Ferdinand Pecora, an Italian-American immigrant  was " The Hellhound of Wall Street"  who led the 1933 Congressional Hearings into events that led to the stock market collapse in 1929.  Pecora was an amazing lawyer, but at bottom he really was an incredibly effective teacher. He was able to take complex economic transactions and turn them into simple morality tales. Pecora was able to crystallize anger at Wall Street in a way that hasn't really happened today. Pecora's efforts prompted legislative reforms that shaped the industry for decades. Until Wall Street started Lobbying to Dilute or DeReulate"
 
 

 
The New Jersey Record; By Hugh R. Morley; Wednesday, November 10, 2010 
The nation's economy collapses. Unemployment hits a record high. A banking crisis ensues and a congressional probe of banking titans into the cause of the meltdown prompts financial reform.

Sound familiar?

The tale, though reminiscent of the recent recession and its aftermath, unfolds in the pages of "The Hellhound of Wall Street" (The Penguin Press), an account of the 1933 congressional hearings into events that led to the stock market collapse in 1929.

Written by Michael Perino, a Leonia resident and law professor at St. John's University School of Law in Queens, the recently published book focuses heavily on attorney Ferdinand Pecora, an Italian-American immigrant " the "hellhound" of the title" who led the congressional interrogation and emerged a nationally known figure.

The hearings prompted legislative reforms that shaped the industry for decades.

Perino, 47, who has consulted for the Securities and Exchange Commission and testified before Congress, said he started writing the book, which carries the subtitle, "How Ferdinand Pecora's Investigation of the Great Crash Forever Changed American Finance," a month before the collapse of Lehman Brothers in the fall of 2008.

He was drawn to the story in part by the sweeping impact of Pecora's investigation, which put him on the cover of Time magazine, and his personal story: He was an Italian-American who rose from poverty to prominence in an era when perceptions of Italian immigrants were heavily shaped by tales of the Mafia.

Perino, who also has Italian-American roots, talked to The Record about the parallels between the economic crisis of the 1930s and today, and efforts to rein in banks after each.

Q. You must be very lucky or very smart to get the book out just as public interest in the Depression is so high, sparked by the recent recession.

The timing is certainly fortuitous. I will say when I was writing it, it already felt like I was too late. I would be working on this book, and I would be reading these transcripts from the 1930s, and I would come home and read the newspaper and it sounded like the same story all over again.

Q. What are the big differences and similarities from now to what happened in the '30s?

A lot of the same issues that are going on now were going on then. Back then, it wasn't subprime mortgages packaged into bonds and then sold off to investors, it was the debt of Latin American investors sold to investors. But the basic underlying principles were the same: Wall Street firms were selling a huge number of shoddy securities to unsuspecting Americans, and eventually they all collapsed.

Q. The book tells of how Charles Mitchell, chairman of National City Bank (now Citigroup), walked out of the hearing after interrogation and five days later was removed from his job because the hearings were so devastating. Some people say this time around we haven't had that kind of accountability.

In some ways Mitchell was the anomaly back then. Most of the big executives in the Wall Street firms did not lose their jobs. I would look at the parallels in a different way. We have the same issues of selling pretty dodgy securities to investors without disclosing to investors the risks that the investment banks knew about. We have a situation where there is huge public outrage over excessive executive compensation similar in both time periods. And you had that outrage at least yielding some changes in terms of the way we regulate Wall Street. Back then it was the first federal securities laws. Now it's the new Dodd-Frank Wall Street Reform Act.

Q. Critics say the banks have really not been brought to task. Is that fair, and was that any different back then?

That was different back then. Because part of what Pecora was able to do was crystallize anger at Wall Street in a way that hasn't really happened today. Pecora was an amazing lawyer, but at bottom he really was an incredibly effective teacher. And what he was able to do in a way that I don't think anybody was really able to do the same way today is to take these complex economic transactions and turn them into simple morality tales.

The other difference is the circumstances under which these hearings happened: Pecora put Charles Mitchell on the stand at precisely the moment when the banking crisis was hitting. Also, it was a much more severe economic crisis.

Q. It seems like the recent hearings haven't really had that much of an impact on the general public.

I think that's right. Part of it is the way that some of these inquiries, like the Financial Crisis Inquiry Commission, have chosen to present the material.

