By Michael Perino, Penguin Press, New York, N.Y. $27.95, 352 pages
The “rulers of the exchange of mankind’s goods have failed, through their own stubbornness and their own incompetence, have admitted their failure, and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.”
No, we are not talking about Lehman Brothers or Goldman Sachs or the numerous subprime lenders of our generation. Those words were spoken by President Franklin Delano Roosevelt in his first inaugural speech. Where he got those words, and what he was talking about, was what was discovered by the “Hellhound of Wall Street,” Ferdinand Pecora.
Whenever my son asks why he has to study history I give him the same answer one of my favorite history teachers gave me: “because history repeats itself” and “we should learn from the successes and failures of the past.” This book is a clear example of a story and a man that we can learn from. It is a story I had never heard. It is a story that I hope I can inspire you to pick up and read. It will keep you entertained throughout, and you will come away knowing that we do not always learn from our mistakes. Hopefully, however, we may learn from Pecora’s successes.
“The Hellhound of Wall Street” was written by Michael Perino, a professor at St. John’s University School of Law. Professor Perino has authored numerous academic articles and monographs on securities regulation, securities fraud, and class action litigation. He has testified in both the U.S. Senate and the House of Representatives, has served as an advisor to the Securities and Exchange Commission, and is frequently quoted in the media on securities and corporate matters.
Professor Perino also has been a visiting professor at Cornell Law School and Columbia Law School, as well as a lecturer and co-director of the Roberts Program in Law, Business, and Corporate Governance at Stanford Law School. He earned his LL.M. from Columbia Law and he received his J.D. from Boston College Law.
As FDR stated those words in his inaugural, the author believes that “Ferdinand Pecora must have been smiling. It was Pecora, more than anyone else, who deserved credit for those lines… [I]t was Pecora—the man reporters called the Hellhound of Wall Street—and the Senate hearings he’d wrapped up just two days earlier that had made those lines true.”
Pecora was a Sicilian immigrant and a former assistant district attorney from New York City (he almost became the district attorney) who was named chief counsel for the Senate Committee on Banking and Currency, charged with investigating the causes of the 1929 stock market crash.
Pecora was born the son of a shoemaker in a small Italian town due west of Mount Etna. He was a part of the great Italian exodus from Southern Italy, the poorest part of the country. New York City did not make Italians all that welcome at the time. As stated in The New York Times: “There has never been since New York was founded…so low and ignorant a class among the immigrants who poured in here as the Southern Italians who have been crowding our docks during the past year.”
Even a rash of lynching of Italians in New Orleans did not bring sympathy. In fact, “In an editorial sympathetic to the lynch men, The New York Times argued that the victims were ‘sneaking and cowardly Sicilians, the descendants of bandits and assassins, who have transported to this country the lawless passions, the cutthroat practices, and the oath-bound societies of their native country, [who] are to us a pest without mitigations. Our own rattlesnakes are as good citizens as they.’” Racism and discrimination have always existed—only the targets change.
Pecora attended the New York City public school system (which only went to the eighth grade) and he graduated in 1895 as both valedictorian and class president. Over the next 20 years, he supported his family and helped put his younger brothers and sisters through school. Pecora would eventually go to New York Law School at night.
At the time of his appointment in 1932, the Committee on Banking and Currency was finishing its mandate (with little success) and was wrapping up its report in the lame duck session of Congress awaiting the inauguration of FDR and his party’s takeover from the Hoover administration.
This final round of the committee’s hearings lasted just 10 days. But in those 10 days Pecora examined the officers from National City Bank (now, a few name changes later, Citigroup) and its chairman, Charles E. Mitchell. Chairman Mitchell walked into the hearings a titan of Wall Street thinking that nothing nor no one could sully his reputation. Mitchell would walk out alone, discredited and disgraced. His bank would quickly accept his resignation.
Pecora had shown that the bank and its securities-trading arm had engaged in all sorts of unsavory behavior. It sold worthless bonds to investors without fully disclosing their risks, manipulated its own stock price and the stock prices of other companies, and lavishly compensated its executives as the country plunged into depression. Sound familiar?
Using his experience as a prosecutor, Pecora was remarkably effective as a questioner (some might say cross-examiner) of multimillionaire Wall Street investment houses and banking executives. The senators on the committee found Pecora so effective that they ceded him center stage, and perform he did. Utilizing simple questions and never allowing a question to go unanswered, he obtained the needed admissions. Building up the drama, he cast witnesses as villains or heroes, and the media was happy to report the show. One cannot read this book without realizing what a great movie this story would make.
In light of the current economic downturn, coupled with the story of Citigroup’s history and role in the Great Depression, one cannot miss the similarities to today’s financial market.
While few may remember Ferdinand Pecora, the statutes and regulations passed as a result of his work live on. Investors today have prospectuses to read and an SEC to complain to. Bank depositors have the Federal Deposit Insurance Corporation to protect them.
As Perino concludes, “Pecora showed what a well-run and well-researched Washington investigation could accomplish.”
In conclusion, as asked in a New York Times editorial entitled “Where Is Our Ferdinand Pecora?” (Jan. 6, 2009). Maybe the answer is Michael Perino—if for no other reason than showing us how one individual’s impact matters, even if very few remember his name.
Matthew Sciarrino Jr. is a Criminal Court judge in Manhattan.