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Wall Street Under Oath: What Have We Learned?

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"These laws are no panacea; nor are they self-executing. More than ever, we must maintain our vigilance." --Ferdinand Pecora, Wall Street Under Oath, "A Word About the Future," 1939

Bailout or otherwise, we don't need no stinkin' commission to understand the roots of the current Wall Street crisis. While our economy has become much more complex and globalized, it would be a good start for John McCain, among others, to just dust off their old copies of the Pecora Commission's report from the 1930s, and learn about the history of Wall Street speculation, stock price manipulation, commercial and investment banking, and fraud, and why we have securities laws and regulations in the first place. Or rather, the history we have so quickly forgotten.

Here's the preface from Ferdinand Pecora's memoir, Wall Street Under Oath, which should be required reading for all Americans (and presidential candidates):

"Under the surface of the governmental regulation of the securities market, the same forces that produced the riotous speculative excesses of the 'wild bull market' of 1929 still give evidences of their existence and influence. Though repressed for the present, it cannot be doubted that, given a suitable opportunity, they would spring back into pernicious activity.

Frequently we are told that this regulation has been throttling the country's prosperity. Bitterly hostile was Wall Street to the enactment of the regulatory legislation. It now looks forward to the day when it shall, as it hopes, reassume the reins of its former power.

That its leaders are eminently fitted to guide our nation, and that they would make a much better job of it than any other body of men, Wall Street does not for a moment doubt. Indeed, if you now hearken to the Oracles of The Street, you will hear now and then that the money-changers have been much maligned. You will be told that a whole group of high-minded men, innocent of social or economic wrongdoing, were expelled from the temple because of the excesses of a few. You will be assured that they had nothing to do with the misfortunes that overtook the country in 1929-1933; that they were simply scapegoats, sacrificed on the altar of unreasoning public opinion to satisfy the wrath of a howling mob blinding seeking victims.

These disingenuous protestations are, in the crisp legal phrase, 'without merit.' The case against the money-changers does not rest upon hearsay or surmise. It is based upon a mass of evidence, given publicly and under oath before the Banking and Currency Committee of the United States Senate in 1933-1934, by The Street's mightiest and best-informed men. Their testimony is recorded in twelve thousand printed pages. It covers all the ramifications and phases of Wall Street's manifold operations.

The public, however, is sometimes forgetful. As its memory of the unhappy market collapse of 1929 becomes blurred, it may lend at least one ear to the persuasive voices of The Street subtly pleading for a return to the 'good old times.' Forgotten, perhaps, by some are the shattering revelations of the Senate Committee's investigation; forgotten the practices and ethics that The Street followed and defended when its own sway was undisputed in those good old days.

After five short years, we may now need to be reminded what Wall Street was like before Uncle Sam stationed a policeman at its corner, lest, in time to come, some attempt be made to abolish the post.

It is in the hope of rendering this service, especially for the lay reader unfamiliar with the terminology and conduct of The Street, that the author has endeavored, in the following pages, to summarize the essential story of that investigation--an inquiry which cast a vivid light upon the uninhabited mores and methods of Wall Street."

Ferdinand Pecora, New York City, 1939, Wall Street Under Oath