible 00:48:18].

Andrew Ross Sorkin:

Well, by the way, there’s questions about fraud and manipulation. There’s lots of leverage. There’s less regulation. You’re seeing the stock market fly up and fly down. There’s also lots of government protection. So China’s throwing lots of money at different things. It’s sort of hard to know exactly … There’s sort of a state capitalism issue that’s taking place there. And by the way, similarly, there have been issues in Europe and parts of South America as well. So I think there’s a reason why not only are some of the great companies coming out of the United States, but they are on exchanges in the United States and traded in the United States because there’s just a better, deeper, more efficient marketplace.

Preet Bharara:

Have you become … So I’m getting that question that you get every time, but I’m going to ask it in this way. You’ve spent eight years writing this book, Andrew. You learned a lot of stuff. You read diaries, you looked at graphs, charts, you looked at history. You know that history doesn’t repeat itself, but it rhymes. All that jazz. Do you feel like you were a little bit better at predicting when such a thing could happen again? And if so, you can whisper to me when it’s going to happen.

Andrew Ross Sorkin:

I think I am a little bit better, but I don’t know if I’m going to be able to get it on the nose. And the truth is I haven’t been liquidating all those mutual funds that I have, just so you know, because I’m not sure that things are toppling tomorrow just yet. But if and when I do, I’ll call you.

Preet Bharara:

The weird thing is I remember there was a moment when COVID was beginning to ravage the country. The market, just huge plunge. And I’m like, “All right. It’s time for the Bharara family to speculate a little bit and put in a bunch of money, such as it was, on the side.” And then I woke up in the morning and there was a huge rally. And then I never did such a thing. Is that wise? Or was that not wise?

Andrew Ross Sorkin:

Well, it sounds like you missed it, so I don’t know how wise it was.

Preet Bharara:

Right. Because unlike the optimists that you talk about and write about, super interesting. I’m always thinking if the market crash is going to stay down for a long, long time. And I got kids to put through college and I have other things I got to deal with. Whereas on the other side of the coin, the problem that we end up talking about is that people keep thinking, “Well, the market is just going to continue to be booming forever and ever and ever. Why should it ever crash?” Is it good to have some people like me in the mix?

Andrew Ross Sorkin:

Oh. I think we need Cassandras. Look, I’m a journalist. I’m a professional skeptic. But the truth is it’s been a lot more profitable over the last 100 years to be a professional optimist. The question isn’t is the stock market, for example, going to be higher 30 years from now than it is today? It invariably should be. I hope it is. And if it isn’t, I think there’s real questions about what’s gone on between now and then. The question is your needs. So you’ve got kids.

Preet Bharara:

Completely. Right.

Andrew Ross Sorkin:

They have to go to college. I don’t know what their ages were when you were thinking about this back in 2020. But if you’re a retiree, yeah, you should have some cash on the side or something that you think is liquid that you can get out of. But if you told me that you could hold your stock for 20 or 30 years, I would tell you that whether there’s an AI bust or not, hopefully it’ll be better on the other side. And that’s the answer.

Preet Bharara:

Andrew Ross Sorkin. Look, let me hold it up for the YouTube audience.

Andrew Ross Sorkin:

Preet Bharara, thank you.

Preet Bharara:

There it is. 1929: Inside the Greatest Crash in Wall Street History – and How It Shattered a Nation. Hope to see you soon, sir. Thank you so much.

Andrew Ross Sorkin:

Thank you, sir.

Preet Bharara:

Good luck.

Andrew Ross Sorkin:

Really appreciate it. This was fun.

Preet Bharara:

My conversation with Andrew Ross Sorkin continues for members of the CAFE Insider community. In the bonus for insiders, we kick around a possible film or a series adaptation of 1929 and Andrew dream casts the characters.

Andrew Ross Sorkin:

John Hamm for Hoover. I don’t know how you feel about that. That feels right to me.

Preet Bharara:

I don’t know how I feel about that.

Andrew Ross Sorkin:

Okay.

Preet Bharara:

To try out the membership, head to cafe.com/insider. Again, that’s cafe.com/insider. Stay Tuned. After the break, I’ll answer your questions about the legality of potential US strikes in Venezuela and explore the history of the oath of office.

Now let’s get to your questions. This question comes in an email from Monica. “On a recent episode of Face the Nation, I heard Senator Lindsey Graham claim that the President already has all the legal justification he needs without Congressional approval to launch strikes on Venezuela and even send in ground troops. That sounds legally dubious to me, but is it? What’s your analysis?” Great question, Monica. And it’s a long simmering feud and dispute on these kinds of executive actions. As you probably know, the Trump administration has carried out strikes on vessels it claims were smuggling drugs from Venezuela. Trump has repeatedly expressed frustration with Venezuelan leader, Nicolás Maduro, accusing him of harboring narco terrorists. We’ve talked about some of these strikes on the Insider podcast. In recent months, the US has also expanded its military presence in the Caribbean with warships, fighter jets, and thousands of troops, all of which suggests that land strikes could follow.

