When Wall Street bankers were put on the carpet
Fifty years ago I wouldn't have stayed in the office; I would have taken a 25 -cent taxi to the tension and excitement of the high-ceilinged Caucus Room in the Senate Office Building and listened to Ferdinand Pecora, counsel of the Senate Banking and Currency Committee, asking top leaders of the financial community why there had been a crash. It was there that I saw the circus midget sit in J.P. Morgan's lap.
Today we are just emerging from the worst recession since 1933 and I am a little surprised that there is no congressional follow-up inquiry into the economic system. (After all, only a few years ago Detroit automobiles were dominant; now Americans like as not buy foreign compacts; what happened? But that is nothing like the post-Hoover collapse of course.)
The Pecora inquiry and the Temporary National Economic Committee (TNEC) under Sen. Joseph O'Mahoney could not be stayed. Just last month comments by George E. Reedy, press assistant of Lyndon Johnson, brought it all back to me. ''I first came to Washington as a very, very young newspaper- man,'' Reedy testified. ''One of the first stories I covered was the hearings of the TNEC. We got the picture of our economy as it had evolved in the mid 1930s. I think there is crying need right now for such a thorough-going assessment of our economy.'' How did Pecora do it? He hired a hundred investigators and accountants and sent them coursing through Wall Street like a pack of bloodhounds.
Was it fair? That can be debated even today. But the Banker had till then been one of the most august figures in American life. Now the public - with FDR leading them in his initial galvanic ''Hundred Days'' - demanded to know what had happened. ''Now in 1933 and 1934,'' wrote Cabell Phillips of the bankers in his book ''From the Crash to the Blitz 1929-1939,'' ''their degradation was augmented as the greatest champions among them were forced to confess their fallibility (and often their larceny) in broad public view before a committee of the US Senate.''
An example: The benevolent J.P. Morgan explained under oath that he had not paid any federal income taxes in 1930, 1931, or 1932 nor, in the latter two years, had any of his partners. It happened that on the week he testified the circus was traveling through town and as the committee broke for lunch a doll-like figure climbed into the financier's lap. An astute publicity man engineered the thing. I was seated right beside the witness at the press table and asked the venerable Mr. Morgan how it happened. It developed that he thought the intruder was an artless child. . .
Looking back now, the reporter must confess that they were gaudy days for the press however desperate they were for the world at large. The financiers who trooped before the committee were celebrities, or their lieutenants; there was the story of Ivar Kreuger, the ''Swedish match king,'' a $100 million swindler whose manipulations involved the respected brokerage house Lee, Higginson and Company. There was the story of Samuel Insull, a fugitive from justice aboard his yacht somewhere in the Mediterranean; the collapse of his utility empire ruined thousands. The first Pecora witness (in February 1933) was Charles E. Mitchell, head of New York's National City bank, a leading promoter of the stock market boom. Mr. Mitchell testified that the bank paid him about $1.2 million annually and he paid little or no income tax, and that he had skillfully protected himself by legal devices after the market crash. Commentator Walter Lippmann looked back at it: ''The industrial and financial leaders of America have fallen from one of the highest positions of influence and power that they have ever occupied in our history to one of the lowest.''
There was not much sympathy to go round. A revolution was occurring. The Pecora inquiry exposed an invisible government which had operated in the background. Half a century ago this summer hearings were under way that separated Wall Street from Washington and brought control back to the capital.