Portraits in Oversight:

Ferdinand Pecora
and the 1929 Stock Market Crash

 The Banking Committee inquiry into the stock market had been authorized in 1932 (Senate Resolutions 84 and 234), but didn’t pick up steam until the committee hired its fourth chief counsel, Ferdinand Pecora, a former prosecutor, in January 1933. The committee had earlier focused on the practice of short selling stocks, but failed to obtain key bank records and held ineffective hearings that failed to attract public or media attention. When Mr. Pecora was hired to write the committee’s final report, he was alarmed by how narrow and incomplete the investigation was. He asked committee members to reopen the inquiry, and the Senate later approved Senate Resolution 56, which expanded the scope of the examination.

Over the course of the next two years, the augmented committee investigation received support from both Presidents Herbert Hoover and Franklin Roosevelt, and bipartisan support from the Senate. On the committee itself, regardless of which party was in the majority and the pressures placed on the committee’s limited budget, committee members stood behind Mr. Pecora and worked to support his investigative efforts. Eventually, the inquiry became colloquially known as the Pecora Investigation.

Mr. Pecora acted first to obtain key documents from multiple financial institutions. Rather than request the documents and wait for them to be delivered, he preferred to walk directly into a bank and hand-deliver a subpoena. He and his staff then waited for the documents to be compiled and produced on the spot, and the team worked through the night copying relevant records and examining the financial information.

Mr. Pecora then designed and led hearings that dominated the news. The committee called wealthy, powerful bankers and corporate executives whom no one else had held accountable for their actions. Insiders explained that he scheduled hearings only when the committee’s research had uncovered important facts and incriminating records. Due to his detailed grasp of the documents, issues, and events and his strong interrogation skills, the committee often permitted Mr. Pecora to lead the questioning of witnesses. Hearing witnesses included:

• J.P. Morgan Jr., the most powerful financier of the time;
• Charles E. Mitchell, Chairman of National City Bank, then the largest U.S. bank;
• Richard Whitney, President of the New York Stock Exchange;
• Otto Kahn, senior partner at Kuhn, Loeb & Company, a wealthy investment bank;
• Albert H. Wiggin, former Chairman of Chase National Bank;
• Harry Sinclair, founder of Sinclair Oil;
• Jesse H. James, Chief of Reconstruction Finance Corporation; and
• John J. Raskob, former Vice President of Finance at DuPont and General Motors, and Chairman of the Democratic National Committee