This article appears in the August 2026 issue of The American Prospect magazine. If you’d like to receive our next issue in your mailbox, please subscribe here.
In early 1932, when Republicans still had a Senate majority despite the ravages of the Depression, the Senate Banking and Currency Committee launched an investigation of what caused the Great Crash of 1929. For almost a year, the feeble investigation went nowhere. In the November 1932 election, FDR and the Democrats not only won the White House, they also took back the Senate.
In December, the outgoing Republican chair of the Banking Committee, Sen. Peter Norbeck of South Dakota, decided to give the moribund investigation one last shot. After several candidates for chief counsel turned him down, Norbeck hired a former New York City chief assistant DA named Ferdinand Pecora.
They were a curious couple. In 1932, just 20 years after Theodore Roosevelt’s failed 1912 run for president as a third-party candidate, many leading Republicans still considered themselves Teddy Roosevelt Progressives. Norbeck was one. The crash had devastated South Dakota farmers. Norbeck wanted a serious investigation of the role of bankers.
Pecora had also been a Teddy Roosevelt man. After Roosevelt declined to run again in 1916, Pecora became a progressive Democrat. As chief assistant DA, he became known as the best cross-examiner in New York. When Pecora’s boss, the elected DA, retired in 1929, he proposed that Pecora succeed him. But Pecora was too incorruptible for Tammany Hall, and Democratic Party chiefs vetoed endorsing him. He left government, opened a small law practice, and was bored. When Sen. Norbeck called, Pecora leapt at the opportunity.
It was not just Pecora’s meticulous preparation and photographic memory that made him so effective. It was his sense of theater.
After being named chief counsel in February 1933, Pecora had just a few weeks to prepare and hold hearings before the Democratic Congress took office on March 4 and the committee’s mandate expired. But in that time, Pecora managed to lay bare the maneuvers that had crashed the economy, humiliate several of the nation’s most influential bankers as well as the head of the New York Stock Exchange, and transform the public’s view of finance, radicalizing the menu of necessary reforms. When Democrats took over in March, with FDR’s personal support they broadened the mandate for the investigation and kept Pecora on the job.
Few people have heard of Pecora today. But in early 1933, he was a celebrity. The revelations of what became known as the Pecora Commission were front-page news. He was featured on the cover of Time magazine. In a matter of weeks, public opinion went from being bewildered about what had crashed the economy to accurately blaming the conflicts of interests of the leading bankers.
FERDINAND PECORA WAS BORN in Nicosia, Sicily, the son of a shoemaker. His father, who had no use for the Catholic Church, converted to Episcopalianism. Ferdinand was four years old when the family emigrated to New York in 1886. The family lived in a cold-water basement flat in Manhattan’s Chelesa neighborhood. But young Ferdinand soon became an academic standout. St. Peter’s Episcopal Church, where the family attended, put him in contact with more privileged kids. He graduated from public school as class president and valedictorian. He won a scholarship to attend St. Stephen’s College and attended law school at night.
As assistant DA, his successes included prosecuting more than a hundred Wall Street “bucket shops,” sleazy brokerages that peddled bogus stocks and illegally bet against their clients. Another Pecora prosecution resulted in a prison term for the New York state superintendent of banks, Frank Warder, for taking bribes from the City Trust Company.
In readying congressional hearings that began on February 15, 1933, Pecora used subpoenas to demand detailed bank records. He was a master of the bluff, and managed to get his hands on materials that bank lawyers might well have denied him, including diaries of board of directors meetings. He used these and other records to trip up executives when they gave misleading or evasive testimony.
Pecora’s strategy was to personalize the abuses that crashed the economy, and he started at the top. His first banker witness was Charles E. Mitchell, chairman and chief executive of National City Bank, today renamed Citibank, then the nation’s largest and most prestigious financial institution. Mitchell, at the pinnacle of the Wall Street establishment and a board member of the New York Federal Reserve, was thought to be untouchable. By the time Pecora was finished with him, Mitchell would resign in disgrace and settle a criminal indictment for tax evasion with a fine of $1 million.
Pecora’s investigation and interrogation revealed that National City Bank and its securities affiliate, the National City Company, engaged in a number of shady maneuvers little different from those of bucket shops. National City Bank employed more than a thousand retail salesmen to peddle securities that the firm underwrote at a handsome markup. When a sketchy stock or bond proved hard to unload, the bank offered salesmen special bonuses for selling it.
