Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: Carol Master along with Tim stenovikleven Our Bloomberg Interactive Broker Studio.
Speaker 2: We all just listen to Jamie Diamond on Bloomberg. JP Morgan,
Speaker 2: by the way, featured very prominently in a new book
Speaker 2: out on the nineteen twenty nine market crash, and this
Speaker 2: feels like kind of the right conversation to be having
Speaker 2: at this moment in time when certain investing narratives dominate
Speaker 2: US financial markets, AI, private credit, transparency concerns, crypto prediction markets,
Speaker 2: and more questions about whether these narratives are the right
Speaker 2: ones that lead to longer term gains and prosperity for
Speaker 2: investors and for the country.
Speaker 3: There's a lot of questions.
Speaker 1: Out there, yeah, stub about exuberants as well. Could it
Speaker 1: lead to a crisis or to a crash? It does
Speaker 1: lead us to nineteen twenty nine, a book that takes
Speaker 1: us inside the greatest crash in Wall Street history and
Speaker 1: how it shattered a nation. The book by New York
Speaker 1: Times bestselling author of Too Big to Fail, who also
Speaker 1: happens to be an award winning journalist for The New
Speaker 1: York Times. He's a founder and editor at large of
Speaker 1: Deal Book. He's anchor of Squawk Box on CNBC. Andrew
Speaker 1: Ross Sorkin joins us. Now, welcome, thanks for having me, guys. Yeah,
Speaker 1: thanks for jeving me here. You know, it's funny. Jamie
Speaker 1: Diamond was asked about just now by David Rubinstein about
Speaker 1: the financial crisis and about whether or not we could
Speaker 1: have another big financial crisis. Our question for you is,
Speaker 1: in this day and age, could we have another nineteen
Speaker 1: twenty nine like stock market crash? Or is the structure
Speaker 1: just completely different? Are the protections now in place? Could
Speaker 1: it happen again?
Speaker 4: So yes and no. I can explain why no, And
Speaker 4: then if you'd like, I can get you there if
Speaker 4: you want to get if you want to go there. Look,
Speaker 4: the good news is the world is very different today
Speaker 4: from a technology perspective. One of the reasons that nineteen
Speaker 4: twenty nine ever even happened was literally the stock exchange
Speaker 4: was oftentimes off, meaning the numbers that you saw on
Speaker 4: the big board were three four five hours behind the
Speaker 4: actual the actual numbers, and as a result, people were
Speaker 4: just selling indiscriminately because they just thought the whole thing
Speaker 4: didn't even work. I mean, one of the reasons you
Speaker 4: always see this famous pictures of people down the New
Speaker 4: York SAX ex Change next Planta. The reason they're there,
Speaker 4: the reason they're all in the street, is these are
Speaker 4: people who come from all over New York and the
Speaker 4: rest of the country to try to find out, like
Speaker 4: what's happened to their money. So that piece of it
Speaker 4: you take off the table because you can get the
Speaker 4: numbers right here and off of your terminal and everything else.
Speaker 4: There's an SEC Insider trading is not legal. It was
Speaker 4: legal then, sore all the manipulation that was taking place.
Speaker 4: There was no FDIC, so you had bank runs that
Speaker 4: took place in the aftermath of this crisis. You know,
Speaker 4: we could talk about Glass Stiegel and what that either
Speaker 4: representator didn't or whether you think it's come back or not.
Speaker 4: But here's a bigger one. Capital requirements for banks there
Speaker 4: were none zero back then. So there's a lot of
Speaker 4: reasons you'd like to believe that we can't have another
Speaker 4: crisis of the magnitude we did. And by the way,
Speaker 4: it's also worth noting the crash in nineteen twenty nine.
Speaker 4: It wasn't preordained that when that happened that we had
Speaker 4: to have a Great Depression. That was really the first
Speaker 4: domino of a series of dominoes, and then a series
Speaker 4: of frankly terrible policy choices, the Federal Reserve basically doing nothing,
Speaker 4: the implementation of tariffs. We can discuss what that means today.
