11/11/2011 12:42 pm ET | Updated Jan 08, 2012

FDR vs. the House of Morgan Over Who Caused Crash of 1929

This debate has been going on ever since there were crises, bear markets, even depressions.

Let's go to the record book (thanks to MM Thomas, a partner in the old Lehman Bros., and later at Drexel Burnham)

In 1932, before election day, Russell Leffingwell, a top partner of of the supreme bank on Wall Street, JP Morgan, wrote to his old friend, the Democratic candidate Franklin D. Roosevelt, the following: "You and I know that we cannot cure the present deflation and Depression by punishing the villains, real or imaginary, of the first postwar decades, and that when it comers down to the day of reckoning, nobody gets very far with all this prohibition and regulation stuff."

To which FDR responded; "I wish we could get from the bankers themselves an admission that in the 1927 to 1929 period there were grave abuses and that the bankers themselves now support wholeheartedly methods to prevent recurrence thereof. Can't bankers see their own advantage in such a course?"

JP Morgan's Leffingwell wasn't having any of that from this "traitor to his class." No sir; here's his answer: "The bankers were not in fact responsible for 1927-298, and the politicians were. Why then should the bankers make a false confession?"

It is ever thus; the bankers are having nothing of this villain stuff despite the publication of two dozen books laying into them as well as several government officials. No doubt there were faults on both sides and neither Wall Street nor Washington will ever admit it.