The findings shocked the public. Nearly all major financial firms are publicly traded today, but Wall Street then was dominated by small, private partnerships that behaved much like members-only gentlemen's clubs, says historian Ron Chernow, author of The House of Morgan. No government bank examiner had even stepped foot inside the Morgan bank. "In the 1920s, nobody was under any illusions that the market was fair or open, so there was a sense of Pecora lifting a curtain on all of these secret machinations," Chernow says.
Pecora's power also came from his ability to turn the hearings into exposés of Wall Street's immorality, historians say. Individually, none of the witnesses Pecora questioned were responsible for the crisis. But by highlighting their greed, fraud, and sometimes criminal behavior, Pecora was able to whip up fervor against the whole banking industry. Even more of a sensation, says Michael Perino, an expert in securities law at St. John's University who is writing a book on the hearings, was the image of Pecora, the Italian immigrant, taking on the WASPs of Wall Street. Italian-Americans, not least of all Sicilian-Americans, had been stereotyped as lawless and crime-ridden for the past decade. The bankers, with their potpourri of Ivy League degrees and their venerable bloodlines, were seen as the nation's law-abiding leaders and guardians of its prosperity. Pecora cut through their facades, pinning them down again and again in an unveiling of Wall Street's secrets.
For many observers, one particular moment crystallized just how extraordinary the hearings had become—and how they upended Wall Street's power structure. Amid what one New York Times reporter called "hours of weary examination," a press agent for Ringling Brothers Circus seized on a comment made by a cranky Senator Glass five days earlier that the hearings were a "circus" lacking only "peanuts and colored lemonade." The Ringling flack plopped Lya Graf, a 21-inch, 22-pound woman wearing a blue satin dress, into Morgan's lap. "The smallest lady in the world wants to meet the richest man in the world!" he announced. Spectators roared, and cameras popped. The stunt infuriated Sen. Duncan Fletcher, the Florida Democrat who had replaced Norbeck as chairman when the Democrats took control of Congress, and he ordered the films suppressed and telegraphed the newspapers not to use them. But the "smallest lady" and "richest man" were splattered on front pages across the country the next day, making the message clear. The hearings had not just brought the country's most powerful financiers down to the level of the common people, they had made them a sideshow.
The laws that resulted from the Pecora hearings are considered their greatest legacies, but their most telling moment may have been when a bemused banking tycoon balanced a tiny woman on his knee.
In the run-up to Morgan's appearance, the banker had underestimated Pecora, calling him a "second-rate criminal lawyer" and "dirty little" Italian. Even on his way to the Capitol, Morgan's chauffeur assured the tycoon that he wouldn't stoop to losing his temper "with the likes of them." But his self-assurance couldn't save him from the embarrassing disclosures that ensued. He left Washington with a tarnished name and front-page notoriety. And Pecora returned to the hearings, bent on bringing down more bankers—and reshaping the financial system.