In his new book about the 1929 stock market crash, the journalist Andrew Ross Sorkin recalls a scene from a summer day that year in Manhattan. He writes that the Plaza Hotel's dining room attracted attention when leading figures from Wall Street and the business world came to lunch on Saturday. The presence of such a crowd might not have caused a stir at another time in history, but these were not typical times. The nation was captivated by a market that was dumping wealth on investors large and small.
Some of these bolded names, including respected CEOs of major banks, had a history of joining forces in market manipulation schemes that were not well kept secret. Together, the big players formed a pool and drove up the price of shares through “wash trades” with each other, creating the appearance of high demand before they all sold out, driving down the price and devastating those duped who followed suit.
One would think that some of these people would have faced consequences, or at least lived in fear of exposure, even though their behavior was technically legal at the time. But they had good connections. One of them John J. Raskobwas chairman of the Democratic National Committee and a prominent political donor; his biggest beneficiary, former New York governor and presidential candidate Al Smithhad lunch with him that day. Another, William Durant, met secretly with President Herbert Hoover earlier this year to help him stop the Federal Reserve Board from reining in Wall Street excesses.
In his book 1929: Inside the Greatest Crash in Wall Street History—And How It Destroyed a Nation, Sorkin refers to the “remarkable parallels” between the run-up to this crisis and today's political and economic climate, but does not elaborate on the idea; his report is essentially a straight story recorded in a journalist's journal. However, some telling parallels do emerge from beneath the surface, and they reflect poorly on our current path. In addition to the greed and “this time is different” arrogance that precedes every stock market crash, the crash of 1929 seems to me to have been caused by a more insidious and pervasive force that is actually playing out everywhere today.
The 1920s, Sorkin shows, were an era when Wall Street largely had its way and Washington stayed away, a precursor to President Donald Trump's tax cuts and deregulation. In the light of today, it is more interesting to study how the environment became was so dangerously friendly to Wall Street in the 1920s—and how it remained that way even when red flags began to appear. The key element, I would argue, was the phenomenon known in regulatory circles as “capture”: Wall Street and big business managed to absorb other centers of power in society. Those who had influence in various spheres united into one club circle and fell prey to groupthink that envisioned wealth for everyone without consequences. The regulators, the political and judicial apparatus, the press – almost all the corrective mechanisms in our system were either weakened or so focused on bullish and rich people that they did not think to use the powers they still had.
Some critics did raise the alarm, most notably Senator Carter Glass, but the banking elite and its high-ranking friends could safely ignore the skeptics, who would be carried away by the prevailing current. (Only after everything fell apart was the senator able to rein in the banks with the help of the Glass-Steagall Act.)
The financiers mounted a crackdown on the press and enlisted top reporters as allies, offering lucrative jobs or outright bribes. Private-sector titans took on quasi-government functions—such as advising the president and negotiating deals with other countries—or became true federal officials. Investor and industrialist Andrew Mellon was the longtime Treasury secretary, a predecessor to Trump appointees at the Treasury. Steven Mnuchin And Scott BessantBoth of them were recruited straight from Wall Street. The joke about Mellon's influence, Sorkin tells us, was that three US presidents served under him.
This crossover comes to mind Elon Muskwho, like J.P. Morgan Chairman Thomas Lamont and other tycoons of the 1920s, became a player in public politics without having trouble getting elected or receiving powers from Congress. During Joe Biden's presidency, Musk made the decision to give Ukraine and its troops critical access to its satellite internet service. Starlink. Having bolstered Trump with his considerable influence in the 2024 election cycle, he has received a proposal from the president to cut the federal bureaucracy. DOJwhich is a pretty blatant example of political hijacking. The fact that Musk and his giant businesses could benefit from deep regulatory cuts has not gone unnoticed (Senator Elizabeth Warren, a critic of Carter Glass, released report on the topic), but resistance had little effect.
No figure from the 1920s resembles Musk more than Raskob, the Democratic National Committee chairman whose rise to great influence played a central role in the collapse. Raskob was a car company executive, the father of 13 children, and became an extremely ambitious entrepreneur. He could move the market with an offhand comment about General Motors, of which he was a director, in much the same way as Musk tweeted about Tesla privatization and saw its shares quickly rise to over $20 per share; the deal never materialized. Raskob made his own move into the political fray, funding Smith and using the Democratic National Committee to settle scores—with the help of a compliant press.
