When I was young -- or perhaps I should begin: Today, when the old community values no longer seem to exist...
Looking back, when I grew up, I absorbed from my family the notion that bankers and financial advisers were persons of integrity. One assumed they worked by professional standards. We firmly believed their clients' interests were paramount in their minds.
Widows like Granny, my great-grandmother Sara Delano Roosevelt, had implicit trust in the people who handled her financial affairs, in much the same way that she assumed integrity and professional standards in her doctor or lawyer.
Looking back again, I'm not at all sure that my grandfather, Franklin Roosevelt, swallowed his mother's idealistic notions. As Assistant Secretary of the Navy during eight years in Woodrow Wilson's administration, he had handled all the Navy's contracts and labor relations. He then observed during the Harding and Coolidge presidencies how business interests were given the highest priority, and then, even during the Great Depression, how President Hoover considered our capitalistic system sacrosanct, untouchable. Hoover's Secretary of the Treasury, Andrew Mellon, was a "leave it alone liquidationist" who concluded: "[Liquidation] will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, lead a more moral life."
Hoover didn't go along with all that meanness, but, as if he was driven by religious fervor, he did not want to interfere with "free enterprise." He felt strongly that capitalism should and could balance itself without government intervention. FDR could see that this wasn't working. The Great Depression was getting worse.
By 1933 any illusions even my dear great-grandmother might have had were shattered by a Congressional committee's exploration of the business and financial community's part in creating the Great Depression. The "Pecora Commission" as it became known, due to the inimitable skill and insight of the committee's counsel, Ferdinand Pecora, was actually initiated by the chairman of the Senate Banking Committee, South Dakota Senator Peter Norbeck -- a name lost to history because of Pecora's extraordinary personality.
Although FDR was inaugurated six weeks after the Pecora Commission began its work, he defended the Pecora investigation against the charge that it was destroying the nation's confidence in bankers. He said the bankers "should have thought of that when they did the things that are being exposed now." The New Deal administration advised the Pecora commission: "The feeling is that if the people become convinced that the big violators are to be punished, it will be helpful in restoring confidence." The present administration, particularly the president's economic advisers, seems averse to seeing anything like that happen.
Alan Brinkley, in a recent edition of Vanity Fair, describes the Pecora Commission's investigation, concluding that it "had a lasting impact on the public's image of the financial world, and it helped make possible new laws and regulations aimed at preventing a depression-size calamity from befalling the country again."
He adds: "Congress has been remarkably decorous about investigating what went wrong." He writes that, in contrast to the Pecora Commission, today, "showboating and modestly informed members of Congress berate witnesses without eliciting any useful disclosures -- only self serving apologies." (Replies from the CEO of Goldman-Sachs come to mind.)
But to ask, "Where is our Ferdinand Pecora?" sidesteps the real questions: Where is the White House? Where is presidential leadership in our crises?
President Obama should note that President Roosevelt's slamming the bankers and financiers -- beginning with his inaugural address and right up through his campaign for a second term -- did not destroy the country's banking system.
Sixty million Americans listened and then responded to the president's advice after his radio fireside chat on March 12, 1933, just a week after his inauguration. Roosevelt concluded: "I can assure you that it is safer to keep your money in a reopened bank than under the mattress."
The next day, the public lined up to return their money to the very banks they had withdrawn it from two weeks before. Why? Their president said that it was now safe to do so. FDR had explained what banking was all about without being condescending. As Will Rogers wryly said at the time: "He made everybody understand it, even the bankers."
The New York Stock Exchange, which had been closed for nearly two weeks, reopened and enjoyed a 15 percent increase the first day. (For more details see Jonathan Alter's The Defining Moment, pages 267-271.)
We haven't been able to count on the banking community since my childhood, and we can't count on this Congress to give us the equivalent of the Pecora Commission. However, we should be able to count on our president.
There are many differences between those days and today, but presidential leadership should remain the same. Confidence in FDR won for the Democrats the 1934 mid-term election, and then provided Roosevelt with an overwhelming victory in 1936, electing him to a second term. Enough said.
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