It was not just Pecora’s meticulous preparation and photographic memory that made him so effective. It was his sense of theater. Probing National City Bank’s deceptive sales of South American bonds, he subpoenaed Hugh Baker, president of City’s investment affiliate, to read into the record a 1923 memo from the bank’s foreign desk. The memo proved that the bonds City salesmen were pitching were worthless. For example: “Peru has been careless in the fulfillment of contractual obligations,” with “broken pledges” and “flagrant disregard of guarantees.”
Pecora: “On the whole, Mr. Schoepperle’s report … was against financing any Peruvian credits, wasn’t it? … It was considered a bad risk; isn’t that so?”
Baker [squirming]: “I assume that must have been his reason there.”
City also peddled its own stock, which bank executives could buy at reduced prices with no-interest loans. When City’s stock price began collapsing after October 1929, salesmen continued flogging the stock to retail customers in hopes of propping it up. Pecora produced the admission that City had participated in an illegal “stock pool,” in which participants sell the stock back and forth to each other to drive up the price, hoping to attract other investors.
Pecora also revealed that Mitchell had engaged in a sham stock transaction, which resulted in paying no income tax in 1929 despite a salary and bonus of $1.1 million (the equivalent of $21.2 million today). “By the way,” Pecora asked Mitchell, as if offering a casual afterthought, “That sale of this bank stock … in 1929 was made to a member of your family, wasn’t it?” It quickly became public that Mitchell had sold the shares to his wife.
Pecora’s next witnesses were the top executives of J.P. Morgan, including the current chairman and son of the founder, J.P. Morgan Jr., known as Jack. Unlike City, J.P. Morgan was organized as a private bank. As Pecora demonstrated, private banks were not even subject to rudimentary bank examinations. The interrogation of Jack Morgan revealed that his bank had a list of preferred clients, who could buy new stock issues at insider prices, just like today’s IPOs. In the securities legislation that followed, private banks were abolished and J.P. Morgan would be subject to the same regulations as others.
The questioning of Richard Whitney, president of the New York Stock Exchange, demonstrated that the NYSE also avoided government regulation, and totally failed to police corrupt behavior on the part of its members. Whitney, heavily in debt to cover his own losses, later turned to embezzlement, pilfering funds from the NYSE Gratuity Fund, the New York Yacht Club (where he served as treasurer), and $800,000 from his father-in-law’s estate. He served more than three years at Sing Sing.
Pecora’s hearings not only featured leading financiers. He called many victims to testify, drawing on the thousands of letters that poured into his committee as soon as its hearings were publicized. One small investor, Edgar D. Brown of Pottsville, Pennsylvania, told of how National City Bank salesmen repeatedly talked him out of selling stocks as the market was falling and urged him to buy more stock in their bank. “I am today a pauper,” he said. Testimony like this redoubled popular outrage against Wall Street.
As the Pecora hearings unfolded in early 1933, thousands of banks were failing and millions of depositors lost their life savings. Smaller banks that were still open were limiting withdrawals, and governors were temporarily ordering bank closures. Until Pecora’s investigation, public understanding of the causes of the crash was unfocused. After the Pecora hearings, Wall Street banks were widely and correctly understood to be the prime instrument of the collapse.
In just two weeks, following the first round of Pecora’s hearings, the legislative mood drastically changed. Benjamin Cohen, one of FDR’s closest advisers on financial reform, said that bankers were “so discredited in the public eye that Congress was ready to pass anything.”
The fact that Pecora was an olive-skinned Italian immigrant added to the drama. Most of the bankers he was up against were part of the WASP patrician elite. It reinforced the New Deal narrative of the little guys striking back against the plutocrats.
ROOSEVELT HIMSELF, due to take office on March 4, closely followed the Pecora hearings and was emboldened by them. The laws that Congress passed essentially reverse engineered all the major abuses of the 1920s and made them illegal, informed by the details of just how the corruption worked. The laws included:
- The Banking Act of 1933, also known as the Glass-Steagall Act, prohibiting the same institution from performing commercial and investment banking activities, as well as prohibiting banks from lending money to their own executives, and creating the Federal Deposit Insurance Corporation to safeguard personal accounts.
- The Securities Act of 1933, for the first time regulating the underwriting and sale of stocks and bonds, prohibiting various conflicts of interest, and requiring extensive disclosures on the part of publicly traded companies.
- The Securities Exchange Act of 1934, regulating stock exchanges for the first time, and creating the Securities and Exchange Commission. Until then, the New York Stock Exchange had fended off all attempts at regulation, gave deceptive practices a wide berth, and was a law unto itself.
