Securities Exchange Act Creates SEC, Regulates Secondary Markets

President Franklin D. Roosevelt signs the Securities Exchange Act of 1934 into law on June 6, 1934, establishing the Securities and Exchange Commission (SEC) and comprehensive federal regulation of secondary securities trading (stocks, bonds, and debentures). FDR’s compromise approach attempts to get private enterprise and federal government working together to create a stronger, more equitable economy, with Ferdinand Pecora, Benjamin Cohen, Thomas Corcoran, and James Landis present at the signing. The Act follows the explosive 1932-1934 Pecora Commission hearings that expose widespread Wall Street abuses contributing to the 1929 crash. New York Stock Exchange President Richard Whitney orchestrates what Representative Sam Rayburn later calls “the biggest and boldest, the richest and most ruthless lobby Congress had ever known” to defeat or eviscerate the bill, conducting massive letter-writing campaigns and threatening to relocate the NYSE to Montreal, Canada to escape regulation. Whitney’s well-financed protest campaign and intense lobbying efforts result in some modifications but ultimately fail to stop the bill. Roosevelt appoints his friend Joseph P. Kennedy, a self-made multimillionaire financier and Wall Street veteran who participated in pool syndicate operations the year before, as the SEC’s first chairman over Ferdinand Pecora who led the investigation. Kennedy’s top priority is restoring capital market health after the monthly average value of new securities issued plunged from $849 million in 1929 to $59 million in 1933, though concerns about an organized “capital strike” to force regulatory rollbacks prove largely unfounded. The five-member bipartisan commission establishes ongoing federal oversight of securities markets, representing a fundamental expansion of federal regulatory power over financial markets that will be progressively weakened through deregulation campaigns, demonstrating the New Deal’s creation of strong regulatory institutions that business interests would systematically capture and dismantle over subsequent decades.