Speaker 4: You know, there was a gold standard, so there was
Speaker 4: a question about how much money you could throw into
Speaker 4: the system. Austerity, all of that that worked against things
Speaker 4: that led to twenty five percent of unemployment didn't have
Speaker 4: to happen, if you will.
Speaker 2: I have to say that was one of the things
Speaker 2: in reading your book that I was like, wait, I
Speaker 2: think there was just an assumption that it was the
Speaker 2: market crash that caused the great depressions.
Speaker 4: Always everybody fasted, like there's one bad day and then
Speaker 4: somehow there's a great depression. But there's so much in between.
Speaker 2: You know, listen, so many people on your book tours
Speaker 2: like everybody's like, nineteen twenty nine happen again. And I
Speaker 2: do wonder, is there a better, smarter question that we
Speaker 2: should be asking you. Having done all this research and
Speaker 2: taken us back there, making us feel like we.
Speaker 3: Were in the room when it happened, you know that
Speaker 3: we should.
Speaker 4: Be asking you, Well, look, it didn't happen, and then
Speaker 4: I'll tell you, I'll give you actually how you could
Speaker 4: get to nineteen thirty two today, And that sort of
Speaker 4: maybe speaks to this. So one of the lessons that
Speaker 4: came out of nineteen twenty nine, it was actually the
Speaker 4: lesson that Ben Bernanke learned when he was doing his
Speaker 4: Great his thesis on the Great Depression at Princeton is
Speaker 4: when there's a crash or a crisis or a panic,
Speaker 4: the playbook is to throw money at the problem. Maybe
Speaker 4: politically unpopular, but that is the lesson. And he did
Speaker 4: it in two thousand and eight, and by the way,
Speaker 4: we did it again during the pandemic. And I think
Speaker 4: we now think that there is a playbook. And by
Speaker 4: the way, there's also therefore a put on the market
Speaker 4: because we now we have the playbook. The one thing
Speaker 4: that's different this time is if you genuinely believe every
Speaker 4: financial crisis to some degree is a function of debt.
Speaker 4: Too much debt in the system. So far we're all
Speaker 4: talking about corporate debt. Really back then, there was in
Speaker 4: nineteen twenty nine, there was a budget surplus in America.
Speaker 4: Now we have thirty eight trillion dollars The question is,
Speaker 4: let's say we have a crash and the government says,
Speaker 4: you know, we're gonna write a check for five trillion dollars.
Speaker 4: That's the put and whether you believe that there is
Speaker 4: some kind of invisible line that turns into a red
Speaker 4: line for the bond market where they say, you know what,
Speaker 4: we like you guys in America. We'll happy to lend
Speaker 4: you money at three or four times the rate that
Speaker 4: we do today. And that's the interest that you're going
Speaker 4: to pay. And then all of a sudden you actually
Speaker 4: do get into some kind of austerity spiral, and then
Speaker 4: you're living at a twenty five percent unemployment rate in
Speaker 4: the country. That's I mean, when you really started trying
Speaker 4: to get through the permittations, how do you get there
Speaker 4: in this day and age. That's one way. One other
Speaker 4: thing that's interesting today is the technology, as bad as
Speaker 4: it was then, in some cases, could even be too
Speaker 4: good today. And I think we learned that with the
Speaker 4: Silicon Valley Bank of Failure, where someone goes on Twitter
Speaker 4: and says, I'm pulling my account. Now that information is accurate.
Speaker 1: Everybody does it over the weekend on their pe.
Speaker 4: Everybody does it. I used to think, oh, this device
Speaker 4: is so great because if there was a bad piece
Speaker 4: of information be corrected very quickly. But if there's an
Speaker 4: accurate piece of information that's not.
Speaker 3: Good, right, people act on it quickly.
