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Cynthia Kouril, Host:
The country is in the grip of a great financial crisis. People face record unemployment.Wall Street executives are described as geniuses who are fully worth the exorbitant salaries and bonuses they are paid, but those salaries are coming out of money that should rightfully go to their shareholders.
Banks are on the verge of collapse as a result of “innovative” new “financial products” that in reality are incestuous self dealing and market manipulation. Millions of dollars have been lost by investors who bought these new financial products believing them to be safe, but in reality they were backed by next to nothing.
You think I’m talking about mortgage backed securities and counter-party trades, don’t you?
Attempts at reform by a few brave souls in Washington are met with political isolation and derision from the Masters of the Universe. It seems that there is no political will to rein in the excesses of Wall Street or to impose meaningful regulation.
Now you are sure I’m talking about today, aren’t you?
The year is 1933. An unlikely former ADA from Manhattan named Ferdinand Pecora in named as the 4th in a series of counsels to the Senate Banking and Currency Committee, which had held a year of unproductive and under reported hearings that moved nary a vote in favor of reform. In just 10 days of riveting hearings during the lame duck session at the end of the Hoover administration, Pecora managed to put on an instructive passion play that captured the imagination of the public and Capitol Hill and presented a narrative that was both easy enough to explain in a 400 word newspaper story and dramatic enough to ensure that such stories were written in bulk, every day of the hearings.
Reform proposals that were laughed off in Washington just a few months earlier were now getting serious hearings in the waning days of the congressional session.
Investigators before Pecora had hesitated to rip the band-aide off the festering wound on the American and world economy fearing that it would further erode public confidence in the banking system; we hear that same argument today. As New York Herald Tribune columnist Walter Lippman wrote:
The much debated question as to whether Congressional exposure of the [the President of Citibank’s] conduct of the National City Bank was in the public interest can now be answered clearly in the affirmative. It is, of course, true that the exposure accelerated the banking crisis by adding to the popular distrust of banks. But the exposure has proved to be a good thing, not merely in the general sense that wrongs should always be exposed whatever the consequences, but in the specific sense that the way has been opened to a more thorough-going reconstruction. The crisis has not only made it possible for the Administration to reform the banking system drastically, but it has produced, or at least brought into the open, a recognition of evils and a desire for reform within the banking community itself.
It will not surprise you to learn that Pecora’s contract as committee counsel was renewed and the hearings continued through the first year of FDR’s new administration.
I have long been a fan of Ferdinand Pecora. The transcripts of the hearings he ring-mastered are page turners. They read like a movie script—I should know, I’ve read them too many times. The questions he asked are as timely today as they were in 1933. As a direct result of the influence the Pecora Hearings had on American opinion, the Securities Act of 1933, the Banking Act of 1933 (known around these parts as Glass-Steagall) and the Securities Exchange Act of 1934 overcame the political resistance that had once seem to doom their passage and they were signed into law.
Professor Michael Perino, the Dean George Matheson Professor of Law at St. John’s University Law School, has written a study of the man who brought about this miraculous change in public opinion and politics by understanding how a trial lawyer crafts a story for the mind of the jury; in this case, the jury was the American public and Congress. This biography is full of little known personal details about the times and events that shaped Pecora and the path that brought him to his pivotal service in room 301 of the Senate Office Building.
It contains the back stories and side stories of men and institutions that dominated the Crash of ’29 and the Great Depression. It’s got politics, gilded age opulence, Depression age poverty, and up by the bootstraps Horatio Alger story, a little sex and a lot of courtroom drama. If it weren’t all true, it would make a great historical novel.
Most of all, the parallels with today smack you in the face on almost every page.