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Is Ferdinand Pecora Rolling Over in His Grave?

Posted by Larry Doyle on November 19, 2010 6:57 AM |

Where are our statesmen?

Where are the individuals who would choose to sacrifice personal gain for our national welfare? I am not talking about mere public policy implementation. I am talking about those who would choose to pursue and embrace the truth while exposing the incestuous Wall Street-Washington relationship that has brought our nation to its knees.

Where is today’s Ferdinand Pecora when we need him? I shudder to think that the great Pecora, who led the investigation of Wall Street practices which brought on the Great Depression, might be rolling over in his grave right now. Why’s that?

Reports released yesterday indicate that the Financial Crisis Inquiry Commission (FCIC), this generation’s Pecora Commission, is not exactly embracing Ferdinand’s ‘take no prisoners’ approach, but likely playing politics. Are you kidding me? America is brought to its knees and the commission charged with exposing the people and practices behind this devastation is locked in a political dogfight? While I am not surprised, I am enormously disappointed.

Perhaps the FCIC will surprise me and all of us, but for now my confidence level in the FCIC has dropped precipitously. While little attention is brought to this story in our domestic media, the Financial Times yesterday highlighted, Crisis Panel Delays Report Amid Rancor:

The Financial Crisis Inquiry Commission has delayed its report into the causes of the crisis amid rancour between members of the panel.

Set up by Congress as a version of the widely praised Pecora commission, which in the 1930s studied the causes of the Great Depression, the FCIC has told the White House it wants to delay publication of the report from December.

….the effectiveness of the investigation and whether all members of the FCIC will sign off on the final report when it is delivered in January is still in doubt.

In particular, Republican members have wanted more of a focus on the government’s role in the crisis and are concerned that Mr. Angelides, a Democratic appointee, is focusing too much on Wall Street’s role, according to people familiar with the committee.

Some have argued that the panel is yet to get into substantive discussion on the causes of the crisis and say they do not believe that will happen.

WOW. Is this the best America gets?

A nation brought to its knees and the commission charged with pursuing the truth after eleven months “is yet to get into substantive discussion on the cause of the crisis.” And people are surprised as to why The Tea Party is thriving? Boy, what would our friend Ferdinand have to say about this state of affairs? If only we could bring him back.

Well, let’s do the next best thing. Let’s go back and take a peek at the preface to Ferdinand Pecora’s book Wall Street Under Oath. As you read Pecora’s words, I would ask you to reflect upon today’s money-changers on Wall Street and also today’s financial policemen in Washington. Pecora wrote: 

Under the surface of the governmental regulation of the securities market, the same forces that produced the riotous speculative excesses of the “wild bull market” of 1929 still give evidences of their existence and influence. Though repressed for the present, it cannot be doubted that, given a suitable opportunity, they would spring back to pernicious activity. Frequently we are told that this regulation is throttling the country’s prosperity. Bitterly hostile was Wall Street to the enactment of the regulatory legislation. It now looks forward to the day when it shall, as it hopes, resume the reins of its former power.

(LD’s comment…please do not tell me that the Dodd-Frank financial regulatory reform will truly make an impact. Wall Street is already hard at work gutting the Volcker Rule to limit proprietary trading!!)

That its leaders are eminently fitted to guide our nation, and that they would make a much better job of it than any other body of men, Wall Street does not for a moment doubt. Indeed, if you now hearken to the oracles of The Street, you will hear now and then that the money-changers have been much maligned. You will be told that a group of high-minded men, innocent of social or economic wrongdoing, were expelled from the temple because of the excesses of a few. You will be assured they had nothing to do with the misfortunes which overtook the country in 1929-1933; that they were simply scapegoats sacrificed on the altar of unreasoning public opinion to satisfy the wrath of a howling mob blindly seeking victims.

These disingenuous protestations are, in the crisp of a legal phrase, “without merit.” The case against money-changers does not rest on hearsay or surmise. It is based upon a mass of evidence, given publicly and under oath before the Banking and Currency Committee of the United States Senate between 1933-1934, by The Street’s mightiest and best-informed men. Their testimony is recorded in twelve thousand printed pages. It covers all the ramifications and phases of Wall Street’s manifold operations. The public, however, is sometimes forgetful. As its memory of the unhappy market collapse of 1929 becomes blurred, it may lend at least one ear to the voices of The Street subtly pleading for a return ” to the good old times.” Forgotten, perhaps, by some are the shattering revelations of the Senate Committee’s investigations, forgotten the practices and ethics that The Street followed and defended when its own sway was undisputed in the good old days.