Speaker 1: Well, so let's talk more about the technology today and
Speaker 1: sort of parallels and the idea of maybe irrational exuberance
Speaker 1: and signs of irrational exuberance right now. In reading the book,
Speaker 1: in the nineteen twenties, there were certainly a lot of that,
Speaker 1: but it seemed like it was, you know, more on
Speaker 1: credit and people buying on margin. Nowadays, there's the idea
Speaker 1: of crypto some of that has been kind of pulled back,
Speaker 1: and in just a couple of months actually, since since
Speaker 1: you published the book, we've seen something. There is a
Speaker 1: lot of debt in the crypto market, I mean shocking
Speaker 1: about leverage. So there's there's that side of things. There's
Speaker 1: prediction markets and sort of the money that's going into those,
Speaker 1: the excitement around those private credit and concerns about private
Speaker 1: credit that we've seen in the last couple of months,
Speaker 1: any signs of anything there.
Speaker 4: Look, the private credit business has always concerned me because
Speaker 4: of the transparency of it, or frankly, lack of transparence.
Speaker 4: I think if you were to talk to J. Powell,
Speaker 4: he would tell you that, you know, even the Federal
Speaker 4: Reserve doesn't have a full grasp of how interlinked all
Speaker 4: of the debt and credit is in the private credit market.
Speaker 4: Having said that, depending on what numbers you're looking at,
Speaker 4: you could argue, it's only two trillion dollars two trillion
Speaker 4: dollars a lot of money. But it's not. It's not
Speaker 4: the entire market. It's stem So I don't know if
Speaker 4: it's I don't know if it's systemic. By the way,
Speaker 4: I might worry more today about short term treasuries. I mean,
Speaker 4: by the way, we the United States have been trying
Speaker 4: to sell short term treasuries like crazy because we think
Speaker 4: that we can get a cheaper rate that way. That's
Speaker 4: also a much more complicated place to be if, in fact,
Speaker 4: you actually have to pay it back more quickly.
Speaker 2: One of the questions we were kicking around when we're
Speaker 2: thinking about having our discussion with you, is is Wall
Speaker 2: Street greedier today?
Speaker 4: I don't know if it's greedier today. Frankly, I always
Speaker 4: argue agreed, Look, I think.
Speaker 3: There's greed bad necessarily, I think.
Speaker 4: The lesson for me of writing this book in some
Speaker 4: ways was that they didn't use the phrase back then.
Speaker 4: But this idea of fomo, which by the way, is
Speaker 4: driven in part by this phone and talk and people
Speaker 4: seeing all sorts of things, and by the way, I
Speaker 4: think makes inequality. Actually I don't know if it makes
Speaker 4: it worse, but the perception of it and just the
Speaker 4: visibility of it. But I do think the sort of
Speaker 4: fomo greed envy, I think that's what's driven. That is
Speaker 4: what's driven people for you know, the test of time,
Speaker 4: and that's what it is. Is it is it worse
Speaker 4: today than it was before? I don't know, except and
Speaker 4: maybe this gets to the inequality piece. I think there
Speaker 4: are more people who think that they're effectively unable to
Speaker 4: actually make it, and therefore more willing to take risk
Speaker 4: and more willing to sort of try to grab this
Speaker 4: lottery ticket as opposed to sort of make it over
Speaker 4: time slowly. So so on.
Speaker 1: That the ultra wealthy today versus the ultra wealthy back then.
Speaker 1: And reading the book, there's a lot of you know,
Speaker 1: people have their yachts and in some in some cases
Speaker 1: actually sailing to work in Lower Manhattan on the yacht.
Speaker 1: Absolutely today, the wealthiest people today, how much different are
Speaker 1: their lives versus the ultra wealthy, and not with the technology,
Speaker 1: but I mean what they were able to do versus
Speaker 1: what the normal person is able to do. I mean
Speaker 1: you have, you know, billionaires going to space.
Speaker 2: Now, I think.
