After the November election, as Norbeck tried to get the investigation back on its feet, he faced the same problem that had vexed him in the spring. Whom could he trust to run a real inquiry?
The obvious choice was Samuel Untermyer, the lawyer who had worked with Pecora to draft the bill to toughen New York’s securities laws. The seventy-four-year-old Untermyer was one of the highest-paid and best-known corporate lawyers in the country, but he was also a fierce critic of Wall Street. He had served as counsel to a Senate committee investigating the so-called “money trust” back in 1912. In those hearings, named after the Louisiana senator Arsène Pujo, Untermyer had famously cross-examined the elder J. P. Morgan, and the disclosures from those hearings laid the groundwork for the creation of the Federal Reserve.
As the grand old man of Wall Street critics, Untermyer considered himself, according to one biographer writing in the 1930s, “the stellar investigator of the age, if not of all history.” He was a ruthless cross-examiner who often shouted at hostile witnesses. For the particularly recalcitrant, his favorite prop was his tortoiseshell glasses, which he would dramatically snatch off his face to stare down a witness, although in truth he was nearly blind without them. Outside the courtroom, he was arrogant, humorless, dictatorial, patronizing, and, not surprisingly, almost universally disliked. He was also quirky. Untermyer was an avid gardener with a collection of more than 60,000 orchids in the greenhouses of his Westchester estate, Greystone. The dapper lawyer wore one in his lapel every day, making sure that it matched his tie. On court days, his assistant carried spares in a damp paper bag so that Untermyer could have a fresh one for the afternoon session.
The grandstanding Untermyer frequently tried his cases in the newspapers and, although others might be able to match his investigative skills, his biographer wrote, “there is not the slightest doubt that he surpasses all his contemporaries in the art of making the first page.” He knew how to work the press, usually by giving reporters the big, dramatic quotes they wanted. When Norbeck’s investigation first got under way, Untermyer told reporters that the New York Stock Exchange was “the most despotic institution on earth,” and that “its existence in its present form is . . . a menace and a disgrace....” He blasted Congress too, arguing that it was Congress’s failure to regulate the exchange as he had advocated that led to most of the market misdeeds: “The idea that such an institution should continue unregulated is repugnant to all conceptions of civilized government.”14
Norbeck offered Untermyer the job in December 1932, but Untermyer immediately turned it down. Roosevelt had already asked him to draft the stock exchange legislation the president-elect planned to introduce once he took office. Untermyer offered Norbeck a host of reasons for turning down the job—the authorizing resolution was too narrowly drawn and the current committee lacked the determination to carry out a meaningful investigation. The truth, however, was that Untermyer was hoping to become counsel for the investigation when the chairmanship passed from Norbeck. Taking the post now with so little time left in the investigation and so great a possibility that nothing meaningful would happen would do nothing to enhance his chances of landing the job once Roosevelt took over.15
Untermyer did, however, make sure to keep his name in the press. Although he was supposed to be drafting stock exchange legislation, he spent most of his time publicly lobbying to run the investigation when Roosevelt took office. Just a few weeks after meeting Norbeck, Untermyer released a statement calling for federal regulation of the stock exchanges, predicting that a special session of Congress would pass such legislation, and criticizing what Norbeck had thus far accomplished. Untermyer clearly wanted to leave little doubt that he was the only man for the job.16
Norbeck next turned to Harold L. Ickes. The thin-skinned Ickes reveled in his ornery, argumentative personality, even calling his memoirs The Autobiography of a Curmudgeon. In December 1932 he was little known outside Chicago, where he had waged a long battle against Samuel Insull’s control over Illinois and Chicago politics, urging Norbeck to open a full-scale Senate investigation of the wealthy utility magnate. Ickes thus made some sense as counsel for the committee, but only if it intended to wrap things up with Insull. Ickes knew Insull, but he was not an experienced courtroom lawyer. Ultimately, it did not matter, because Ickes, too, turned down the job.
