MANILA – Eighty years ago this month, Ferdinand Pecora, the cigar-chomping former assistant district attorney for New York City, was appointed chief counsel for the US Senate Committee on Banking and Currency. In subsequent months, the hearings of the Pecora Commission featured many sensational revelations about the practices that led to the 1930’s financial crisis.
More than that, the Commission’s investigation led to far-reaching reform – most famously, the Glass-Steagall Act, which separated commercial and investment banking. But Glass-Steagall didn’t stop there. It created federal insurance for bank deposits. With unit banking (in which all operations are carried out in self-standing offices) viewed as unstable, banks were now permitted to branch more widely. Glass-Steagall also strengthened regulators’ ability to clamp down on lending for real-estate and stock-market speculation.