Speaker 4: There is a distinction. But look, I think you go
Speaker 4: back and I think of JP Morgan's son, he was
Speaker 4: building the biggest, the biggest yacht at the time. People
Speaker 4: would have thought that's like, you know, the gates, Obezos,
Speaker 4: whatever yacht you're thinking of. I think that there was
Speaker 4: a distinction. But I remember having an interesting conversation oddly
Speaker 4: enough to drop a name with President Obama, interesting maybe
Speaker 4: two thousand and fifteen about the idea that and I
Speaker 4: think this is true in the twenties, but really true
Speaker 4: even just twenty five years ago. I think CEOs people
Speaker 4: of means were oftentimes living in the same neighborhoods with
Speaker 4: the people who worked on the factory floor of their companies,
Speaker 4: and as a result, their kids went to the same schools,
Speaker 4: and they went to the same temples and churches, and
Speaker 4: ran into each other at the same restaurants and markets.
Speaker 4: And I think that there's a cohesion there that's important
Speaker 4: for our culture, and I think that increasingly that has
Speaker 4: come apart.
Speaker 2: We were talking with Andrew Ross sork In the book
Speaker 2: is nineteen twenty nine Inside the Greatest Crash in Wall
Speaker 2: Street History and how it shattered a nation. You know,
Speaker 2: politics got in the way of regulating banks and markets
Speaker 2: back then, and I think it was kind of fascinating
Speaker 2: to see.
Speaker 3: Some of that.
Speaker 2: Is there a parallel to that today when you look
Speaker 2: at the activities Andrew coming out of the White House
Speaker 2: on things like cryptocurrencies, regulatory oversight, Like, I just wonder
Speaker 2: how you see that?
Speaker 4: Well, I'll give you actually a parallel that may seem
Speaker 4: like not like a parallel, but to me is which
Speaker 4: is we're all talking about right now the politicization potentially
Speaker 4: and independence of the Federal Reserve. I actually remember, as
Speaker 4: I was working on this book, looking at the diaries
Speaker 4: of a lot of the people who worked on the
Speaker 4: Federal Reserve on the board, and it was still such
Speaker 4: a new institution born in nineteen thirteen that they were
Speaker 4: concerned about the political implications of either raising or lowering
Speaker 4: interest rates at any given moment. They actually cared about
Speaker 4: the politics now It wasn't that Hoover was telling them
Speaker 4: exactly what to do, but they were so scared, not
Speaker 4: that they were just going to get hauled up in
Speaker 4: front of Congress from making the wrong choice, but that
Speaker 4: the entire thing, which people still called back then the
Speaker 4: experiment at that point, that Congress could effectively disband this
Speaker 4: very idea. And so I raised that only because it's
Speaker 4: clear to me that actually the independence of the FED matters.
Speaker 4: In fact, one of the reasons I think that they
Speaker 4: didn't act more forcefully in nineteen twenty nine and in
Speaker 4: nineteen thirty and after that was in part because there
Speaker 4: was their own concern about the politics, putting aside whether
Speaker 4: the White House was telling them one thing to do
Speaker 4: or the other.
Speaker 3: Do we have that today, I think.
Speaker 4: Less so, or at least up until recently less so.
Speaker 4: I think that maybe in the same way that clearly
Speaker 4: those governors of the FED back then were cognizant and
Speaker 4: nervous about the politics. I mean, I don't think this
Speaker 4: bed things are going to be disbanded, but I think
Speaker 4: that they're cognizant. They are very aware, very aware of
Speaker 4: what the President's saying, what their reputations are going to
Speaker 4: be like as a result what people are saying about them,
Speaker 4: whether they have to do certain things to demonstrate their independence.
Speaker 4: I mean, that's the thing. The idea of demonstrating your
Speaker 4: independence effectively means you might even make a decision that
Speaker 4: might not be the decision you'd otherwise make, but you're
Speaker 4: doing it for your own reputation. So yes, I think
Speaker 4: that all of that is not healthy.
Speaker 1: Does the FED keep that in a few months when
Speaker 1: Jay Powell is no longer FED chair, And look, we
Speaker 1: can't see the future. We don't know who will be nominated.
Speaker 4: I have a view that is maybe contrarian in this space,
Speaker 4: which is there's a board and there's a number of
Speaker 4: people on that board. I've never believed that the entire
Speaker 4: FED is controlled by one human being. It just isn't.
