Like thunderheads roiling on the horizon, the clamor has been building as more and more Americans want to know exactly what, and who, brought on the worst economic crisis since the great depression. What happened and how do we keep it from happening again?
Congress has finally acknowledged the outcry and is supporting some 21st century version of the "Pecora hearings."
"Pecora hearings?" That's right, as in Ferdinand Pecora, the savvy immigrant from Sicily who became a Manhattan prosecutor with a memory for facts and figures that proved the undoing of a Wall Street banking world gone berserk with greed and fraud.
In the early 1930's, during the Great Depression, and under threat of subpoena, one tycoon after another, including J.P. Morgan Jr., was hauled before the Senate Banking Committee and grilled by Pecora, the committee's chief counsel.
Here he is on the cover of TIME Magazine in June 1933. "Wealth on Trial" reads the headline inside, where Pecora is described in ethnic stereotypes of the day as "The kinky-haired, olive-skinned, jut-jawed lawyer from Manhattan." To their shock, pompous financiers, unaccustomed to having their actions or integrity questioned by anyone, much less some pipsqueak legalist making $255 a month, were no match for his cross examination.
The revelations of the Pecora hearings and the public's anger led to sweeping reform, reining in the high-handed, free-wheeling banking industry. Those reforms stabilized our financial world for half a century, until the titans of finance and friendly politicians began to dismantle them.
Ferdinand Pecora, your time has come again. Your biography is being written by this man, Michael Perino. A scholar of Law and Securities Regulation, Michael teaches at St. John's University here in New York, and has been an advisor to the Securities and Exchange Commission, the government agency that was created because of the Pecora investigation.
And, returning to the JOURNAL is Simon Johnson, former Chief Economist at the International Monetary Fund who now teaches at MIT's Sloan School of Management. Just this week Simon Johnson co-founded "The Hearing," a new economics blog at washingtonpost.com.
Transcript below the fold.