(Courtesy of the Library of Congress )
Herbert Hoover launched an investigation of the stock market in 1932 after learning that a "bear raid"--a move to drive stock prices down for profit--was in the offing. The Senate Banking and Currency Committee called as its first witness the imperious president of the New York Stock Exchange, Richard Whitney. Whitney was a bond dealer with close ties to J.P. Morgan and Company. Like FDR, he went to Groton and Harvard. Unlike FDR, he believed no reform was necessary. "You gentlemen are making a great mistake," he informed the senators. "The Exchange is a perfect institution." (McCraw, 194)
After the Democrats took over the committee, Whitney met his match in the person of chief counsel Ferdinand Pecora. Pecora was a pugnacious Sicilian-born New Yorker with a sharp mind and a quick tongue. Pecora made the hearings more than an investigation of the causes of the crash; he sought to discredit big business and Wall Street so much that fundamental reform would be possible. As an ethnic American and an outsider to the gentlemen's club that was American finance, he had no qualms about challenging his "betters."
Pecora began by looking into Samuel Insull's holding companies, but the high point of the hearings came when he looked at the House of Morgan. Pecora's investigators turned up a "preferred list" of highly placed Americans allowed by the beneficence of J.P. Morgan and Company to buy low and sell high on insider information. Pecora succeeded in fanning public outrage, making it politically possible for FDR to make good on his promise of financial reform.
