Why a Biden Administration Shouldn’t Turn the Page on the Trump Era

And so, the hearings continued. Democratic senator Duncan Fletcher of Florida took over the chairmanship of the committee, but the inquiry—now known as the Pecora Commission—clearly belonged to its chief counsel. FDR encouraged the investigator to press his luck by calling an even more notorious banker to testify: J.P. Morgan Jr.

Public interest in the infamous “House of Morgan” was so pronounced, the committee had to relocate to the large caucus room in the Senate Office Building. Pecora appropriately put on a show, revealing that neither Morgan nor any of his 19 partners had paid a single cent in federal income taxes in either 1931 or 1932. (This was actually due to their own losses in the market and entirely legal, but the nation’s unemployed didn’t care.) Pecora also proved that Morgan kept a secret “preferred list” of elite clients who had been allowed to purchase stocks at special below-market prices. The list was a who’s who of the elite, including both Republican president Calvin Coolidge and his Democratic opponent in 1924, John W. Davis, then present as Morgan’s legal counsel.

Some senators found the spectacle unseemly. “We are not engaged in political vaudeville,” harrumphed Senator Phillips Lee Goldsborough, a Maryland Republican. Senator Carter Glass, a crotchety Democrat from Virginia, called it pointless grandstanding. “We are having a circus,” he said sarcastically, “and the only things lacking now are peanuts and colored lemonade.”

Glass’s comment inspired a press agent from Ringling Brothers to show up the following week. During a break in the hearings, he escorted Miss Lya Graf—a circus performer described as “22 years old, 28 inches tall and…24 pounds”—into the chamber, up to the witnesses and right onto Morgan’s lap. Tipped-off photographers happily snapped away.

The committee’s leaders were livid. (Reporters recorded the shades of their outrage, noting that Pecora “flushed a deep crimson” while the chairman turned “beet red.”) Fletcher warned photographers they’d be banned from future sessions if they ran their photos. Notably, that afternoon, they were all gone.

Despite their worries, all the drama helped make the hearings a success. Pecora became a national celebrity, appearing on the cover of Time and Newsweek in the same week that June. More important, the cause he pressed became a national concern as well.

The American people, who had looked up to bankers in the 1920s, now called them “banksters”—gangster-like figures up to no good. The hearings had crafted a narrative about who had wronged them, and how, and prepared the way for Congress to enact sweeping new laws to ensure it would never happen again. The Securities Act of 1933 and the Securities Exchange Act of 1934 led to the creation of the Securities Exchange Commission which regulated Wall Street from that point on. The Glass–Steagall Act, meanwhile, forced commercial banks out of risky investments and established the FDIC system which guaranteed deposits in case of bank failures.

For decades, these laws guarded against another great crash. Their evisceration in the late 20th century, not surprisingly, contributed to the financial meltdown of 2008.

When Obama, and Biden, came to office soon after, many called for another investigation into Wall Street to hold individuals and institutions accountable. In January 2009, Ron Chernow asked in the New York Times: “Where Is Our Ferdinand Pecora?” In April, House Speaker Nancy Pelosi likewise called for a new Pecora Commission, even pressing Treasury Secretary Tim Geithner about it. But nothing happened: Obama wanted to look forward.

This time around, Democrats should learn from Obama’s mistakes and Roosevelt’s successes. Policies follow politics, and before any administration can “move forward,” it first has to make clear what it’s moving forward from, and why. Leaders have to tell a story before they turn the page.

This article has been updated

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