After five short years, we may now need to be reminded what Wall Street was like before Uncle Sam stationed a policeman at its corner, lest, in time to come, some attempts be made to abolish that post. It is in the hope of rendering this service, especially for the lay reader unfamiliar with the terminology and conduct of The Street, that the author has endeavored, in the following pages, to summarize the essential story of that investigation—an inquiry which cast a vivid light upon the unhabitated mores and methods of Wall Street.

Ferdinand Pecora
New York City
February, 1939

Larry Doyle

The FCIC NEVER responded to any of the details I shared with them on a wide array of topics. Do we know if the FCIC ever used its subpoena power?

Related Commentary
Sense on Cents/Financial Crisis Inquiry Commission

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I have no affiliation or business interest with any entity referenced in this commentary. As President of Greenwich Investment Management, an SEC regulated privately held registered investment adviser, I am merely a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • Tea Party

    Powerful stuff, and you hit the right chard about why the Tea Party is thriving. A pox upon both their houses on Wall Street and in Washington.

    “Take No Prisoners”

    • fred

      The Tea Party is not thriving, it is simply filling a void. The citizenry of this country has become disenchanted with both ruling parties and is reaching out for an alternative. Where is the voice of the Tea Party, what are the moral pricipals for which it stands? Change is not enough, we need change with direction, sacrifice with purpose.

      We need an accurate accounting of what happened, where we stand now, and where we should go from here.

      Let’s stop this game of exchanging one bubble for another, lives are ruined in this process; these are not the prudent actions of a great nation!

      As an example, some questions that still need to be answered concerning mortgage back securities:

      Who are the creditors, why are they being protected at taxpayer expense, how are these securities being valued, is there standardized methodoligy, what is their mark to market valuation? Surely, with the enormity of the crisis, there was wrongdoing, who has been prosecuted? Who will be prosecuted? Who benefited financially from these transactions? why aren’t we demanding repayment of some or all of the profits?

      Why is the Fed now loading their balance sheet with these toxic assets? Under what authority, for what purpose, and why, for Gods sake, pay full value? Why is the Feds balance sheet insured by the federal gov’t when they can purchase “toxic” MBS, and “toxic” foreign gov’t issues? How will the Fed next exploit it’s authority, by purchasing “toxic” munis?

  • LD


    For an effort that has only been in the making for 18 months, I would put the Tea Party in the thriving category. I do not disagree that it has a LONG way to go to gain the necessary credibility and depth BUT as a grassroots organization they are already a force.

    I agree with all of your other points.

    • fred


      Thriving denotes continued growth beyond one or two election cycles. I hope the tea party becomes a viable third party of lasting significance, only then will it encounter its greatest challenge; to avoid the pitfalls of its own success.

      How will it avoid the pitfalls of it’s success? it must define and internalize more clearly the moral and fundamental principles for which it stands.

      Less government, lower taxes, free capital markets, sounds great but not enough!

      The Tea Party could do worse than to borrow the Sense on Cents driving principles of honesty, integrity, and transparency and maybe even include a few others such as responsibility, accountibility and a committment to the interest of it’s majority citizenry.

      Ironically, future Tea Party success may be predicated on this countries continued failures.

  • phil trupp

    Today’s politics, by any name or stripe, is a part of the problem. Politics has enabled the crisis; and, what is worse, politics blurs “crisp” conclusions as to cause and effect.

    The destructive and diseased portions of Wall Street were summed up accurately in 2009 by William F. Galvin, secretary of state and chief securities regulator of Massachusetts. In testimony before the House Financial Services Committee, Galvin said the following:

    “The auction rate securities scandal is just one more variation on a recurring theme. And that theme is the documented belief of large segments of the financial-services industry that they are above the law, entitled to special privileges, entitled to engage in conflicts of interest, and they have no duty or obligation to average investors.”

    Going beyond the ARS scandal, Secretry Galvin later elaborated, concluding that Wall Street believes it has no duty or obligation to the nation as a whole. This was proven in 1929 and in 2008, and many dates in between. The cycle of social and economic destruction will continue so long as the “new normal” accepts corruption at the corporate level, and enablement of that corruption by political leaders and regulators. Like Pecora, Diogenes is still in search of honest men and women.

    None of this should surprise us. Thomas Jefferson famously warned that “banking institutions are more dangerous to our liberties than standing armies.” As a nation, we knew from the very beginning that a mix of corrupt political leadership and what is naively viewed as “free market capitalism,” left unchecked, was bound to morph into today’s financier-driven monopology, oligarchy and financial anarchy.

    We face a dualistic threat: political chaos driven by special interests, and the regretable acceptance of destructive, almost pathological markets.