- Later legislation, such as the Public Utility Holding Company Act of 1935, prohibiting pyramid schemes in public utilities, another contributor to the Great Crash, also built on the Pecora investigations. Likewise the Investment Company Act of 1940, which regulates mutual funds.
Professor Joel Seligman, the authoritative historian of the Securities and Exchange Commission, wrote that “effective securities legislation might not have been enacted had Pecora’s revelations not galvanized broad public support for direct regulation of stock markets.” And James M. Landis, who drafted much of the securities legislation, wrote, “We built completely on his work.”
Those reforms kept the financial industry well regulated until the 1980s. In the immediate postwar era, there were no more stock market crashes and very few banking failures. But under Bill Clinton, weakening or repeal of many of FDR’s reforms, including of Glass-Steagall in 1999, and the failure to enforce the ones that remained, invited abuses that were variations on the ones exposed by Pecora. A prime beneficiary, once again, was Citibank. Virtually all of the games that bankers played that created the second crash in 2008 had been prefigured by the Wall Street deceptions of the 1920s that Pecora’s investigation exposed in 1933.
Two of the architects of the deregulation were former Goldman Sachs executive and Clinton senior official Robert Rubin, and his protégé, Larry Summers. After Rubin left government, he became Citibank’s chairman.
A PERSONAL NOTE: Some 40 years after Pecora’s hearings ended in June 1934, I held a version of Pecora’s job. In the mid-1970s, I served as chief investigator of the Senate Banking Committee under its great progressive chairman, Sen. William Proxmire (D-WI). Though I ran some important investigations, including on bank redlining, Federal Housing Administration frauds, and foreign corporate bribery, there was one crucial difference. Unlike Pecora, I never conducted public interrogations of witnesses. That fell to Sen. Proxmire, who was superb at it. I just did the staff work and prepped the senator.
Pecora, by contrast, was so good that the senators on the committee, hardly shrinking violets, just let him run the show. This was unique in the annals of Congress. The previous great investigation of the “money trust,” under Rep. Arsène Pujo (D-LA) in 1912-1913, is known as the Pujo investigation, though it relied on brilliant staff work by chief counsel Samuel Untermyer. The Pujo hearings helped lay the groundwork for the Federal Reserve Act (1913), the progressive income tax (1913), and the Clayton Antitrust Act (1914). In the Watergate hearings, chief counsel Sam Dash did brilliant work, but the hearings are remembered for the committee chair, Sen. Sam Ervin (D-NC). Other notorious investigators such as Sen. Joe McCarthy’s scurrilous counsel Roy Cohn—a mentor to Donald Trump—played major roles; but in the witch hunt for communists, McCarthy ran the hearings, not Cohn.
The aftermath of the Great Crash played out strikingly differently than what followed the financial collapse of 2008. No senior financial executive went to prison after 2008, and hardly any lost their jobs; and the technocratic reforms of the 2010 Dodd-Frank Act proved inadequate to contain a new cycle of concentration and abuse.
History handed Barack Obama a teachable moment about the corruptions of financial capitalism. But unlike the powerful synergy between Pecora, FDR, and the reforms that followed, the incoming Obama administration was more interested in propping up the giant banks than breaking them up or mobilizing public opinion to support drastic reform. Some of that can be attributed to personnel: When Obama took office, he appointed Summers as his chief of economic policy and another Rubin crony, Tim Geithner, as Treasury secretary. It was as if FDR had appointed Hoover’s team.
The closest equivalent to the Pecora committee was the Congressional Oversight Panel (COP), created by Democrats in 2008 as their price for approving George W. Bush’s bank bailout fund, known as the Troubled Asset Relief Program (TARP). The oversight panel was chaired by Elizabeth Warren and established her as a crusader for reform.
But unlike the Pecora hearings, the COP investigation did not galvanize public opinion. Its deputy chair, Damon Silvers, told me, “We had no subpoena power and no authority to swear in witnesses.” TARP was not permitted to advance money to banks that were insolvent. “Both Treasury and Citi insisted to us that the bank was not insolvent,” Silvers said. “Elizabeth and I knew that they were lying and there was nothing we could do about it.” Citi got $45 billion.
In drastic contrast to Pecora and FDR, the failure of the Obama administration to place the blame squarely where it belonged—on Wall Street—seeded popular grievances that led directly to Donald Trump. When leaders fail to remember Ferdinand Pecora and the critical role of investigative oversight in rallying the public to demand better, we all pay the price.
This article appears in Aug 2026 issue.
