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CounterPunch
January
11, 2003
Ferdinand Pecora:
An American Hero
By JACKIE CORR
Ferdinand Pecora is no longer with us.
The spiritual and moral landscape of
the country is again littered with the rot and decomposition
of licentiousness business excess while the stench of a permissive
corporate morality hangs as a great pall over our culture, our
communities, and our politics. But we have been to this place
before and as a nation have a great experience that can now be
called upon. The time has come to resurrect a past American hero,
a man who a short time ago seemed irrelevant and forever lost
to American history.
So let us return to the year 1933, the
fourth year of the Great Depression. The setting is Washington
D.C. The leading man in this drama, and one of the lost stalwarts
of the American way of life, is Ferdinand J. Pecora.
It is February, 1933 and President Herbert
Hoover and many others who had been valiant defenders of the
Wall Street way of life are packing their bags. And with a new
congress on the way a revitalized Senate Banking and Currency
Committee is about to begin hearings.
To the lords and ladies of America's
state religion, upholders of the dogmas of the hard righteousness
of the Marketplace, even the threat of a public forum on the
causes of the Depression was considered an outrage. And now,
the hearings have become a reality bringing fear and paranoia
to the Wall Street temples and mansions.
And for good reason. Not only would this
be a public show trial but who could predict what kind of reaction
the bankers in the dock might trigger?
Would the rabble rise up and hang their
betters from the poles of street lights? Were gold, jewelry,
and property deeds to be seized? And what about Moscow and the
Communists? Everybody knew they were behind everything just as
everybody knew Franklin Roosevelt was crippled up from the syphilis
he got from Eleanor. And why all the secrecy about the Jewish
blood in that family? No wonder things were as they were.
And so it was when the Wall Street banks
were called to appear before Ferdinand Pecora in late February
of 1933. Since 1929, forty per-cent of all American banks had
closed while the accounts of nine million individuals and families
were forever lost. The New York Stock Exchange was a fifth of
its 1929 value and by the time the new president was inaugurated,
there would be seventeen million unemployed.
Even the music was Depression music and
"Brother, Can You Spare A Dime?'' was America's most popular
song . And squalid, crowded, and unsanitary refugee camps were
a common sight outside of American cities and towns. From these
camps, men, women, and even children searched and begged for
food, clothes and work. The refugee camps, in honor of the President,
were called "Hoovervilles." Old newspapers. which many
Americans used to shield themselves from the weather or stuff
in their shoes were "Hoover blankets" and "Hoover
leather." Bicycles were "Hoover-mobiles" and even
desperately hunted jackrabbits were known as "Hoover hogs."
And then, like a bolt of lightning, the
stalled investigation into the financial racketeering that had
brought on the Depression began in the United States Senate.
The hearings, long sidetracked by what
Franklin Roosevelt called the "economic royalists,"
came into being with the shocking landslide victory of President-elect
Roosevelt and the vengeful slaughter of Republican incumbents
in November of 1932. During the campaign, language had been heard
that meant hard times for Wall Street. Roosevelt, before the
greatest crowds in American history spoke of " the ruthless
manipulation of professional gamblers and the corporate system."
Time after time he mocked the state religion of the "economic
nobles" in front of cheering crowds as he lashed out at
dogmas that had allowed, "a few powerful interests to make
industrial cannon fodder of the lives of half the population."
With the balance of power shifting to
a new president and a new congress, a longtime Wall Street critic,
Republican populist Senator Peter Norbeck of South Dakota, took
the chair of the Banking and Currency Committee. Norbeck struck
quickly and appointed a hard nosed New York City prosecutor named
Ferdinand J. Pecora as counsel. The hearings came to be known
as the Pecora hearings. The Pecora hearings, white-washed out
of the corporate version of the American past, remain the most
unique congressional investigation in our history.
First on the stand was Wall Street's
"Sunshine Charley" Mitchell, President and Chairman
of the Board of the National City Bank, known today as Citicorp.
Mitchell was the most powerful banker in the country and was
used to doing what he wanted. As president of the National City
Company in 1916 he quickly transformed the affiliate to the world's
volume seller of securities that the bank was forbidden by law
to deal in. He would tell the committee he "did not see
it as a problem." In 1921 he became president of the bank
and the affiliate promptly began to sell stock in the bank which
was also forbidden by law. Mitchell didn't see that as a problem
either. Not that he had anything to worry about. He was an old
friend of Treasury Secretary Andy Mellon who was running the
country for President's Harding, Coolidge and Hoover.
Scheduled to follow Mitchell was National
City Director and Anaconda Copper Chairman John D. Ryan. Third
would be Hugh Baker, president of the National City Company.
Summoned, but too ill to attend was the ultra-wealthy Percy Rockerfeller
who was on the board of directors of 51 companies besides the
National City Bank and Anaconda Copper.
The hearings would last over a year,
hundreds would testify, and much it would be front page news.
As Wall Street was to discover, Ferdinand Pecora was a man who
did his homework and the first days of the hearings sent the
country into an uproar as Charles Mitchell admitted to: Dodging
his 1929 income tax with the ruse of a fictitious loan of $2,
800,000 from the National City Company. Confessing that a series
of unsecured and unpaid loans for millions of dollars were made
to National City insiders to cover stock market losses and were
signed off by Mitchell, Baker, Ryan and Percy Rockerfeller. Conspiring
with Cuban President Gerado ("The Butcher") Machado
as the National City Bank, unloaded $31 million worth of useless
Cuban sugar loans by transferring the insolvency to the stockholders
of the National City affiliate without their knowledge. To do
this the National City Company created a dummy Cuban company,
the General Sugar Corporation.
