The Great Crash 1929

"The book shows his talent as a popular economist. It’s not chiefly a work of economics , though it does analyse the causes of the Great Depression . It’s more a work of history, almost of journalism. For an academic, Galbraith writes unusually well. When you open this book, it starts with real estate speculation in Florida. Everybody is rushing down there because they believe Florida real estate is going to have an enormous boom. They are speculating in derivatives on it. The parallels could hardly be more precise. “There’s nothing abstract or complicated about greed, vanity and weakness” Galbraith also draws out well the way in which one of the top bankers of the day, Charles Mitchell of National City Bank, together with Richard Whitney, head of the New York Stock Exchange, contrived to prolong the period of financial speculation. After the crash, these two became the symbols of the financial class’s malfeasance. They were prosecuted and reputationally ruined. Whitney was sent to Sing Sing [prison]. There, the parallel breaks down. No senior banker has faced such harsh justice this time. Galbraith didn’t go so far as to say that it could never happen again. But he did conclude that Wall Street would never be trusted in the same way. Instead, America would trust new institutions and regulations – first and foremost the Securities and Exchange Commission. But if you fast-forward to the past decade, you find that the SEC had become ineffectual. And the Federal Reserve, at least under Alan Greenspan, was treating derivatives as though they were reducing and distributing risk, rather than creating it. So with benefit of hindsight, you have to say that Wall Street came through the Great Crash without being fundamentally changed."