Speaker 4: And so I think it's very important who is running
Speaker 4: it telling you it isn't. But I do think there
Speaker 4: will be people on that board, those who care also
Speaker 4: about their own independence, who will, By the way, another
Speaker 4: reason I think Ja Powell may ultimately stay on that
Speaker 4: board for that reason.
Speaker 3: That you went there. Because we're hearing that a lot, right,
Speaker 3: Because we.
Speaker 2: Keep waiting, we're going to expect to hear an announcement.
Speaker 2: It just keeps getting pushed off, and I just think there's.
Speaker 4: A lot no. No, By the way, it's not that
Speaker 4: I think that jap I was going to be in
Speaker 4: this role for forever. They're gonna let him stay, No,
Speaker 4: but just that you know, he can stay for another
Speaker 4: two years after this on the board, on the board,
Speaker 4: and I think it is more likely that he will stay.
Speaker 4: And in fact, to the extent that this the President
Speaker 4: would somehow like to use that spot for for somebody
Speaker 4: that he'd like to nominate, I would argue this, this
Speaker 4: whole thing has backfired. In fact, you know, I was
Speaker 4: talking to Harvey Schwartz at the New York Economic Club
Speaker 4: yesterday from Carlisle, and he made the point most people,
Speaker 4: most taxi drivers, people in the street didn't care about
Speaker 4: the the idea of FED independence at all. A week ago,
Speaker 4: they didn't even know. I mean, this has been an
Speaker 4: academic conversation for the most part. Now it's like a thing. Yeah,
Speaker 4: and people constituents across the country all of a sudden
Speaker 4: care about this issue. They may start to call their Congress.
Speaker 4: I mean, it's very interesting what's happening.
Speaker 2: Yeah.
Speaker 1: I was actually I've shared this story before, but I
Speaker 1: was with a friend's Sunday night who he follows the news,
Speaker 1: but he's not in financial news or anything, and he
Speaker 1: picks up his phone. He's like, have you seen this
Speaker 1: video from j Powell? I was like, why do you
Speaker 1: care about Jay Powell? And that's how big of a
Speaker 1: deal it was over the weekend.
Speaker 4: And so to me, that's why, in some ways I
Speaker 4: think Harvey Schwartz is probably right. The idea of fetting
Speaker 4: dependence may have actually become more important and potentially even stronger,
Speaker 4: at least in the short term.
Speaker 2: Hey, I want to ask you about the process. I
Speaker 2: remember reading Too Big Defail, loved it and reported through
Speaker 2: it and was able to I think, like you talk
Speaker 2: to some of the people who were in the room
Speaker 2: when it all happened. I remember driving to John mack
Speaker 2: on a panel of course, formerly a Morgan Stanley and
Speaker 2: getting that actual physical tech from Mitsubishi. It felt like
Speaker 2: it felt like, excuse me, you were in the room
Speaker 2: like the way I read it, So to tell me
Speaker 2: how you did that?
Speaker 3: So unform what was the box of things that you've got?
Speaker 4: You're like, oh my gosh, so unfortunately all of these
Speaker 4: people were not allIt.
Speaker 3: No.
Speaker 4: What and you really I spent about eight years, really,
Speaker 4: you know, just combing through boxes and boxes and materials,
Speaker 4: some at libraries, some from families that were involved in
Speaker 4: this universities. I was able to convince, after a lot
Speaker 4: of knocking on doors, the Federal Reserve in New York
Speaker 4: to give me access to the board minutes. That was
Speaker 4: something that they haven't given out over the past one
Speaker 4: hundred years. They, by the way, interesting on their website
Speaker 4: today you can get you know, last month's board minutes.
Speaker 4: You still can't get the nineteen twenty nine board minutes.
Speaker 4: But that sort of became a treasure map for me.
Speaker 4: But a lot you know, when you see two people
Speaker 4: talking to each other in a room, what's oftentimes happening
Speaker 4: is I'm finding a series of depositions. For example, where
Speaker 4: Charlie Mitchell, who's the main character of the book, ran
Speaker 4: National City, which become a city group. You know, he
Speaker 4: would be interviewed in the deposition or in a civil case.