True to form, Ickes responded angrily to Norbeck’s plan to conduct only eight hours of testimony concerning Insull. He called it totally inadequate and refused to participate unless the hearings were dramatically expanded. Or so he said. Ickes, like Untermyer, already had his sights set on the Roosevelt administration. The Chicagoan had broken with Republican ranks to support Roosevelt during the 1932 election. He was already angling for the Secretary of the Interior post as his reward, making it highly unlikely he would be willing to become the committee’s chief lawyer.17
In early January 1933, Norbeck reached the last name on his list, the white-haired, patrician judge Samuel Seabury. Seabury had just completed a series of high profile investigations of Tammany Hall that revealed massive corruption in New York City politics and led to the resignation of New York City’s flamboyant mayor Jimmy Walker. Pecora’s name never came up, and he was, not surprisingly, never linked to any Tammany corruption. He remained loyal to his Tammany friends, though, advising them on what to expect when they appeared before Seabury.18
While the New York probe had made the upright Seabury the country’s best-known investigator, it wasn’t entirely clear that he was the right man for the Banking and Currency Committee investigation. He was a stalwart reformer who had dedicated nearly forty years to the cause of good government, but, unlike Untermyer, he seemed to know little about the inner workings of Wall Street. In any event, Seabury didn’t want any part of the assignment, either. He did suggest, however, that Norbeck hire one of his “boys” from the investigation, a young lawyer named Irving Ben Cooper. Although Cooper was then a few weeks shy of his thirty-first birthday, he was already a tenacious investigator, having worked two years for Seabury and, before that, on an investigation of ambulance-chasing lawyers. Cooper had a self-confident swagger, sported a pencil-thin mustache, carried a walking cane, and wore flashy suits that rivaled those of the New York mayor he helped to chase from office.
Cooper’s élan didn’t seem to bother the decidedly unflamboyant Norbeck, who thought he was “brilliant.” To entice Cooper, Norbeck assured him that the $255-per-month salary limit would not apply to his work as counsel. Norbeck would try to get him $5,000 for the less than two months remaining in the investigation. Cooper accepted the job and his appointment was announced on January 10. He was noncommittal about his plans for proceeding with the investigation, but what he said suggested both nonchalance about the rapidly approaching deadline and an independence from the committee that might prove problematic. Cooper planned to read through testimony, and then he would “take up such phases of the inquiry as he deem[ed] necessary.”19
Editorial writers saw Cooper’s appointment as a hopeful sign that the Wall Street investigation would emerge from “lull and oblivion.” Cooper had a chance to perform a “rare service” for the country. “A thorough investigation into the methods of high finance during the wild days,” the New York World-Telegram declared, “will help defend future investors, and it ought to be highly useful to students of modern industrial economy and to the legislators alike in their efforts to help chart the country’s progress out of its present travail.”20
Norbeck must have welcomed that optimism. He was more and more distraught over the country’s economic woes, which he pinned on the “destruction of public confidence” following the stock market crash. “People have no faith in the Government,” Norbeck wrote, “and no faith in industrial leaders or bankers, in economists, statisticians, or even in themselves.” Society was past fraying; now it was rending, and Norbeck was hardly alone in seeing it. A Youngstown, Ohio, lawyer noted in his diary that winter a rise in “begging and holdups and
murder,” not to mention lawyers who were disbarred for stealing client trust funds. “It seems,” he wrote, “that all misdeeds and grievances are coming to the surface during this time of depression.”
