1929 vs 2025: Andrew Ross Sorkin on Crashes, Bubbles & Lessons Learned

The 1929 boom was built on a new mass-credit system that turned ordinary Americans into leveraged stock buyers. After GM pioneered installment lending in 1919, Sears followed for appliances and National City extended it to stocks, with customers sometimes borrowing $10 for every $1 invested amid almost no underwriting, disclosure rules, or SEC.

The financial system itself was speculating with other people’s money, not merely serving reckless retail traders. Banks used depositor funds, corporations loaned balance-sheet cash into markets, and the Fed—aware of the danger—avoided forceful rate action, instead issuing a vague appeal to stop speculative lending that banks struggled to interpret.

Glass-Steagall emerged from bank rivalry and lobbying as well as public reform, complicating its later reputation as a clean consumer-protection law. Sorkin says Chase and Rockefeller interests pushed measures that weakened J.P. Morgan, while Carter Glass privately complained that bankers were taking over his bill.

The crash did not immediately produce Depression-era politics because many Americans initially believed the downturn would reverse. The market finished 1929 down about 17%, Hoovervilles appeared mainly by 1932, and the deeper rupture followed policy failures including tax increases, Smoot-Hawley tariffs, and the Fed’s refusal to flood the system.

Sorkin does not see today as a replay of 1929, but he sees leverage migrating to less transparent corners of the economy. Big AI companies are largely funding investment with cash, while real estate, energy infrastructure, and private credit carry more leverage; he also flagged potentially circular financing around major chip deals.

AI may be supporting far more of current U.S. growth than headline GDP makes obvious. The discussion cited estimates that data-center spending contributes roughly 100–200 basis points of GDP, while excluding the Magnificent Seven makes the broader economy look materially weaker—raising the stakes if AI investment slows.

The central regulatory conflict is no longer simply protection versus speculation, but protection versus access. Depression-era rules restricted private investments to wealthier “accredited” investors because they could supposedly absorb losses; today, excluded investors increasingly see those safeguards as barriers that reserve some of the best opportunities for the wealthy.