Speaker 4: There were also criminal cases where they would ask him,
Speaker 4: you know, where were you when X happy He said, well,
Speaker 4: I was walking down the street and I got to
Speaker 4: sixty fifth Street, and what did you say to so
Speaker 4: and so, and I said such and such, And then
Speaker 4: they would interview his colleague and they'd say, well, you
Speaker 4: were standing on the corner, what did you say to it?
Speaker 4: And he would say, this is what I said. And
Speaker 4: then they'd interview his wife and so when you though
Speaker 4: all of those quotes are real. And then oftentimes I
Speaker 4: would go and try to find the architecture plans or
Speaker 4: a photograph of the room so I could really try
Speaker 4: to put you in it, and I try to understand
Speaker 4: what the weather was that day and what you know,
Speaker 4: whether it was light out or not, all of these
Speaker 4: sort of little things so that again, if you're trying
Speaker 4: to as a narrator narrator, you can sort of feel
Speaker 4: like you're.
Speaker 2: There, right.
Speaker 1: Was there a time when you were, you know, in
Speaker 1: some sort of archive over the last ten years doing
Speaker 1: this where you got this sort of treasure trove of
Speaker 1: correspondence between two people and you were like, Okay, this
Speaker 1: is what I need, this is the ticket. It's just
Speaker 1: going to illuminate.
Speaker 4: You know what it was? One of it was like
Speaker 4: or is it just so peaceful? No, it was like
Speaker 4: it would either be raining, like you're in the rainforest
Speaker 4: and it was fabulous, or just like the desert for nods,
Speaker 4: and you'd know because you'd go to these places looking
Speaker 4: for stuff and then you'd go through all these boxes
Speaker 4: and there'd be nothing, and then you'd be so depressed,
Speaker 4: and then magically something would happen. I mean there, I
Speaker 4: will say there was one moment for me still that
Speaker 4: I think was just like a true aha, which is
Speaker 4: one of the main characters of the book is Carter Glass,
Speaker 4: of course, is the Glass to Eagle. He was a
Speaker 4: senator in Virginia, and I think I had an impression
Speaker 4: going in. You know today, it's off that bill is
Speaker 4: often held up by Elizabeth Warren other people as this
Speaker 4: sort of pure effort to really break up the banks
Speaker 4: for all the right reasons, and I found a trove
Speaker 4: of correspondence that showed, I think, maybe for the first time,
Speaker 4: that in fact, parts of that bill were actually written
Speaker 4: by a out their banker trying frankly to screw over
Speaker 4: JP Morgan. And you think to yourself about, you know,
Speaker 4: money in Washington and lobbying, and I thought, oh, the
Speaker 4: good old days, they didn't do things like that. And
Speaker 4: it's no different.
Speaker 3: Yeah, exactly what I.
Speaker 1: Want to talk about Evangeline Adams.
Speaker 4: Ie the Evangeline, the.
Speaker 1: Character that everybody wants to talk about. Well, we should
Speaker 1: explain who she has for people.
Speaker 4: Ev Angeline Adams is an astrologer. She had an office
Speaker 4: up at Carnegie Hall on fifty seventh Street, and every
Speaker 4: banker in town would go visit with her. She had
Speaker 4: a newsletter. I mean, I like to think deal book
Speaker 4: is successful. She had a newsletter with one hundred thousand subscribers.
Speaker 4: Back then. People would go visit with her. They'd pay
Speaker 4: fifty dollars an hour to sit with her, and they
Speaker 4: she would ask her what's going on for the stock market,
Speaker 4: and she would tell them. They would go off and
Speaker 4: make their trades, And it was just She's just an
Speaker 4: unbelievable character. Even believe that something like that existed and
Speaker 4: that serious people were, you know, really engaged with what
Speaker 4: she was saying and doing.
Speaker 1: It was almost like she was a confidant for some
Speaker 1: of these people, which was pretty surprising to me.
