M E M O R A N D U M
FROM: [Student name]
RE: Pecora Hearings
The Pecora hearings were much-publicized investigations of the nations’ financial sector. The stock market crash of 1929 caused the Senate banking committee of the United States led by lawyer Ferdinand Pecora to examine the irresponsible and corrupt conduct of major banks and their involvement in the stock market crash. The committee faced some objection from the bankers who were of the opinion that the committee’s actions would lead to even more problems in the stock exchange with the New York stock exchange lobbying for self-regulation of the market without any government involvement.
The investigations resulted in significant reforms on Wall Street with some being in existence up to date. Additionally, the process provided evidence that resulted in a consensus on the corrupt nature of the financial system and political allies. However, the hearings did not divide the nation as would be expected or lead to an undue focus on the current economic crisis. The hearings provided the foundation for Congress to draft legislation that enabled the public to have confidence in the financial markets once again and protected the honest bankers as well.
After the hearings, there were numerous regulatory and legislative reforms in the financial sector. These were put in place as preventative measures to avoid the occurrence of another depression. The Glass-Steagall Act, for instance, created a wall between the commercial and investment banking industries. Other acts were the Securities Act of 1993 and the Securities Exchange Act of 1934. Also, the investigations resulted in some tax reforms as the elites had taken to ways of avoiding payment of tax. The reforms resulting from the Pecora investigations managed to keep away future crises in the U. S until they were removed through deregulation.
Senator Fletcher proposed law aimed at preventing another economic crisis within the stock exchange market in the United States. More importantly, President Roosevelt viewed the Stock Exchange Bill as a caveat emptor warning Americans about fraud within the stock markets. Without regard to other impending factors, the bill could prevent a stock market crisis in the United States. However, critics of the law such as Richard Whitney indicated that it would give the government authority to interfere with the stock exchange. The problem before us, therefore, is choosing between stock market interference by the government or certainty of stock markets through market regulation.
The most realistic option was to support the bill that had gained significant support from the economic and political actors. In this regard, critical inputs by the like of Richard Whitney would not succeed against presidential inputs. Although stock market regulation seemed sinister, there was public outcry on the consequences of an unstable economy. As indicated earlier business lobbying was not successful as the financial industry had tainted its image as being manipulative and oppressive. From a logical perspective, it was only ideal that the stock market was curbed to prevent exploitation and loss of funds.
Despite creating a dilemma, the whole ordeal about stock exchange regulation created two options. First, was the Senator Fletcher way that gave the government authority to interfere with free markets. Another option was to go the Richard Whitney way that advocated for minimal government interference in the stock market. Although the two options were persuasive, Senator Fletcher’s proposal on enacting stock legislation was the better plan. Furthermore, the United States was recovering from a stock crisis that had crippled the economy, and the people could not withstand another market showdown. In this regard, I support the Stock Exchange Act with reservations that the government should put up measures to ensure minimal interference with business practices.