Admitting that in 1927 and 1928 the National
City Bank dumped $90 million of worthless Peruvian government
bonds on unsuspecting customers of the National City Company.
Under the grilling of Pecora, Mitchell also conceded that the
bonds were not "a good moral risk." Mitchell and Baker
both testified to a memory loss when asked if there was any reason
to consider the bonds sound.
Admitting that time and time again millions
of dollars were made on insider trading and pool manipulations
of Anaconda Copper subsidiaries: Andes Copper, Chile Copper and
Greene Cannea Mining stock by National City bank insiders including
Percy Rockerfeller, James Stillman Jr., Mitchell and Anaconda
President John D.Ryan.
Admitting that the National City Bank
and the Anaconda Copper Company conspired to defraud the public
through call loans. Call money was first lent at 15%. This was
followed by manipulation of Anaconda Copper fueling the speculative
mania which was pushing stocks to record highs. In addition,
Mitchell confessed to a series of National City Bank/Anaconda
Copper operations that as of 1933 were the greatest frauds in
American banking history. Among the details grudgingly given
by Mitchell was the single most sensational Wall Street "sting"
of the "Roaring Twenties." First, Mitchell, Rockerfeller
and Ryan set up a "joint account" of nearly a million
and a half shares of Anaconda Copper Company stock.
The stock was then repackaged and aggressively
advertised and sold through the National City affiliate and its
salesmen. At all times the "joint account" was being
manipulated by Mitchell and Ryan who ran the stock up, from $40
in December, 1928 to $128 in March of 1929. The trio then dumped
the stock, the results being one of the great fleecings of Wall
Street. The hearings concluded that this single National City/Anaconda
operation cost the public at least $150 million. At the time
of the hearings Anaconda stock was listed at $4 a share. In addition
to the millions made from these "transactions and others,
" as Mitchell called them, none of the National City-Anaconda
"joint accounts" required the insiders to put up any
money.
Pecora would later write about the small
investor, "surprised to find all of this going on, who had
somehow believed that everything on Wall Street was regulated,
overseen, and safe. He has reckoned without the ingenuity of
the legal technicians and the complaisance of governmental authorities
toward powerful financial and business groups."
"BANKSTERS!"
Soon Mitchell and Baker were gone and
the hearings moved into a second week before a stunned public.
During the first days of the investigation Mitchell and Baker
resigned all their Wall Street positions and directorships. Anaconda's
John D. Ryan mysteriously died without getting on the stand.
His demise came only three days before the hearings began. The
ailing Percy Rockerfeller died in late 1934.
But the first week was enough for TIME
Magazine to bring a new expression to the American public. In
describing the confessions wrung out of Mitchell and Baker, the
magazine coined the word "bankster." Montana Senator
Burton Wheeler added that "some of these bankers should
at least join Al Capone in prison." But none would. There
were few laws governing white-collar crime and only Richard Whitney,
president of the New York Stock Exchange, would end up in Sing
Sing.
But others would come before Pecora and
the Senate. And finally it was the turn of the great J.P. Morgan
Jr. On a hot July afternoon Pecora asked Morgan if he had paid
any income tax in 1930. The only noise to be heard in the room
were the overhead fans. Morgan was silent. Pecora was silent.
It was the kind of question you asked a field hand or a bank
clerk but not a deity. Finally the great man replied "I
cannot remember."
The" Lion of Wall Street,"
whose legend spoke of a grasp of detail and numbers second only
to his father had no answers. The same question was asked of
1931 and then of 1932. Question after question brought 'I cannot
remember" from Morgan. Then Pecora revealed that Morgan
had paid no income tax in 1930, 1931, and 1932. And he had done
nothing illegal. Treasury Secretary Mellon had inserted enough
clauses in the tax code so that America's very wealthy, including
Mellon, seldom paid taxes. Al Capone would have never went to
prison if he had known Andy Mellon.
As for the Morgan banking partners the
answers were the same. J.P.Morgan knew nothing of any taxes paid
by his office or his partners. Pecora said the total taxes paid
by the entire House of Morgan and its partners in the previous
five years was a single payment of $5,000 dollars in 1931.
Of course these are just two examples,
if two of the more sensational appearences before this long ago
comittee. Yet even a brief glance at these hearings quickly reveals
how Wall Street greed plunged the United States and the world
into what is known as the Great Depression. And if little or
no memory of this great committee remains, and if Ferdinand Pecora,
the son of poor Italian immigrants has been written out of the
American History Themepark, all is not lost.
For what does exist, besides the committee
documents and records gathering dust somewhere, is a book called
"Wall Street Under Oath: The Story of our Modern Money Changers"
(1939). The author: Ferdiand J. Pecora. It is a book that could
stand a reprinting but for now it can be obtained from your local
reference library. I recommend it.
Following the Pecora investigation and
hearings would be a great wave of New Deal regulatory legislation
which would keep America's corporate predators in check for over
sixty years. Some of these legislative acts were known as the
Securities Act of 1933 and the Securities Exchange Act of 1934
which created the Securities and Exchange Commission. Others
were the Glass-Steagell Banking Act and the Wheeler-Rayburn Public
Utility Holding Company Act. Almost all of this regulatory legislation
would vanish or be diluted in the permissive atmosphere of the
New Economy 1990's. Ironically it was a Democratic president
named William Jefferson Clinton that gleefully put his pen to
the deregulating legislation of the era.
And in some cases, this legislation is
so clearly mean spirited and evil, particularly in the cases
of the telecommunications legislation and the predatory credit
card/ banking lobby inspired bankruptcy law, that one might wonder
if Ferdinand Pecora is spinning in his grave.
Jackie Corr
lives in Butte, Montana. He can be reached at: jcorr@in-tch.com
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