Speaker 4: I almost think of her as a psychiatrist, like a
Speaker 4: therapist for people back then.
Speaker 2: Yeah, yeah, I mean, just the similarity is like I
Speaker 2: think about kind of the Wall Street South that existed
Speaker 2: right with folks in Florida, and we have that today,
Speaker 2: Tom Springs.
Speaker 4: I mean when I learned that mar A Lago happened
Speaker 4: to be owned by who if Hutton, which is just
Speaker 4: such an indication of what was going on in America
Speaker 4: at that time. And by the way, if Hutton had
Speaker 4: also moved in I don't know if you saw it
Speaker 4: to the Plaza Hotel, the famous Oakroom, which is a
Speaker 4: bar right during profession, had become a brokerage house.
Speaker 2: So do you feel like you have a better understanding
Speaker 2: of what would cause Like Jamie Diamond said, we may
Speaker 2: not get another great financial crisis, but there will be
Speaker 2: a problem. Like do you feel like you know, I
Speaker 2: think because everybody keeps saying could we get this again?
Speaker 3: Is it likely?
Speaker 2: Or do you get a better indication of like what
Speaker 2: we should be watching out for in terms of what marks?
Speaker 3: Is it leveraging? Is it think it's always leveraged.
Speaker 4: It's it's just it's like a one word answer. It's
Speaker 4: probably boring. Leverage is the match that lights the fire
Speaker 4: every single time. You could have all the bad actors
Speaker 4: you want on stage doing all the bad, greedy things
Speaker 4: you could possibly imagine, but there isn't the leverage piece.
Speaker 4: It's very hard to have a true systemic problem, you know.
Speaker 4: I was shocked to know that at the end of
Speaker 4: nineteen twenty nine the stock market was only down seventeen percent,
Speaker 4: And I actually think it was a headfake for a
Speaker 4: lot of politicians who were looking at the market and saying, oh,
Speaker 4: looks like things are better. But most people didn't appreciate
Speaker 4: that during the fifty percent downdraft that had happened prior
Speaker 4: to that, it wasn't just that equities had fallen fifty percent.
Speaker 4: Is that people had taken out loans, oftentimes ten to one.
Speaker 4: So they didn't just ow, oh what the equity was
Speaker 4: that had fallen. They were getting margin calls saying you
Speaker 4: got to sell your house, and so it's that. And
Speaker 4: I think we saw that again in two thousand and
Speaker 4: eight with the subprime crisis, and I mean, you can
Speaker 4: it repeats.
Speaker 2: Well, it's funny, you know, the Joe Kennedy thing about
Speaker 2: like when is it your shoeshine guy?
Speaker 3: Right?
Speaker 2: And I always think about before the GFC being on
Speaker 2: a yoga retreat in Mexico and everyone was talking about
Speaker 2: buying real estate, and I thought, this is like, this
Speaker 2: is just weird, like those little snippets of things as
Speaker 2: an indicator that things are just exuberant irrationally.
Speaker 3: Perhaps is that fair?
Speaker 1: I think it's fair.
Speaker 3: I think Look, I think all of these are, with
Speaker 3: all the data that we have, right to look at
Speaker 3: the mark.
Speaker 4: All these are red flags being thrown on the field.
Speaker 4: But just because maybe I should say yellow flags being
Speaker 4: thrown on the field. And the question is when do
Speaker 4: they turn red? And I think that's the hard part
Speaker 4: to know. You know. Famously, here we are started the
Speaker 4: segment coming out of Jamie Diamonds's interview in two thousand
Speaker 4: and eight. His daughter had come to him, as this
Speaker 4: is all happening and said, Dad, what's a financial crisis?
Speaker 4: And he said it's something that happens every seven or
Speaker 4: eight years. And so I think the truth is, well,
Speaker 4: check your calendar. We might be due.
Speaker 1: We're speaking with Andrew Ross, sork And, author of nineteen
Speaker 1: twenty nine Inside The Greatest Crash in Wall Street History
Speaker 1: and how it shattered a nation? Does Herbert Hoover get
Speaker 1: a bad rap?
