The Return of the Bankster

Ron Chernow had an Op-Ed in the January 2009 New York Times, Where is Our Ferdinand Pecora? The issues raised by Chernow are as relevant today as they were in 1929 after the Wall Street Crash. Ferdinand Pecora was chief counsel for the Senate committee hearings in the 1930's regarding the investigation of Wall Street banking and stock brokerage practices.

BARACK OBAMA has assigned a top priority to financial reform when the new Congress assembles today. If history is any guide, legislators can perform a signal service by moving beyond the myriad details of the rescue plans to provide a coherent account of the origins of the current crisis. The moment calls for nothing less than a sweeping inquest into the twin housing and stock market crashes to create both the intellectual context and the political constituency for change.

Ted McGrath; Photograph of Ferdinand Pecora by Associated Press

For inspiration, Congress should turn to the electrifying hearings of the Senate Banking and Currency Committee, held in the waning months of the Hoover presidency and the early days of the New Deal. In historical shorthand, these hearings have taken their name from the committee counsel, Ferdinand Pecora, a former assistant district attorney from New York who, starting in January 1933, was chief counsel for the investigation. Under Pecora’s expert and often withering questioning, the Senate committee unearthed a secret financial history of the 1920s, demystifying the assorted frauds, scams and abuses that culminated in the 1929 crash.

The riveting confrontation between Pecora and the Wall Street grandees was so theatrically apt it might have been concocted by Hollywood. [...]

Pecora not only documented a litany of abuses, but also paved the way for remedial legislation. The Securities Act of 1933, the Glass-Steagall Act of 1933 and the Securities Exchange Act of 1934 — all addressed abuses exposed by Pecora. It was only poetic justice when Roosevelt tapped him as a commissioner of the newborn Securities and Exchange Commission.

Our current stock market slump and housing bust can seem like natural calamities without identifiable culprits, creating free-floating anger in the land. A public deeply disenchanted with our financial leadership is desperately searching for answers. The new Congress has a chance to lead the nation, step by step, through all the machinations that led to the present debacle and to shape wise legislation to prevent a recurrence.

The remedial legislation of the 1930's which confronted the banking abuses that were exposed by the Pecora hearings are the very same stopgaps that were removed in the 1990's. With bipartisan legislation that was signed into law by ihen President Bill Clinton, these safeguards were reversed. Thereby the door was opened to the abuses of banks and financial institutions that are prevalent today.

There is a lesson to be learned. Congress are you educable?