Wall Street Under Oath

Pecora served as chief counsel to the Senate Committee on Banking and Currency from January 1933, and his questioning of bankers over the following fifteen months produced the record that supported the Securities Act of 1933, the Glass-Steagall Act and the Securities Exchange Act of 1934. He wrote this account in 1939, after serving as a commissioner of the Securities and Exchange Commission.

The book reports what the hearings established. National City Bank sold Peruvian government bonds to retail customers while its own officers had internal reports describing Peru as a bad credit risk. The same bank moved bad loans off its books by selling them to an affiliate it controlled. Charles Mitchell, its chairman, avoided income tax by selling stock to his wife at a loss and repurchasing it. J P Morgan and Company maintained preferred lists offering favoured public officials, politicians and business figures the chance to buy new issues below the price at which they would trade. Several Morgan partners had paid no income tax in 1931 and 1932. Investment trusts sold to the public were used to support the sponsoring firm's own underwritings.

Pecora's argument from this evidence is that the securities business had no meaningful separation between the interests of the seller and the buyer, that the affiliate structure allowed commercial banks to dump risk on depositors and customers, and that the remedy was compulsory disclosure, separation of commercial from investment banking, and a federal regulator.

The book is a participant's account written to defend the New Deal securities legislation, and it reads as advocacy. Historians have since argued that the abuses were less universal than Pecora presented and that the affiliates performed better than the hearings suggested. The primary record of the hearings remains the stronger source, but this is the accessible version and the description of the specific mechanisms is accurate.