The Wall Street investigation, such as it was, was under way.
Ten months later, with authorization for the investigation and Norbeck’s chairmanship both expiring on March 4, 1933, the South Dakota senator wanted to return to the probe, which had lain dormant since June 1932. The senator had expressed high hopes for the investigation when it got started in the spring. In early March, as the country obsessed over news of the Lindbergh kidnapping and of Al Capone being shipped off to jail for tax evasion, Norbeck and the other progressives on the committee seized control of the investigation. Unlike Walcott, they were not complaisant yes-men, and they saw little reason to limit a Wall Street investigation to short selling. The resolution they adopted permitted the committee to investigate virtually any aspect of stock exchange practices. By April, Norbeck had wrested control of the investigation away from Walcott. The South Dakota senator would run it himself.
In part it was a shrewd political move. There was no love lost for Wall Street in South Dakota, and Norbeck knew that investigating the stock market would sell well to his constituents back home. One political cartoon from his home state, captioned “Keep Norbeck on the Job,” showed a South Dakota voter cheering as Norbeck, wearing overalls and brandishing a pitchfork, chased “Wall Street Gamblers.” Norbeck, however, was thinking farther ahead than just the next election. After years of frustration over the failed farm legislation he had sponsored, Norbeck saw this investigation as his best chance to leave his mark in Washington. He was careful not to share those views publicly, telling reporters when asked what effect the inquiry would have on the stock market, “I don’t know, and I don’t care.” Privately, however, he admitted the potential significance of what he was about to undertake. “This is the greatest opportunity I have had for broad work since I came to Washington,” he wrote to his campaign manager.14
Seven months later, he knew that his aspirations had largely failed. Despite the expanded resolution, the committee had mostly confined itself to short selling, as Hoover wanted. Even with that limited focus, the hearings had not gone well. “This committee has spent a great deal of time trying to prove up on short selling as having a far-reaching effect on the market,” Norbeck wrote. “Our best effort did not result in anything substantial, though everyone knows that.” Then, at the end of June the committee announced without warning that it would suspend the investigation for the summer and fall. Norbeck had little choice; he needed to get back to South Dakota to wage his reelection campaign, and the other committee members insisted that they did not want hearings while Congress was adjourned. The press was both puzzled and surprised, especially since another $50,000 had just been appropriated to continue the probe. What exactly did this latest announcement mean? No one was sure. “What the future may hold for the investigation is unknown,” the New York Times reported, but the paper was quick to point out that when Congress suspended investigations it rarely restarted them.15
In November 1932, Norbeck announced that he was ready to try again. A little more than a week after the election, he returned to Washington and told reporters that the committee would turn its attention to the Insull utility empire, which had collapsed spectacularly earlier in the year, taking 600,000 shareholders and 500,000 bondholders with it. The implosion of the Chicago-based company was billed as “the biggest business failure in the history of the world,” the equivalent of an Enron or Lehman Brothers today. It wasn’t hard to see the potential to score some political points. Even Roosevelt, in a campaign speech in California in September, had railed against “the reckless promoter, the Ishmael or Insull whose hand is against every man’s.” Several of Norbeck’s political cronies, including his good friend and progressive colleague Senator Hiram Johnson of California, urged him to “cash in” on the scandal.16
Cashing in would not be easy. Samuel Insull, the mastermind behind the company, was in Greece, beyond the reach of the federal prosecutors in Chicago who had just indicted him for fraud. Many of the basic facts about the collapse were already well-known. The scandal had been thoroughly ventilated in the press and trustees were in charge of the company, sorting out the mess Insull left behind. Criminal enforcement authorities and “[e]verybody in Cook County running for office” had already been investigating for some time. It was more than a bit unclear what adding a set of congressional hearings on top of all those other investigations would accomplish.17
Norbeck said he would hold hearings anyway, even declaring that the committee might subpoena Samuel Insull if and when he was extradited from Greece. The New York bankers seemed unconcerned. “I am reliably informed,” a member of Norbeck’s staff wrote to him, “that Wall St. and the Exchange are well satisfied and believe nothing will be done.” The press was similarly skeptical. This was a lame duck session of Congress, after all, and the committee was likely to find all its time devoted to new banking and reconstruction legislation. The press was right. In mid-December, the committee gave a banking bill sponsored by Senator Glass privileged status, a move intended to help speed it along. It meant that the banking bill would take precedence over almost everything else that came before the committee, with only Senator Glass having the ability to move it temporarily to the back burner.18
The ill-fated bill needed all the help it could get. It represented a major structural overhaul of banking regulation, and the ideas embodied in it had been kicking around in Congress since 1931, when Glass and a Columbia economics professor named H. Parker Willis began stultifyingly dry hearings on banking reform. The bill that emerged had something for everyone to hate, with two features at the very top of the list. Banking laws to this point reflected Americans’ historical wariness of large concentrations of capital. They limited the ability of the largest banks to establish branches, and at the same time permitted small rural banks scattered throughout the South, the West, and parts of the Midwest to form and operate with tiny capital reserves. Naturally, those small banks took a beating when the economic downturn came, and most of the failures over the last few years had come from that group.