Property rights and the rule of law, once nearly universally respected, were flagrantly ignored. In coal country, out-of-work miners dug their own shafts on company property and sold whatever they could. When they were arrested for theft, juries refused to convict them, despite overwhelming evidence of guilt. The unemployed in Virginia and Detroit walked into company stores and simply took food off the shelves. One businessman expressed alarm “at the increasing undercurrent of hate directed against our bankers and big industrial leaders. The mention of revolution is becoming quite common.”21
Norbeck saw federal banking and securities legislation as a small step that might help restore Americans’ confidence. The New York Times and other newspapers, however, continued to criticize the idea that more laws might deter fraudulent behavior. Norbeck himself provided the impetus for one of the Times’ editorials. As a way to jump-start the investigation, Norbeck had abruptly announced that the committee would hold hearings on the massive fraud perpetrated by the so-called Swedish Match King, Ivar Kreuger. Before his suicide in his Paris apartment, in March 1932, Kreuger was almost universally hailed as a financial genius; the securities of his companies were among the most widely held in the world. Within weeks of his death, Kreuger was reviled as the mastermind behind what was perhaps the world’s greatest financial fraud. His companies—which had negotiated a series of match monopolies throughout Europe—proved to be nothing more than a massive accounting hoax. The shocking news further unnerved an already jittery public. Along with the British Insull, the Swedish Kreuger became the face of financial fraud, the poster boy for unscrupulous foreign businessmen who duped honest Americans out of hard-earned savings.
In his typical scattershot fashion, Norbeck left no time for investigation. As with Insull, he was just trying to cash in on a prominent scandal. Marrinan and Norbeck handled most of the questioning at the Kreuger hearing, which was just finishing as Norbeck was hiring Cooper. Naturally, without any investigation the two men relied solely on previously reported information. The picture they painted over two days of testimony was of foolish American investment bankers from the Boston firm of Lee Higginson who allowed themselves to be duped by this criminal mastermind. Norbeck and Marrinan saw the accountants as the heroes for uncovering the fraud, although in reality Kreuger lulled them into a lethargic stupor with fat auditing and consulting fees and lavish European trips. In any event, for the Times the real lesson of these hearings was that Kreuger was a “unique phenomenon,” a criminal not unlike Al Capone. Kreuger was successful because he preyed on the trust inherent in modern business transactions. The Times’ editorial writers warned the South Dakota senator: “You cannot legislate for business on the basis of a monstrous exception.” Federal legislation might protect investors, but perhaps at the cost of killing the entire securities industry.22
If Norbeck was buoyed by the initial reaction to Cooper, his happiness was short-lived. Just a week after he was hired, Cooper quit in a huff, claiming that Norbeck had denied him a “free hand” in his investigation. Despite his laid-back initial response, Cooper had forged ahead aggressively. He hired seven lawyers to assist him, all former members of Judge Seabury’s staff, apparently without consulting Norbeck. He then demanded five hundred blank subpoenas from the senator, which Cooper would then be free to serve on anyone he chose, without any input from the committee. Although the committee had issued only twenty-seven subpoenas over the previous nine months, Norbeck seemed initially inclined to issue them. But the senator quickly thought better of the idea. In fact, he suggested that Marrinan, the former journalist, should go to the New York office to supervise Cooper’s activities until the lawyer had familiarized himself with how the committee had been conducting the inquiry.23
Cooper bristled; apparently, he was having trouble seeing that he was working for a Senate committee and that he was not some free-floating investigator. The enraged lawyer lashed out angrily at Norbeck, suggesting that Marrinan was really there to “sit on the lid” of the investigation. It wasn’t true, of course. It had been Marrinan, after all, who had urged Norbeck to dump Gray lest the committee be accused of “protecting the Stock Exchange.” Norbeck didn’t know it at the time, but Cooper’s reaction was perfectly in character. Cooper would go on to make a career of petulance and irascibility. Thirty years later, President Kennedy nominated Cooper for a federal judgeship, but most bar groups opposed his confirmation, not because of his legal qualifications but because of his volatile disposition and “persecution complex.”24