    Discussions of politics has blinded our vision of the “political economy,” which is no longer a study of weights and measures and sound governance, but rather an obscene babble focused on who is–or should be–“on top.”

    Our politicians have no clothes. Wall Street has always been a naked predator.

    Will any political party come to the rescue? Not in the present confused environment. Ethics, such as they are, have become impotent bumper stickers.

    America needs to grow up, and soon! A “Lord of the Flys” culture, ruled by self-interest and untamed survivalism, reveals how out of control we have become. The best and brightest certainly are not on Wall Street, and you won’t find them on Capitol Hill. The best and brightest are among us, in the heart of our culture. We need to look inward and apply what is now a silenced wisdom of reason and will.

    Or am I asking too much?

    • fred


      Your not asking enough! Defined values must move from the bumper sticker to our hearts, minds, and beliefs.

      “Silenced wisdom of reason, will”, and morality.

      Powerful Stuff!

      “Who you are shouts so loudly in my ears that I can’t hear a word your saying”

      • Fred,

        Where did that last quote come from? Intriguing.

        I didn’t want to use the word “morality” because I think of morality as tied indirectly to ethics–except in one important way: morality can be abstract, while ethics are like laws: they are written down, giving all of us a chance to learn and understand them.

        • fred


          I think the original quote can be attributed to Ralph Waldo Emerson, the substitution of “who” for “what” may be my own deviation from the originl quote, though I can’t be certain.

          To me, morality (using your definition), would be quite fitting. As with reason and will, all three are best suited to abstract rather than specific interpretation. Abstraction lends a sense of universal timelessness. you
          just “know it when you see it” and “it’s as true now as it always was and always will be.

          • Fred,

            Thanks for the Emerson citation. It’s one I will carry around with me.

            I wish I had time to thoroughly discuss the “abstract.” You make a good point, although by definition the abstract isn’t specific or concrete. I think it was Ike who said of pornography that he couldn’t define it, but he knew it when he saw it. Does this fit your definition?

            Always a pleasure to have your thoughts and insight.

        • fred


          The original quote was Ralph Waldo Emersons, the subtitution of “who” for “what”, I can’t recall with certainty, but it may be my own variation of the original quote.

          As for your comment concerning the use of morality in describing wisdom, I like the addition, it adds a 3rd leg to the stool, a sense of stability.

          Interestingly, I’ve had a similar sense of “incompleteness” concerning the Feds dual mandates for some time now, something is missing. Inflation Targets and Full Employment without a “counter balance”, in my opinion, are not completely viable.

          Returning to your comments morality not easily being defined…that’s precisely why it’s inclusion is so fitting; wisdom and will without morality lacks substance, The inclusion of morality lends a sense of “universal truth to a sense of timelessness”, as it is now, always was and always will be, a complete thought without weakness, trinity.

  • JL

    Larry – – –

    I think comparisons of the 2010s with the 1930s is just starting. I expect a different course of action, some of the differences definitely to the benefit of the current period. But when it comes to structural economic adjustments I think the modern period may fall short of the success experienced in the 1930s (and even with respect to the Teddy Roosevelt era earlier).

    Perhaps we needed to fall further into the abyss to get any traction on needed system structure adjustments.

  • Rob

    The fact they have done nothing for 11 months is pathetic. Thank you LD for bringing this to light. You are 100% correct that the DF act does nothing. FT highlighted the work-around to the Volker rule last week. It is extremely sad that greed still wins over the good forces of wall street i.e. fostering innovation and creating value through sound investments.

    I am going to see Inside Job tonight. It is supposed to be beyond eye opening with regards to how in bed ws is with d.c.

    • LD


      Is there anything mnore reviling than the stench and residue of an incestuous relationship?

      I think not. Just thinking of it makes my skin crawl.

      I first referenced the incestuous nature of the Wall Street-Washington relationship in early 2009. The fact is the smell and odor remain overpowering to this day.

  • Michael

    Thanks for this great post on Ferdinand Pecora.

    Pecora ended his memoirs, Wall Street Under Oath, with these words, which are also all too relevant today:
    “These laws are no panacea; nor are they self-executing. More than ever, we must maintain our vigilance. If we do not, Wall Street may yet prove to be not unlike that land, of which it has been said that no country is easier to overrun, or harder to subdue.”

    For those interested in reading more about Pecora, take a look at my book The Hellhound of Wall Street: How Ferdinand Pecora’s Investigation of the Great Crash Forever Changed American Finance (Penguin Press 2010).

  • Esteban

    If you read a good biography of JP Morgan, you’ll find that Pecora let it be known through intermediaries that he’d go easy with his hearings in consideration for munificent contributions. JPM declined.

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