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financial crisis, senior executives of the big banks would be taken to task for their sins before modern-day congressional investigative committees, in very Pecora-esque fashion. The son of Sicilian immigrants, Pecora was often photographed with a cigar in his mouth and cultivated the image of a working-class hero going up against the corrupt blue bloods of Wall Street. He didn’t just uncover schemes; he badgered his banker targets during his hearings with rapid-fire questions about their various misdeeds. The bankers called it a witch hunt, but Pecora had both the president and the public on his side for the simple fact that he showed how Wall Street insiders benefited unfairly from their privileged status and other conflicts of interest that would easily rank up there with the practices that led to the 2008 banking debacle.
    Pecora’s hearings also had real teeth. He forced the resignation of the head of National City Bank, one of nation’s largest financial institutions and a precursor to mega-bank Citigroup, and his work gave impetus to a series of new banking laws, including the Banking Act of 1933, one of the most sweeping banking reforms in U.S. history.
    And yet, even as Pecora railed against Wall Street’s chummy circle of friends, insider trading still wasn’t viewed as much of a crime, as the case of Cliff Mining and Rodolphe Agassiz demonstrates.
    Agassiz, the president of Cliff Mining, had access to what the SEC would label today as “material nonpublic information” that his company was sitting on a potentially huge find of copper. Knowing that this would boost shares of his company, Agassiz then did what today would lead to SEC charges, fines, and possibly time served behind bars—he secretly bought shares of his company on the Boston Stock Exchange.
    Shares of Cliff Mining would later soar when news of the copper mine was publicly released. That means someone had to lose money from not knowing the same information.
    Enter a businessman named Homer Goodwin, who sold the stock just as Agassiz was buying, and while he probably didn’t know it at the time, Goodwin was soon to become an important footnote in the long and convoluted history of insider trading. When he discovered that he had sold his shares before the announcement (and thus missed out on the stock’s huge upswing), and that Agassiz had bought shares almost simultaneously, Goodwin sued Agassiz on the basis that the information about the mine was “material” and should have been made public to investors before they sold their shares.
    Goodwin’s complaints as a company shareholder against Agassiz’s actions sound reasonable by today’s standards. But not according to the Massachusetts Supreme Judicial Court, or the SEC, Justice Department, or just about any securities regulator back then. Insider trading may have been one of the outrages the Pecora Commission used to generate headlines and class warfare in order to spur implementation of Roosevelt’s New Deal legislation, but in 1933 it wasn’t even a misdemeanor.
    As Judge Prentice Rugg put it, the law “cannot undertake to put all parties to every contract on equality as to knowledge, experience, skill and shrewdness.” Agassiz, Rugg opined, didn’t put a gun to Goodwin’s head. There were no face-to-face meetings and misrepresentations. Both conducted their business on a public stock market. So the trade was perfectly legal.
    The logic behind Judge Rugg’s defense of the un level playing field goes something like this: It is impossible and impractical for laws to guarantee that business transactions provide equal benefits to all parties—particularly in the securities markets, which are by their nature Darwinian, and where you know that your decisions to buy or sell stocks are based on imperfect information.
    These days, it’s hard to imagine a time when leveling the economic playing field was actually