The Glass bill sought to solidify the creaking banking structure by reversing the previous policy, giving large urban banks greater leeway to open branches and increasing the capital requirements for small national banks. The presidents of the small local banks saw the branch banking provision as a death knell for their businesses, and they lobbied their senators hard to oppose it. As those bank presidents also happened to be major campaign contributors, the senators from those largely rural states were more than happy to oblige, including Norbeck, who was one of the most outspoken opponents of expanded branch banking.19
At the same time, Glass, a bitter and longtime critic of Wall Street “gambling,” thought that large commercial banks had contributed more than their fair share to the speculative excesses of the 1920s because they had moved heavily into the stock-and-bond-selling business. Federal law technically prohibited nationally chartered banks from engaging in these investment banking activities directly, but big banks like City Bank and smaller ones, too, evaded those restrictions by forming securities affiliates, companies that were technically owned by the banks’ shareholders but which the banks controlled. Glass’s original bill simply proposed regulation, but the committee was flooded with so many letters complaining about securities affiliates that Glass ultimately decided that complete separation of commercial and investment banking was the only viable approach.
That proposal had a fair amount of support in Democratic circles—it had even been a plank in the 1932 Democratic platform. Republicans, at least publicly, favored only greater regulation and control, but even the most conservative of them had little good to say about the affiliates in private. The previous summer, Walcott told Hoover that the affiliates were “disgraceful affairs and ought to be done away with.” Eugene Meyer, the Federal Reserve chairman, deplored affiliates. “These investment companies were doing more harm to the banks than they seemed to realize,” he later said. “It was one of the vicious thin
gs that led to the disaster.”20
Commercial bankers, naturally, saw matters differently. The American Bankers Association and the United States Chamber of Commerce opposed the bill; the ABA president went so far as to argue that Congress should repeal some of the banking laws already in existence, not pass more. In a magazine article entitled “Men, Not Laws, Make Sound Banks,” he argued that Americans need only rely on the “honesty and efficiency” of the men who ran the country’s largest banks. They were “the true strength of American banking” and they “continued to command public confidence . . . because they conformed conscientiously to principles of sound public service, which are better business guides than any statute ever written.” With every quarter of the banking industry against some aspect of Glass’s bill, it appeared to have little chance of success, although it would swallow inordinate amounts of time and energy in the Banking and Currency Committee.21
The same day that Glass’s bill was fast-tracked, Norbeck again announced he was pushing forward with his investigation of Insull, even though members of his own committee were pushing right back. Some questioned the propriety of the committee poking around in the matter in the midst of an ongoing federal criminal investigation. Others argued that it was nonsense to do so while Insull remained in Greece. Many on the committee went even further, advocating that they should abandon the investigation altogether. With so little time left and so many other things to do, what was the point of continuing?
By the end of the year the investigation had foundered; the committee had not held a single hearing. Norbeck pressed on, announcing on December 28 that the Insull hearings would indeed be held, although he did not give a specific date. In private, he was much less sanguine. On that warm and rainy New Year’s Eve, Norbeck wrote a friend: “I am having a dickens of a time here to get my Wall Street investigation started. There is so much ‘inertia’; I find it in the most unexpected places, even among those from whom I expected much help.” Norbeck knew that many of his fellow committee members did “not have any relish for this work,” but he was not yet ready to give up.22
The key problem now was finding a competent lawyer to lead the last two months of the investigation. The search was proving much more difficult than Norbeck had ever imagined.
Chapter 2
THE BEST CROSS-EXAMINER IN NEW YORK
Ferdinand Pecora, like Peter Norbeck, had every reason to be content as 1932 came to a close. For the past three years he had been a name partner in a small Manhattan law firm. After three decades in city politics, he was on a first-name basis with almost all of New York’s leading politicians and lawyers. Married, with his only son at New York University, the good-natured lawyer with the easy smile was “Ferd” or “Ferdie” to his large group of close friends. In a week, the dignified and voluble attorney would turn fifty-one years old, and he was prospering. He had just moved to a nice apartment on the Upper West Side of Manhattan. Private practice allowed him to support his extended family, to put away some savings, and to contribute something to the charities that were then helping the army of unemployed encamped in the city. He wasn’t anywhere near rich, but he was comfortable, and that, in itself, was an accomplishment given the Depression raging all around him. He had, by any measure, come a long way in the forty-seven years since he first sailed into New York Harbor.
