11. Lacking and needed today:
a. A new Pecora
b. Moral indignation, as once supplied by FDR
c. A new sense of the role of land pricing in macro, along with general decompartmentalization and integration of economic analysis
B. Full Text, "Reverberations between immoderate land-price cycles and banking cycles"
1. We begin with the Pecora Hearings of March 1933. Ferdinand Pecora's were another "ten days that shook the world", but Pecora's ten days shook the very temple of capitalism, Wall Street itself.
2. These were the dying days of Hoover's Administration and the Republican Congress. Herbert Hoover was desperate to find a scapegoat for the disasters he had overseen, yet holding back safely short of challenging the system, or the cartelization of American industry he had sponsored. He focused on an alleged plot by short sellers who were "selling America short". Few bought this political play on words, so he pushed the lame duck Senate's Banking and Currency Committee to investigate Wall Street and gin up some more scapegoats to save Hoover's face and reputation. Chair of the Committee, through Senate seniority rules, was Peter Norbeck of S.D., a residue of old prairie Populism via T.R.'s Bull Moose Party, and an unreconstructed Progressive [1] . Norbeck knew little of Banking and Currency -- Wall Street Republicans stigmatized old prairie populists as "Sons of the Wild Jackass". Norbeck sought a savvy prosecutor for the hearings.
Few wanted the job -- two weeks working for a lame duck Congress , making powerful enemies. Far down on his list Norbeck came to Ferdinand Pecora, a mere assistant D.A. for New York County. Pecora likewise knew little of banking and currency, but was a quick study with remarkable energy, high ambition, lethal aim, and little awe of pedigreed bankers with Ivy-League degrees, and intimidating miens. Pecora pushed his inquiries well beyond what Hoover or even Norbeck had dreamed, and forced so many famous bankers to disrobe under oath that the hearings made banner headlines and are still known by his name.
3. Pecora had only ten days to put Wall Street under oath, but he seized the public spotlight with his sense of drama, his aim for big players and big issues, and his knockout punch. Pecora's ten days preceded FDR's 100 days, and built a springboard for New Dealers to vault into reforms like the SEC, the FDIC, the RFC, Glass-Steagall, production credit for farmers, and federal intervention in credit markets through FHA, S&L subsidies, FNMA, and later the VA.
Before Pecora bankers were already under fire for bad judgment; after Pecora they were "banksters", disgraced for bad faith, breach of trust and self-dealing. Several were to face criminal charges. Pecora dislodged bankers from their economic, political and social pedestal atop high society and government bureaucrats, and turned the world of finance upside down. FDR could not have asked for a better springboard.
Not since the Pujo Committee revelations of 1912-13, and Louis Brandeis' classic book thereon (Ot her People's Money), both at the acme of the Progressive Era, had anyone penetrated so deeply through Wall Street's opacity to publicize its villainies. And not, tragically, has anyone done so since.
4. There was, however, a basic flaw and lacuna in Pecora's brilliant and dominating performance. He saw the Great Crash as mainly a matter of money and securities, the paper economy, if you will. This view has narrowed and confined reformers ever since, both in politics and academe. Macroeconomics has become synonymous with Fiscal and Monetary Policy (FMP). Y = C+I+G is the template. Everything is expressed in its terms -- it dominates the language, hence the thought. "The Left" wants more C and G; "The Right" wants more "I" and its own kind of G. Within "G", "The Left" generally wants more welfare, and "The Right" more military. Both lean more towards hardware than software. Within those confines the same tired sermons echo back and forth endlessly. This is its own kind of "reverberation", but not the kind my title means. This is the long-term effect of Pecora's lacuna.
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