Norbeck tried to make the best of a bad situation. He told reporters that it would have been “dangerous and unsound” to delegate that kind of unchecked subpoena power to one man. “By granting Mr. Cooper’s demands for unlimited authority, the committee would have lost control of the investigation,” Norbeck told them. “The resignation is not important,” he assured the press. “The investigation will proceed.”25
The damage, however, was done. Cooper came with Seabury’s imprimatur, and so most seemed to believe Cooper and not Norbeck. That was particularly true of the New York World-Telegram. The paper’s editorial page was a big Seabury booster and they seemed to view the Cooper debacle as a direct affront to the judge’s integrity. Over the next three days, they blasted Norbeck for his efforts to “censor” Cooper. His “hamstringing,” the editors wrote, “suggests that Senator Norbeck and his committee have no intention of going thoroughly into the devices by which huge pools and market manipulators have defrauded millions of people who assumed they were trading in an honest market.” The paper concluded “that the investigation is dead as far as this session is concerned. Whether it will be pressed will depend on the Democrats and the Roosevelt administration.”26
The public, or in any event those who wrote to Norbeck, were equally furious. One writer told Norbeck that it was “pathetic” that the country was so lacking in “honorable and patriotic leadership.” Why, he asked, “should Mr. Cooper or any other investigator of honest character be hindered in bringing to light fraudulent and unethical practices whereby certain small groups are allowed to prey relentlessly upon the public in enriching themselves?” A concerned citizen named Sidney May wanted to know how Norbeck could expect any “self-respecting honorable man the type of Irving Ben Cooper to serve . . . under terms and restrictions laid down by you!” May “questioned the sincerity of the stock market investigation from its inception” and “this latest explosion is concrete evidence you have not venture[d] a genuine investigation, fearing to involve influential friends and possibly many affiliated with the present administration.”27
Norbeck was in an enormous bind. Cooper’s resignation had left him, with little more than six weeks left in the congressional term, with no lawyer, and with a public that seemed to believe that the whole effort was a sham. It was at this point that Norbeck nearly gave up. He reached out once more, this time to the former secretary of state Bainbridge Colby, who, like Norbeck, was a progressive and a former Theodore Roosevelt Bull Mooser. But now the task had changed. Norbeck didn’t ask Colby to conduct new hearings but instead to prepare the committee’s report, the summary of its investigative efforts over the previous year. The World-Telegram seemed to be right—the investigation was over.28
Colby was not interested in taking on such a limited assignment. He did, however, suggest one more lawyer to Norbeck, someone he knew from his days in the New York Progressive Party. His name was Ferdinand Pecora.29
Chapter 4
A SHORT-TERM JOB
Norbeck never recorded his reaction when he first heard the name Ferdinand Pecora, but there is a good chance it was less than enthusiastic. For all his progressivism, the senator was not above the bigotry of his times. He possessed a fierce pride in his Nordic ancestry and he generally held “Latins,” as he called the
m, in disdain for what he viewed as their lack of industriousness. Although Norbeck constantly butted heads with the conservative wing of his party, he and other midwestern progressives voted hand in hand with them for the National Origins Act in 1924, legislation that effectively slammed the door on future mass migration from eastern and southern Europe. Five years after the act passed, when there was talk of amending those severe restrictions, Norbeck stood on the floor of the Senate and vehemently argued that it was bad national policy to restrict Scandinavian immigration while continuing to permit too many of the “agents of Mussolini” and the “friends of Capone” into the country.1
Norbeck’s views would hardly have come as a surprise to Pecora, who had been living with them all his life. Perhaps Pecora’s Bull Moose connections helped to overcome Norbeck’s wariness, or perhaps with the clock ticking down on his investigation, Norbeck had nowhere else to go. Whatever the reason, on Sunday, January 22, 1933, Norbeck called Pecora at his New York apartment to offer him the position. In hindsight, it was one of the best decisions the senator ever made.
The call was out of the blue; Pecora had never met Norbeck and apparently had no inkling that his name had been mentioned as a possible counsel for the committee. Pecora knew little about the investigation; in fact, the hearings were so moribund that Pecora thought they were over. Norbeck conceded as much, offering Pecora the same six-week job he offered Bainbridge Colby—preparing the committee’s report of what it had uncovered in the previous year. Norbeck told Pecora he could pay him only $255 per month, a pittance compared with what the senator had offered the younger and less experienced Cooper.
The Hellhound of Wall Street Page 7