Andrew Ross Sorkin

they were oftentimes lending you 10 times that so you could buy into the market.

And so long as the market was going up and for a period of time from the beginning of 1928, for example, to the fall of 1929, the stock market was up some 90%.

It felt like free money for most Americans.

I mean, this was

just this extraordinary boom time and they'd never seen anything like it in their life.

But of course, when things go wrong, when you're effectively buying stock on margin, where they're loaning you money to buy that stock, when it goes down, boy, do you have a problem.

It's more than just a power because oftentimes what you're doing is you're assigning to the bank the prospect of your home or any other kind of collateral that you have.

for that loan and people had never experienced a downturn before.

So they would walk into these brokerage houses and sign away whatever they had, not ever recognizing that the market could go down.

And in fact, that if the stock that they were buying fell, it wasn't just that they were losing money because the stock was 50% of what it was before.

It was that they had taken out such a large loan that they now owed 10 times

what they'd even put down in the first place.

Well, if it happens en masse to thousands of people, all of a sudden the banks don't have enough money and then the banks unto themselves.

start to crater.

And when rumors emerge about the solvency of a bank, the idea that they may not have all the cash that they thought they had, you know, people like in the movie, A Wonderful Life, they literally get in line at the bank to try to take their money out, hoping that they're gonna get their money out before the bank goes under.

And you saw that play out in 1930, 31, 32, 33, to the point where literally 9,000 banks in America failed.

We got to a point of 25% unemployment in the United States, in large part because all of this came unwound.

So Carter Glass was – he was probably the equivalent to maybe like an Elizabeth Warren kind of character in the late 20s.

And he used to rail for years about this thing called Mitchellism.

There was a guy named Charlie Mitchell who ran a bank called National City.