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William K. Black

William K. Black

Posted: July 13, 2009 10:43 AM

How to Create a Successful Pecora Investigation


The original Pecora investigation documented the causes of the economic collapse that led to the Great Depression. It was named after Ferdinand Pecora, lead counsel for the Senate Banking and Currency Committee investigation, whose inquiries established that conflicts of interest and fraud were common among elite finance and government officials.

The Pecora investigations provided the factual basis that produced a consensus that the financial system and political allies were corrupt. They did not divide the nation or divert its response to the economic crisis. The investigations discredited the elites that benefited from that system and were blocking reform. By identifying the most acute problems, Pecora provided the basis for Congress to draft specific legislation that restored public confidence in the financial markets and helped honest bankers. This staved off future crises in the U.S. for 45 years until the protections were removed by deregulation and de-supervision.

The Pecora investigation teaches us how to create a successful investigation that can provide the basis for the fundamental reforms necessary to protect the nation from future economic collapses. Pecora was a prosecutor in New York that had brought cases against "bucket shops" (fraudulent sellers of securities) and corrupt politicians (primarily Democrats). He was not a financial specialist. These are the key factors that made Pecora successful and that need to replicated today:

Leadership and accountability

  • Pecora led the investigation and conducted the questioning. There was no "bipartisan" fiction or friction: Pecora was in charge. A professional with expertise in investigations must conduct the questioning, as members of Congress cannot do so effectively. Pecora picked his aides, not Congress.
  • Pecora was non-partisan and known to be non-partisan.
  • Pecora was fearless.
  • Pecora was relentless and confrontational.
  • President Roosevelt personally and strongly supported Pecora....

You can read the rest of William K. Black's piece at New Deal 2.0.