That leads to the perennial question, is there a legal justification for those potential strikes without Congress? We went back and watched that episode of Face the Nation. Here’s what Senator Graham said. Quote, “There’s no requirement for Congress to declare war before the commander-in-chief can use force,” end quote. Of course, that’s technically correct. It all depends on what war means. The Constitution plainly states in Article I, Section 8 that, quote, “The Congress shall have power to declare war,” end quote. But that said, American history is full, absolutely full of examples of presidents of both parties using military force without Congress ever formally declaring war, including military strikes within sovereign nations. Those examples go all the way back to Thomas Jefferson and the Barbary Pirates. The Korean War, as you may remember from history in school, was also never officially declared by Congress. And for that matter, nor was the Vietnam War. And as Senator Graham mentioned on the show, George H.W. Bush’s invasion of Panama, if you can remember that, likewise proceeded without a formal declaration of war.

So typically, when presidents justify military action without Congressional approval, they frame it in terms of self-defense. We are supposed to be a defender, not an aggressor. Query then why we have a Department of War. But in any event, Jefferson argued he was acting defensively after the Barbary Pirates attacked American ships. Centuries later, President Bush justified the Panama invasion in part by citing the killing of an American serviceman by Panamanian forces. He described the operation as necessary to protect US lives. The so-called self-defense exception isn’t written into a statute, but the Department of Justice’s Office of Legal Counsel has long supported it. During the 1980 Iran hostage crisis, for instance, OLC wrote that, quote, “The President’s constitutional power to use the armed forces to protect the lives, property, and interests of Americans abroad has long been recognized,” end quote. Later, OLC opinions have repeated that same principle.

Now, whether stopping drug smuggling qualifies as a valid legal basis for self-defense under US or international law, I think, remains an open question, but we may soon find out because the situation is escalating quickly. By the way, if you want to follow developments in Venezuela and understand the context a little better, I want to repeat some good news. Vox Media has launched a new podcast. It’s called The Long Game. It’s hosted by Jake Sullivan, former National Security Adviser, and Jon Finer, his Deputy National Security Adviser. And they break down complex foreign policy and national security issues like this one. As a preview, I’ll be talking with Jake and Jon on the show next week to talk about issues like Venezuela, Ukraine, and what it’s like to go from the White House to the podcast studio. You can find The Long Game with Jake Sullivan and Jon Finer by searching for it in your podcast app. As always, Stay Tuned.

This question comes in an email from John, who writes, “In a previous episode, you talked a bit about the history of the oath of office and who has the authority to administer it. I was curious, where do the actual words of the oath come from? Have they always been the same? Or have they changed over time?” John, that’s a super interesting question. And I didn’t know the answer myself. As you point out, on a recent episode, I answered a related question about whether Representative Adelita Grijalva could be sworn in by someone other than Speaker Mike Johnson. And that took us on a bit of a historical detour. As I mentioned then, the Constitution itself requires that all members of Congress, the President, and federal judges take an oath, not to a king or a ruler, but to the Constitution itself. But the Constitution doesn’t actually say what the words of that oath should be.

So when Congress passed its very first bill, now known as the First Oath Act, they addressed this issue and spelled out the wording. The founders kept it pretty simple. The oath went, quote, “I, name, do solemnly swear or affirm that I will support the Constitution of the United States.” That’s it. Fewer than 20 words. That version remained in use until the Civil War. After the South seceded, questions of loyalty were obviously front and center. In 1862, Congress passed a new version, the Ironclad Test Oath. Pretty good name. This Congress clearly wanted to make a point. The new oath expanded from fewer than 20 words to nearly 200, filled with retrospective declarations like, “I have never voluntarily borne arms against the United States. And I have given no aid, countenance, counsel, or encouragement to persons engaged in armed hostility thereto.” But in the second half of that oath, you can see the beginnings of the modern one.

It included the forward-looking promise, quote, “I will support and defend the Constitution of the United States against all enemies, foreign and domestic.” The phrase, “Domestic enemies,” obviously carried a different weight in the middle of the Civil War than it does today. The country used that lengthy Ironclad Oath for about two decades until Congress, again, changed it by simplifying it with a new law in 1884. That act dropped all the retrospective loyalty clauses, the, “I have never,” language, and kept the forward-looking commitment simply to support and defend the Constitution. So with only minor stylistic changes since then, that’s essentially the same oath members of Congress still take today and the oath that I’ve taken on several occasions. So by the time you hear this podcast, given that the House is finally back in session, the oath that Speaker Johnson will have administered to Representative Grijalva will be almost exactly the same words Congress adopted back in 1884.

Well, that’s it for this episode of Stay Tuned. Thanks again to my guest, Andrew Ross Sorkin. If you like what we do, rate and review the show on Apple Podcasts or wherever you listen. Every positive review helps new listeners find the show. Send me your questions about news, politics, and justice. You can reach me on Twitter or Bluesky at @PreetBharara with the hashtag #AskPreet. You can also call and leave me a message at (833) 997-7338. That’s (833) 99PREET. Or you can send an email to letters@cafe.com. Stay Tuned is now on Substack. Head to staytuned.substack.com to watch live streams, get updates about new podcast episodes and more. That’s staytuned.substack.com.

Stay Tuned is presented by CAFE and the Vox Media Podcast Network. The executive producer is Tamara Sepper. The technical director is David Tatasciore. The deputy editor is Celine Rohr. The supervising producer is Jake Kaplan. Lead editorial producer is Jennifer Indig. The associate producer is Claudia Hernández. The video producer is Nat Weiner. The senior audio producer is Matthew Billy. And the marketing manager is Liana Greenway. Our music is by Andrew Dost. Special thanks to Torrey Paquette and Adam Harris. I’m your host, Preet Bharara. As always, Stay Tuned.