I have just read Andrew Ross Sorkin’s excellent new book, 1929: Inside the Greatest Crash in Wall Street History and How It Shattered a Nation. Sorkin tells the story of the Crash through the prism of business leaders and government officials in the fateful run-up to Black Tuesday in October 1929. The great characters include “Sunshine Charlie” Mitchell, president of National City Bank, predecessor to Citicorp, Ferdinand Pecora, the chief investigator for the U.S. Senate select committee and Jesse Livermore, famed Wall Street speculator who made $100 million shorting the market during the Crash.
The most salient part of the book is the Afterword, which begins as follows. “The USA that bounded full of hope and vigor into the fall of 1929 and the USA that emerged in the dark days of the 1930s were two very different nations…To the nation, experiencing the implosion of the stock market felt like watching a heavyweight champion getting knocked out by an untested, unheralded amateur…People started questioning all the things they had taken for granted…Did a capitalist society make sense anymore? One larger question lay behind all the others—who can be trusted?”
In the book, one finds the following trust-eviscerating facts:
- The collapse in stock prices took three years, not one. The overall decline in share value in 1929 was only 17 percent. In the next year, it was 33 percent. In 1931 it was 50 percent. This was falling dominos, as the decline in equity markets led to a drop in consumption, then a spike in joblessness to 25 percent of total workforce and then bank failures.
- The important figures on Wall Street paid no taxes. The CEO of National City Bank sold part of his holdings in the bank to his wife to generate a tax-loss, thereby eliminating his obligation to the IRS. None of the top twenty partners of J.P. Morgan Bank paid taxes in 1931 and 1932. These same J.P. Morgan partners sat on the boards of directors of dozens of the largest companies in the U.S.
- Nine thousand banks failed in the Great Depression, taking with them $7 billion in depositors’ assets. These banks failed because depositors rushed to get their cash out when rumors of insolvency were swirling. They also went under because they were lending money to customers to buy stock on margin, up to 90 percent of total invested.
- New York Stock Exchange President Richard Whitney pilfered securities from the Exchange’s life insurance fund and stole shares from his client, the New York Yacht Club, to make loans to himself. He was sentenced to 10 years in Sing Sing prison.
- The Smoot-Hawley tariffs were implemented in 1930, imposing 60 percent tariffs on imports to the U.S., ostensibly to protect American manufacturers. This caused a 60 percent drop in U.S. exports, prompting catastrophic damage to the farmers who relied on exports of grain to Europe.
What reversed this catastrophic downturn in trust? The Congress punished the financial sector by separating commercial banking from investment banking (Glass-Steagall Act). The New Deal created the Federal Deposit Insurance Corporation, which gave protection to depositors even if a bank failed. There was an investigation of Wall Street malfeasance run by Ferdinand Pecora, which exposed the shady tactics of the National City Bank’s sales force in hawking stocks to a largely unsophisticated public who believed the Bank to have “strength, prudence and high-mindedness.” In short, the public was able to see tangible changes in business practices, enforced by an activist Government.
In his Washington Post column “Democracy’s Crisis of Faith,” Fareed Zakaria cites a 2023 study by Harvard’s Peter A. Hall and Sun In Kim, which finds that citizens tend to favor direct, personalized leadership when they perceive the system as unfair or biased. The 2025 Edelman Trust Barometer finds that nearly two-thirds of respondents have a moderate to high sense of grievance, a belief that the system is rigged and that they no longer have the chance to do better than their parents. In response, governments are acting less as referees and more as fighters curbing migration, reshaping trade through tariffs, scaling back energy-transition incentives, and investing directly in strategic industries and companies such as Intel.
With Government in an activist mode, the question for Business is how to respond. Here is a four-point plan. First, work with Government on issues such as reskilling because there is an inevitable timing mismatch of jobs lost to AI and a redeployment of workers into new types of jobs. Second, advocate for constructive regulation instead of waiting for the inevitable blowback from a revived populism from the Left, on issues such as affordable energy and housing. Third, communicate beyond the classic mainstream media channels in a style consistent with the format so that social media is not monopolized by political advocacy. Fourth, work with NGOs for deep penetration of local markets and support organizations that come together to build trust through volunteerism that focuses on civic engagement. We need to overcome fears of deindustrialization, job loss to AI and migration, restoring optimism by showing that the system works for all.
Richard Edelman is CEO.