Speaker 4: So I have maybe more empathy for Herbert Hoover than others.
Speaker 4: It's not that I think he made the right decisions
Speaker 4: in fact, he made a series of very poor decisions.
Speaker 4: It's just that I think, at least historically, the narrative
Speaker 4: that's been described on him is that he didn't even
Speaker 4: understand what was happening. I think he understood very well
Speaker 4: what was happening. I think he had some of the
Speaker 4: wrong people in his ear, including Andrew Mellon, who was
Speaker 4: his treasure secretary, who had a terrible, unfortunately relationship with
Speaker 4: early on. I think his decision on tariffs was completely misplaced.
Speaker 4: Why did he do that? He did that, by the way,
Speaker 4: for political reasons, because in nineteen twenty eight is he's
Speaker 4: running around the country desperate to get farmers to vote
Speaker 4: for him. He's pledging to them, you vote for me,
Speaker 4: I'll help you.
Speaker 3: Wait wait, wait, are you talking about two thousand and twenty.
Speaker 4: Years and so. But when he hits you know, and
Speaker 4: by the way, nineteen thirty rolls around every economist in America,
Speaker 4: all the bankers are saying, please don't do this, mister president,
Speaker 4: and he says, well, I have to do it because
Speaker 4: I pledge these folks that I would. So you see
Speaker 4: these sort of repeat things. And it's not that he
Speaker 4: didn't know what he was doing. I think he just
Speaker 4: didn't understand. He was also, unfortunately for him, a terrible,
Speaker 4: terrible communicator, right, And I will say maybe this is
Speaker 4: true of all presidents. He had this view that he
Speaker 4: could somehow jawbone people into believing that things were better
Speaker 4: than they really were. And I think we're seeing that now,
Speaker 4: by the way, with the last idllustration that is a
Speaker 4: bipartisan tactic by the White House.
Speaker 2: What's your biggest takeaway from doing this? My understanding is
Speaker 2: you wanted to do this because people used to ask you,
Speaker 2: you know, nineteen twenty nine versus two thousand and eight, But
Speaker 2: tell me.
Speaker 3: You wanted doing this.
Speaker 4: I mean selfishly, I felt like I now understood what
Speaker 4: actually happened. Just as a student of history. I actually
Speaker 4: just genuinely wanted to really get it. I want to
Speaker 4: know who the people were. I wouldn't understand their incentives
Speaker 4: or their motives were why they were doing what they did.
Speaker 4: And I think ultimately the truth is that we are
Speaker 4: all human beings. Maybe it's fomo, maybe it's envy. Maybe
Speaker 4: we all want more, and that's for better or worse.
Speaker 4: What seems to drive people. And then the question is
Speaker 4: when people get a little too confident, you know, can
Speaker 4: you have the humility effectively to step back and realize
Speaker 4: that maybe that confidence could be misplaced?
Speaker 1: You right, that the anidote to irrational exuberance is not
Speaker 1: regulation by itself, nor skepticism, but humility, the humility to
Speaker 1: know that no system is full proof, no market fully rational,
Speaker 1: and no generation exempt. Do you see that humility out
Speaker 1: there today?
Speaker 4: I said it better than the book that I said.
Speaker 4: Now we have the full screen for it, so I
Speaker 4: see there's humility today. I see that humility among some Look.
Speaker 4: I think, you know, we're also talked about Warren buff It,
Speaker 4: Jamie Diamond and David Rubens, and I we're talking about
Speaker 4: Warren Buffett, did think. I think Warren Buffett has a
Speaker 4: remarkable humility, and when it comes to sort of even
Speaker 4: his own confidence, he has humility about that. I think
Speaker 4: there are a number of business leaders and investors who
Speaker 4: absolutely do, and then there's a number of business leaders
Speaker 4: and operators and investors who clearly don't. And I think
Speaker 4: anybody who walks in the door and sits down at
Speaker 4: this table and can tell you exactly what or it thinks,
Speaker 4: they can tell you exactly what's going to happen, probably
Speaker 4: can't