Q. Critics say the banks were sheltered from the Dodd-Frank Act by their lobbying efforts. Is that what happened in the 1930s?

He was drawn to the story in part by the sweeping impact of Pecora's investigation, which put him on the cover of Time magazine, and his personal story: He was an Italian-American who rose from poverty to prominence in an era when perceptions of Italian immigrants were heavily shaped by tales of the Mafia.

Perino, who also has Italian-American roots, talked to The Record about the parallels between the economic crisis of the 1930s and today, and efforts to rein in banks after each.

Q. You must be very lucky or very smart to get the book out just as public interest in the Depression is so high, sparked by the recent recession.

The timing is certainly fortuitous. I will say when I was writing it, it already felt like I was too late. I would be working on this book, and I would be reading these transcripts from the 1930s, and I would come home and read the newspaper and it sounded like the same story all over again.

Q. What are the big differences and similarities from now to what happened in the '30s?

A lot of the same issues that are going on now were going on then. Back then, it wasn't subprime mortgages packaged into bonds and then sold off to investors, it was the debt of Latin American investors sold to investors. But the basic underlying principles were the same: Wall Street firms were selling a huge number of shoddy securities to unsuspecting Americans, and eventually they all collapsed.

Q. The book tells of how Charles Mitchell, chairman of National City Bank (now Citigroup), walked out of the hearing after interrogation and five days later was removed from his job because the hearings were so devastating. Some people say this time around we haven't had that kind of accountability.

In some ways Mitchell was the anomaly back then. Most of the big executives in the Wall Street firms did not lose their jobs. I would look at the parallels in a different way. We have the same issues of selling pretty dodgy securities to investors without disclosing to investors the risks that the investment banks knew about. We have a situation where there is huge public outrage over excessive executive compensation similar in both time periods. And you had that outrage at least yielding some changes in terms of the way we regulate Wall Street. Back then it was the first federal securities laws. Now it's the new Dodd-Frank Wall Street Reform Act.

Q. Critics say the banks have really not been brought to task. Is that fair, and was that any different back then?

That was different back then. Because part of what Pecora was able to do was crystallize anger at Wall Street in a way that hasn't really happened today. Pecora was an amazing lawyer, but at bottom he really was an incredibly effective teacher. And what he was able to do in a way that I don't think anybody was really able to do the same way today is to take these complex economic transactions and turn them into simple morality tales.

The other difference is the circumstances under which these hearings happened: Pecora put Charles Mitchell on the stand at precisely the moment when the banking crisis was hitting. Also, it was a much more severe economic crisis.

Q. It seems like the recent hearings haven't really had that much of an impact on the general public.

I think that's right. Part of it is the way that some of these inquiries, like the Financial Crisis Inquiry Commission, have chosen to present the material.

Q. Critics say the banks were sheltered from the Dodd-Frank Act by their lobbying efforts. Is that what happened in the 1930s?

I think there's little doubt that strong lobbying from the Financial Services Committee watered down the Dodd-Frank bill. If you look back to the 1930s, you see, at least initially, something very different. What Pecora was able to do was create so much anger at the financial community that the normal political forces that prevent major reform legislation from passing were swept aside. Congress really didn't have any choice but to pass major financial reform. That's a key difference between what happened then and what happened now. By the time we turned to financial reform, after the bruising battle over health care, some of that anger at Wall Street had dissipated, allowing the lobbyists to step in.

Q. What came out of the Pecora hearings?

It was a revolutionary change. There was nothing there before. There was not a single law or a single regulation in which the federal government regulated what went on Wall Street. And Pecora changed all that. The first federal securities laws and the creation of the SEC came out of the Pecora hearings. Federal deposit insurance and the creation of the FDIC came out of the Pecora hearings. The Glass-Steagall Act, which among other things, separated commercial and investment banking, came out of the hearings.

Q. Is there a Ferdinand Pecora today?

Pecora was a media superstar in the early 1930s. Everybody knew who Ferdinand Pecora was. In terms of public attention and legislative accomplishments, I don't think there is anybody who has matched Pecora.

E-mail: morley@northjersey.com

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