The call money market was the engine of the 1920s stock market boom, providing short-term, callable loans that enabled widespread buying on margin. A “callable” loan is one which can be called in by the creditor at any time, in contrast to a fixed-term loan. As 1929 discusses, investors could purchase stock by depositing only a fraction of the price and borrowing the rest from their broker. By 1929, this mechanism was the primary source of the high-risk leverage that magnified both the market’s ascent and its eventual collapse. The loans were financed by “call money,” supplied by banks and, increasingly, by large corporations seeking high returns on their excess cash; it was largely unregulated. The scale of this practice was immense by 1929, with demand pushing call interest rates as high as 20% during moments of panic. This system proved disastrously unstable during the crash.

As instability and reduced confidence led to falling stock prices, brokers issued “margin calls,” demands that investors provide more cash so that a minimum equity threshold is maintained, as protection against losses. When investors could not pay these, brokers were forced to liquidate their holdings at any price. This wave of forced selling created a cycle of panic. The role of margin buying was a central point of conflict at the time, with figures like Mitchell defending it as a way to democratize investment while critics like Senator Glass condemned it as a dangerous and illegitimate use of the nation’s credit.

The Federal Reserve’s “direct pressure” policy was a strategy of moral suasion adopted in early 1929 to restrain speculative credit without raising the official discount rate (the benchmark interest rate). The board in Washington, DC, feared that a rate hike would harm legitimate business activity and instead chose to admonish member banks to curb their lending for stock market speculation. This approach proved ineffective and revealed deep fractures within the US central banking system. The Federal Reserve Bank of New York, led by George L. Harrison, favored a rate increase and clashed with the Board’s policy.

The strategy’s failure became a public spectacle during the market break of March 26, 1929. As the call money rate spiked, National City Bank chairman Mitchell publicly defied the Fed’s warnings and pledged to provide funds to the market. The board, though privately infuriated, remained silent, a move that was widely interpreted as a concession to Wall Street. This episode severely strained the Federal Reserve’s credibility and authority, energizing congressional critics like Senator Glass and building momentum for the sweeping legislative reforms that would follow the crash.

Investment trusts were a defining financial innovation of the 1920s, presented in 1929 as a symbol of the era’s speculative engineering. These entities were essentially leveraged holding companies that raised capital from the public to invest in a diversified portfolio of securities. This enabled smaller investors to have new access to the stock market. However, their structures often involved issuing their own layers of debt, including shares of other investment trusts. This practice created pyramids of leverage that magnified both gains and losses, increasing risk.

The book highlights how famous trusts, such as the Goldman Sachs Trading Corporation and the Alleghany Corporation, soared in value based on the prestige of their backers before collapsing during the crash. These trusts also facilitated the cronyism of the era, as shares were often offered at a discount to a “preferred list” of influential insiders. The catastrophic losses suffered by the public in these vehicles destroyed faith in Wall Street’s supposed expertise and became a key exhibit in the Pecora Hearings, justifying the need for greater transparency and the separation of banking functions mandated by the Glass-Steagall Act.

The Pecora Hearings were a series of Senate investigations, beginning in 1933 and led by prosecutor Ferdinand Pecora. They were designed to publicly expose the practices of Wall Street’s most powerful figures. The hearings are portrayed in 1929 as the dramatic climax of the public’s search for accountability after the crash. Pecora’s sharp interrogations probed banks’ roles in securities dealing, the conflicts of interest in their operations, and the insider advantages enjoyed by the financial elite.

The testimony produced revelations that galvanized public anger and created the political will for reform. Key moments included National City Bank Chairman Mitchell’s admission that he sold stock to his wife to create a tax loss, and the finding that the partners of J.P. Morgan & Co. had used similar legal loopholes to pay no income taxes in 1931 and 1932. The hearings also revealed the existence of “preferred lists,” through which Morgan partners offered influential politicians and executives access to stocks at discounted prices, essentially a form of inducement. These disclosures provided the crucial momentum needed to pass the stringent provisions of the Glass-Steagall Act and led directly to the creation of the Securities and Exchange Commission (SEC).