Congress should investigate Wall Street as it did after 1929

Posted by AzBlueMeanie:

Chris in Paris at Americablog raises the question Should Congress investigate Wall Street as they did after '29? Hell yes! And start sending these corrupt "masters of the universe" to jail. Chris provides the historical context:

Most relevant to today, Congress has investigated the causes behind economic downturns, using the power of investigation to raise public concern and improve knowledge of the economy.

This was the case with the famous Pecora Commission, the Senate Committee on Banking and Currency formed in the period between President Franklin Delano Roosevelt's election in November 1932 and his inauguration in March. It was a commission that lasted through May 1934.

The commission set out to discover what had led to the stock market crash in 1929. Committee Chairman Duncan Fletcher of New Jersey placed Ferdinand Pecora, the committee's chief counsel, in charge of the investigation.

Pecora, a tough New York prosecutor, proved to be a masterful interrogator. "I looked with astonishment," said his staffer John Flynn, a former journalist, "at this man who, through the intricate mazes of banking, syndicates, market deals, chicanery of all sorts, and in a field new to him, never forgot a name, never made an error in a figure, and never lost his temper."

Pecora brought some of the most prominent figures from Wall Street to speak with the commission and to answer difficult questions.

Americans learned that the tycoon J.P. Morgan had not paid income taxes for three years. Even worse, tax evasion was common among the wealthy. In his new book on FDR's Hundred Days, Adam Cohen recounts how the hearings revealed how National City Bank had caused enormous problems by mixing commercial and investment banking, reaping huge profits as customers were persuaded to make terrible investments.

Preferential treatment on stock, Americans learned, was routine as certain clients on Morgan's "preferred list" were given the best offers. By the time it closed, the commission produced thousands of pages of data about the inside operations of the financial world.

As a result of the Pecora Commission, public pressure for banking reform greatly intensified. The 1929 crash seemed like much less of a mystery when Pecora was done.

Congress passed historic banking regulations during the New Deal, including the Glass-Steagall Banking Act of 1933, the Securities Act of 1933, and the Public Utility Holding Company Act of 1935, all of which vastly expanded the role of the federal government in overseeing and regulating Wall Street.

One response to “Congress should investigate Wall Street as it did after 1929

  1. Thanks for giving props to Ferdinand Pecora, a man who was (justifiably) considered a saint in my neighborhood of Brooklyn when I was growing up in the 50s and 60s. He ran for Mayor of New York City in 1950 and lost (to Vincent Impellitiri) but he had a great post-commission career as a judge, attorney, and of course, as a commissioner of the SEC.