Jack Morgan and midget

Congressional hearings are always a joke: a few minutes of soundbites, a few days of moral posturings and then back to normal. The crowning moment in this theatre of absurd was the Pecora Commission formed to investigated the causes of the financial market crash (sounds familiar, doesn’t it) in 1933.

With the public clamoring for some action (awfully familiar), the persecutor Ferdinand Pecora went after the private banking and its crown jewel, the House of Morgan. Pecora was successful in figuring out that their executives paid no taxes in the years immediately following the crash, and that before the crash, Morgan offered stocks at discounted rates to many influential people, including the former president Calvin Coolidge, Supreme Court justice Owen J. Roberts. Defending himself, Jack Morgan said Pecora had “the manners of a prosecuting attorney who is trying to convict a horse thief.”

The Morgan testimony was so outrageous that Senator Carter Glass quipped, “We are having a circus, and the only things lacking now are peanuts and colored lemonade.” A press agent for the Ringling Brothers Circus took advantage of this quote to put a midget (one Lya Graf) on Morgan’s lap. To compound the error, the committee chairman, Senator Duncan Fletcher of Florida, asked with newspapers not to print the pictures, which only made them rush to do so. Senator Glass later barred cameramen from the committee room.

The photo of Morgan with a circus midget became the symbol of everything that was wrong with Washington. However, the Pecora hearings were successful in creating financial regulations that existed until Clinton and Bush administrations abandoned them. A similarly sad end came to Graf, who returned to her native Germany only to be put inside a concentration camp and she died at Auschwitz in 1941.

As for Jack Morgan, he was barred from securities business for a year. His company was separated into an investment bank and a commercial bank by the Glass-Steagall Act. The Morgan fortune would greatly diminish after this as the depression, the inheritance and income taxes, and lavish spending on arts took its toll. By the time Jack Morgan died in 1943, he left behind only $3 million dollars and the House of Morgan’s assets were meagre $35 million.