Roosevelt historian David Woolner shines a light on today’s issues with lessons from the past.
There has been a great deal of speculation this week as to whether the newly opened commission on the financial crisis will live up to the reputation of its more famous predecessor headed by Ferdinand Pecora. It is true that Pecora's ruthless pursuit of the truth brought many of the evil practices that contributed to the 1929 crash on Wall Street to light and even landed some of its kingpins in jail. But the real significance of the Pecora commission did not come during the famous hearings but after -- in Congress.
Spurred by Pecora's determination to leave no stone unturned, and buoyed by the overwhelming support FDR had received at the polls in the 1932 election, Congress was not afraid to take matters into its own hands in the wake of Pecora's revelations. Some of the most important provisions of FDR's first hundred days, in fact, were initiated, not by the White House, but by Congress. Perhaps the most significant was the Glass-Steagall Act, which established the Federal Deposit Insurance Corporation (FDIC), separated commercial from investment banking, and shifted greater regulatory power from the Federal Reserve Banks to the Federal Reserve Board in Washington. At first, the newly elected FDR was reluctant to support this bill as it was considered very controversial at the time. But with the public clamoring for action-thanks in large part to the work Pecora-FDR soon came to support it.
Another important and controversial 100 days measure -- the Truth in Securities Act-had FDR's full support. But it was Congressman Sam Rayburn (aided by Felix Frankfurter and other key FDR advisors) who successfully brought this bill through Congress. The 1933 Securities Act was the first major piece of federal legislation aimed at regulating the stock market. It required that investors receive financial and other significant information concerning securities being offered for public sale. It also prohibited deceit, misrepresentation and outright fraud in the sale of securities. Wall Street cried foul at this, but in the aftermath of the financial meltdown of 1929 and the subsequent exposure of the outrageous practices that led to it in the Pecora Commission, Rayburn was able to gain enough support to ensure that it was his bill-the House bill-not the milder Senate version that ultimately became law. As Rayburn put it at the time ‘Today we are forced to recognize that the hired managers of great corporations are not as wise, not as conservative, and sometimes not as trustworthy as millions of people have been persuaded to believe."
There is no question that FDR was a President bent on engaging in serious reform. He is, and may always remain, the one President who effected the greatest change while in office. In fact we live in a nation -- indeed a world -- that was profoundly influenced by the reforming spirit of the New Deal. But FDR did not accomplish all of this by himself. Congress too -- on both sides of the aisle -- played an important part in initiating, drafting, and refining the legislation that gave us the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, the Federal Housing Association, Social Security, unemployment insurance, the Wagner Act, the minimum wage, the GI Bill, and the many other provisions that laid the foundation for the unprecedented prosperity and economic security that followed the twin crises of the Great Depression and the Second World War.
In most if not all of these cases, powerful vested interests did everything in their power stop these measures from moving forward. But heeding the words from FDR's first inaugural that "this nation is calling for action and action now" and that it was time for all to recognize that "the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit," Congress decided to do its duty and act in the public's interest. Recognizing this some years later, FDR noted that the generation that lived up to these great challenges did so because it had "a rendezvous with destiny." Let us hope that this generation-and its leaders-can rise to the same level of achievement.
David Woolner is a Senior Fellow and Hyde Park Resident Historian for the Roosevelt Institute.