Pecora was born in Nicosia, Sicily, a small Italian hill town due west of Mount Etna, on January 6, 1882, the third son of Luigi and Rosa Messina Pecora. Luigi was a shoemaker and at thirty-six had already been working at his craft for the better part of three decades. Rosa was only twenty when her third child, Ferdinand, was born, and just a year and a half later, Luigi left Sicily for New York. He was in the first wave of the great Italian exodus from the Mezzogiorno, the land south of Rome, which had always been economically the poorest part of the country. But it wasn’t just economics that drove Pecora out of Italy. Protestant missionaries had just swept through that overwhelmingly Roman Catholic country and, in one of their few successes there, had managed to convert Luigi Pecora. In a country where the Catholic hierarchy denounced Protestantism as the equivalent of atheism or Satan worship, that conversion created enormous social strains for the family. They were outcasts, Ferdinand later said, shunned “by their friends and neighbors, and even by their own blood.”1
His son described Luigi as a “strong-willed and stubborn individualist” who, rather than abandon his new religion, abandoned Sicily. He left alone for the United States in 1883 and in a little less than three years saved enough money to bring the rest of the family across. Rosa and the couple’s now four children arrived aboard the Alesia on May 25, 1886, when Ferdinand was just four years old. It was seemingly an auspicious year to enter the country. The Statue of Liberty was dedicated that same year, and the great wave of immigration to the United States was cresting. But at the statue’s elaborate dedication ceremony that October, not one speaker mentioned the Emma Lazarus poem written three years earlier. While that omission might seem puzzling today, the reality was that 1886 was an inopportune time to be one of the huddled masses yearning to breathe free.2
The United States was in turmoil. A decade earlier, the country had been largely rural, agrarian, and homogeneous. Now it was reeling, whipsawed by tectonic shifts in the cultural landscape. Urbanization, industrialization, immigration—they were all happening at once. The increasing tensions within America’s rapidly evolving society were most sharply revealed in industrial-labor relations, which were growing alarmingly antagonistic. Violent confrontations among union activists, police, state militias, and federal troops were an all too common occurrence. As tensions mounted, a small but active band of anarchists, many of them European exiles, was beginning to garner public attention by pressing workers to escalate the conflict, to use any means necessary to improve their lot. Over the next generation, political violence—the Haymarket riot, the assassination of William McKinley, the attempted murders of various corporate chieftains, and the bombing of Wall Street—pervaded American society.3
Most Americans laid the blame for the violent radicalism and social unrest at the feet of the European immigrants pouring into the country, unleashing, in the words of historian John Higham, “a torrent of nationalist hysteria.” The newspapers of the day whipped up this fervor with vicious editorials condemning the newcomers. These immigrants were “not Americans, but the very scum and offal of Europe.” Americans weren’t responsible for the increasing rate of labor violence; it was this “invasion of venomous reptiles” that was causing all the trouble. The country should shut its doors to any new “foreign savages who might come to America with their dynamite bombs and anarchic purposes.” Those already here should be “crush[ed] . . . before they [had] time to bite.”4
When Ferdinand and his family arrived in the United States, they had an additional strike against them. They were not just any immigrants; they were among this country’s first wave of Southern Italian immigrants. Southern Italians, so different from the early waves of northern Europeans, were singled out for some of the harshest treatment during that time. “There has never been since New York was founded,” the New York Times wrote around the time Luigi arrived in the United States, “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.”5
That Italians were the object of intense bigotry, discrimination, and hatred is somewhat hard to appreciate today. After all, Americans with at least some Italian heritage number in the tens of millions. They have occupied virtually every position of power, influence, or prestige in the country. Hollywood, to be sure, still peddles stereotypes and will continue to do so as long as the public does not weary of Mafia movies. But no one today would blink an eye if they heard that an Italian American had been appointed as counsel for a high-profile Senate committee.
It was different in the late 1800s, when stereotypical views of Southern Italians were widely held. The Times viewe
d Sicilians, like the Pecoras, as “ragged, filthy and verminous.” Many thought Italians were universally bloodthirsty criminals who lacked the intellectual capabilities of Anglo-Saxons or northern Europeans. “The disposition to assassinate in revenge for a fancied wrong,” the Baltimore Daily News editorialized, “is a marked trait in the character of this impulsive and inexorable race.” Italians were accused of creating the ghettos in which they lived because of their willingness to tolerate filthy and crime-ridden conditions. Even Jacob Riis, the muckraking journalist and ardent tenement reform advocate, wrote that the “hot-headed” and “swarthy” Italian “is content to live in a pig-sty” and frequently settled his quarrels at the point of a knife.6
Tales of Italian criminal activities were frequent fodder for urban newspapers, and many imagined that a secret Southern Italian crime organization, the Black Hand Society, extended its reach into every American city in which Italians were present. American immigration authorities classified Southern Italians as a distinct race on naturalization certificates, separate from the more favored Northern Italians. Unlike northern Europeans, olive-skinned Southern Italians like Ferdinand were not considered “white,” and in the South they could not attend white schools.7
Occasionally racism erupted into violence. When the Pecoras were settling in New York during the early days of Italian immigration, many Italians, unable to find work elsewhere, served as strikebreakers, leading to violent clashes between them and the Irish and German workers they displaced. There were several Italian lynchings in the 1890s, the most infamous of which happened in New Orleans. The local paper justified the killing of eleven Italian immigrants: “Desperate diseases required desperate remedies.” While it might be easy to chalk that response up to the Southern racism of the times, the lynchings were national news and those views were apparently widely shared. 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.” Italian lynchings continued well into the 1900s.8
The Hellhound of Wall Street Page 3
