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Era of Good Feeling. Today, most of Wall Street is nostalgic about the first three years of SEC regulation. First there was Chairman Joseph Patrick Kennedy, ex-market operator, able administrator. He gave SEC its organizational framework, gave the exchanges a few trading rules, but was promoted before the fireworks began. Then there was a Frankfurter Democrat, cautious, legalistic James M. Landis, who gave the Exchange Act its milk teeth, never gnashed them except at gross manipulators like Specialist Mike Meehan. Landis allowed Wall Street to "regulate itself." Since Wall Street was then dominated by Dick Whitney's Old Guard, self-regulation for the New York Stock Exchange meant its continuance as a green-baize gentlemen's club. Toughest man on Landis' Commission was the head of its Trading and Exchange Division, sandy, steel-eyed William O. Douglas. When Landis retired to the cloud-wrapped deanship of Harvard Law School, Douglas became chairman. Ended was the Era of Good Feeling.
Showing muscle at once, Douglas demanded the Exchange adopt far stricter trading rules or have them imposed by SEC. Up rose the commission-broking element inside the Exchange itself, threw out the Old Guard, chose young William McChesney Martin for leader, adopted Douglas' trading rules almost verbatim (TIME, Aug. 15, 1938). With Thief Whitney's Old Guard in rout, Douglas staid his administrative hand; the Exchange began policing itself with such thoroughness that many a broker curses its rules louder than SEC's today. Bill Douglas threw out a final reform suggestion: that customers' credit balances in brokers' hands should be made as safe as in a bank. Then he retired to the Supreme Court.
To fill the empty Commission chair the President appointed fat, loquacious, truculent Leon Henderson. An anti-bigness radical, Henderson, backed by Thomas Gardiner ("Tommy") Corcoran, had risen from WPA's economics staff to Executive Secretary of TNEC. When he was talked of for chairman of SEC, even Wall Street's liberals shuddered. But Henderson, a freshwater economist, knew nothing of Wall Street or high finance. Hence the President (who suggests the chairman, permits the SECommissioners to elect him) changed his mind, drafted a stopgap for the job until Leon should learn the ropes. The stopgap, already a commissioner, knew Wall Street well. He was also an ardent New Dealer. Name: Jerome Frank. He became chairman ten months ago. Leon is still learning.