Musk has not engaged the media to the same extent as Raskob and his ilk did in the 20s; Many believed that the reporters behind the typically sunny coverage of the time were the winners, Sorkin writes, and J. Pierpont Morgan “was known for having countless journalists in his pocket.” Today, many traditional media outlets are not so much corrupt as they are poor and weak, and their corporate owners have demonstrated a willingness to bend under if you apply enough force. By vilifying the press, Trump has cleverly exploited podcasters and streamers, and Musk has been able to literally take over Twitter—by purchasing the company—and thereby secretly shape the news and opinions that reach the masses. Meanwhile, the best traditional media have become far less influential than they once were. It's already hard to believe that the next one New York Time exposure would topple or even deter the president. After all, he had already been indicted four times with the help of reporters, and then he won the popular vote.
Trump's own story represents the ultimate takeover. In his administration, the interests of big money and political power essentially merge in one person: the president himself. He doesn't always side with the financiers and tycoons, but when he does, he becomes not only their enabler, but also their intimidating spokesman. Bankers don't need to meet secretly with Trump to lobby him to neutralize the regulatory state; he will do it himself. He mercilessly attacked supposedly independent Federal Reserve Boardworked to weaken the Dodd-Frank Act and the Consumer Financial Protection Bureau, and Commissioner of the Bureau of Labor Statistics fired after the agency released a troubling employment report. His administration also forged deals that give the government some share at companies such as Intel, Nvidia and US Steel, further blurring the line between the public and private sectors.
Shortly before Trump's second inauguration, he published his own Trump meme coinwhich, to no one's surprise, immediately skyrocketed in value, directly benefiting his family. Thus, within days of taking office, he became a major cryptocurrency entrepreneur and launched a number of cryptocurrency-friendly initiatives, delighting the industry, which made significant donations to his campaign. Trump's Securities and Exchange Commission quickly suspended the case against the crypto billionaire Justin Sun. (The suit accuses Sun, among other things, of creating a pool for “mosh” trading, a throwback to the '20s.) A few months later, Sun, a lead investor in Trump's meme coin, attended dinner with the president at one of his golf courses.
Trump's leniency toward shady white-collar figures extends far beyond the cryptocurrency space. The President pardons fraudster Carlos Watson of Ozy Media, saving him from a 10-year prison sentence; commuted the sentences of Jason Galanis and George Santos after they won his favor; and pardoned former Nikola CEO Trevor Milton, who was convicted of defrauding his investors. Trump explained his position by saying of Milton, “He supported Trump.”
Such steps undermine the integrity of the financial system as a whole. However, the danger of a takeover is not only that it can lead to a recession or even a depression. The danger is also moral. A takeover can radically change society's idea of what is considered acceptable. In retrospect, it seems incredible that during the boom of the 1920s, brokers allowed clients to buy shares with borrowed money at a discount of only 10 percent; if the stock price falls by just 10 percent in this scenario, the trader will go broke. The country's most prominent bankers had no qualms about defending the practice, arguing that if the average person could buy a refrigerator on credit, why not buy shares? The comparison is absurd, but the important thing is that it didn't necessarily seem that way at the time. The idea of leading financiers colluding to increase the prices of certain stocks has not disappeared either.
We now face a situation where President Trump is establishing a pro-crypto policy while his family business reaps the benefits; the president fires officials who bring bad news; and convicted swindlers are forgiven even without a fig leaf. Opponents have filed a number of lawsuits challenging the Trump administration, and some have gained traction (a federal appeals court has now blocked order to fire Federal Reserve Chair Lisa Cook). But the Supreme Court has largely sided with Trump in his second term, pardons are irrevocable, and the sheer volume of attacks on our financial system seems to guarantee that many will prevail or, worse, be ignored or accepted. Unlike 1929, when the takeover was not a widely publicized phenomenon, ignorance is an even less plausible excuse. The parties willing to limit government power in our economy are well aware of graft and bribery, but they seem to have lost the ability to act.
Term moral hazard entered the popular lexicon during the 2008 global financial crisis, which Sorkin chronicled in his best-selling book. Too big to failto explain widespread fears that bailing out banks would set a damaging precedent by saving them from the consequences of their own actions. In 2025, a twist occurs: moral hazard is evident even before any large-scale consequences occur. What was once beyond the bounds of decency has gradually become accepted. In this sense, the collapse has already begun.
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