Michael Perino - The Hellhound of Wall Street: How Ferdinand Pecoras Investigation of the Great Crash Forever Changed American Finance

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Table of Contents

THE PENGUIN PRESS

Published by the Penguin Group
Penguin Group (USA) Inc., 375 Hudson Street, New York, New York 10014, U.S.A. Penguin Group
(Canada), 90 Eglinton Avenue East, Suite 700, Toronto, Ontario, Canada M4P 2Y3 (a division of
Pearson Penguin Canada Inc.) Penguin Books Ltd, 80 Strand, London WC2R 0RL,
England Penguin Ireland, 25 St. Stephens Green, Dublin 2, Ireland (a division of Penguin Books
Ltd) Penguin Books Australia Ltd, 250 Camberwell Road, Camberwell, Victoria 3124, Australia
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Penguin Books Ltd, Registered Offices:
80 Strand, London WC2R 0RL, England

First published in 2010 by The Penguin Press,
a member of Penguin Group (USA) Inc.

Copyright Michael A. Perino, 2010

All rights reserved

Excerpt from Provide, Provide from The Poetry of Robert Frost, edited by
Edward Connery Lathem. Copyright 1969 by Henry Holt and Company.
Copyright 1936 by Robert Frost, copyright 1964 by Lesley Frost Ballantine.

LIBRARY OF CONGRESS CATALOGING IN PUBLICATION DATA

Perino, Michael A.
The hellhound of Wall Street : how Ferdinand Pecoras investigation of the Great Crash
forever changed American finance / Michael Perino.
p. cm.
Includes bibliographical references and index.

eISBN : 978-1-101-44444-3

1. Pecora, Ferdinand, 1882- 2. Stock Market Crash, 1929. 3. Stock exchangesUnited
StatesHistory20th century. 4. Financial crisesUnited StatesHistory20th century. I. Title.
HB37171929 .P47 2010
330.9730916--dc22
2010019157

DESIgGED BY AMAGDA DEWEY

Without limiting the rights under copyright reserved above, no part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form or by any means (electronic, mechanical, photocopying, recording or otherwise), without the prior written permission of both the copyright owner and the above publisher of this book.

The scanning, uploading, and distribution of this book via the Internet or via any other means without the permission of the publisher is illegal and punishable by law. Please purchase only authorized electronic editions and do not participate in or encourage electronic piracy of copyrightable materials. Your support of the authors rights is appreciated.

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For my mother and father

INTRODUCTION

Saturday, March 4, 1933Inauguration Daywas one of those raw March days when it seems that spring will never come. The thick layer of steel gray clouds sheathing the sky threatened rain, and a northwest wind whipped across Capitol Hill. Sunshine broke through on occasion, but it was dull and fleeting and did little to relieve the dreariness of that damp, chilly day.

Historians would later pinpoint that winter as the nadir of the Great Depression, but Americans hardly needed to be seers to realize that the economy could not get much worse. Thirty-eight states had closed all their banks, and everywhere else withdrawals were sharply curtailed. Outright bank failures numbered in the thousands annually. In those days before deposit insurance, one in four families lost their life savings. The economy was in full retreat, industrial production was half what it had been just four years earlier, and unemployment was an appalling 25 percent. Farm incomes were decimated after a decade of plummeting crop prices. Shantytowns of the dispossessed, sarcastically dubbed Hoovervilles, dotted the landscape, and breadlines stretched around many blocks. Homes were foreclosed, renters evicted, and signs of malnutrition among schoolchildren were increasingly evident. On Friday, March 3, the Dow Jones Industrial Average was 86 percent off its wildly inflated pre-crash peak in September 1929. At the end of trading that day, the New York Stock Exchange announced that it would be closed indefinitely.

In the midst of the economic chaos, a shivering crowd of at least 100,000 gathered near the east portico of the Capitol to hear Franklin Roosevelts plan of attack, some perched in the icy bare trees, others crammed in bleachers or crowded atop adjacent buildings. Pundits from all points of the political spectrum were openly calling for Roosevelt to assume dictatorial powers to address the crisis. In some parts of the country the possibility of revolution was openly discussed, and Lloyds of London was doing a booming business in riot and civil disturbance insurance.

The previous spring, tens of thousands of unemployed World War I veterans and their families had marched on Washington, demanding early payment of a promised bonus for wartime service, many protesting on the very spot where the inaugural crowd now gathered. The bonus never came, and in late July, the Army chief of staff, General Douglas MacArthur, let loose his cavalry, sabers and bayonets drawn, on the thousands still milling in the capital. Through clouds of tear gas, the tanks and soldiers drove the bonus army from the city and burned their encampment along the Anacostia River to the ground. Seven months later, Washington still had an ominous, wartime feel. Government buildings were heavily guarded, police patrols ringed the White House, and machine gun nests were strategically placed along the inaugural parade route.

The new president made his way across the crowded platform, gripping his son Jimmys arm with one hand and leaning on a cane with the other, giving the crowd the illusion that he was walking. After being sworn in by Chief Justice Charles Evans Hughes, Roosevelt turned to address the gathered crowd. Despite the chill March air, he shed his hat and overcoat. Grim-faced, his usual broad smile absent on this solemn occasion, he told the assembled crowd and radio listeners that the only thing they had to fear was fear itselfnameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. Roosevelts address is rightly remembered for that hopeful phrase and for his call for the government to launch a war on the Great Depression. Positioning himself in stark contrast with Herbert Hoover, who sat stonily just a few feet away, Roosevelt pledged action, and action now.

The Inaugural Address, however, did more than just announce a vision for fixing the economy; Roosevelt used it to assign blame. Along with most everyone else at the time, Roosevelt pointed his finger at Wall Street, but his goal was not demagoguery. He wasnt trying to accrete power, but to stoke reform. The largely silent crowd stirred when Roosevelt told them that the rulers of the exchange of mankinds 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. Applause erupted for the first time when Roosevelt proclaimed that the money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths.

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