Pujo Committee

Key Takeaways

• The Pujo Committee investigated the concentration of financial power in the early 20th century.
• It found that a small group of plutocrats controlled the U.S. financial system.
• The committee's findings led to legislative acts like the Clayton Antitrust Act.
• Its recommendations included increased regulation and oversight of national banks.
• The Federal Reserve and Federal Trade Commission were influenced by Pujo's findings.1

What Was the Pujo Committee?

Formed after the Panic of 1907, the Pujo Committee examined the influence of financiers such as J.P. Morgan. In its 1913 report, it concluded that a small group of New York plutocrats held virtual monopoly control over the U.S. financial system, later labeled the "money trust." Its findings helped set the stage for reforms, including the Federal Reserve and antitrust legislation such as the Clayton Antitrust Act.11

Historical Context and Legacy of the Pujo Committee

Concerns about the concentration of financial power in the U.S. began to grow in the late 19th century with the rise of the "robber barons," men who accumulated vast wealth and power by building dominant roles in banking, the railroads, oil, and other industries that were key to the nation's growth.

Their names included J.P. Morgan, the banker, and William and John D. Rockefeller, founders of Standard Oil, among others.2

The concerns intensified with the Panic of 1907, which was marked by a series of bank runs that ended only when Morgan personally intervened to shore up teetering financial institutions.1

Key Findings of the Money Trust Investigation

A resolution to investigate the so-called money trust was introduced in the House of Representatives in 1911 by Rep. Charles Lindbergh Sr., father of the aviator Charles Lindbergh. In 1912, Rep. Arsène Pujo, of Louisiana, a Democrat who served from 1903 to 1913, was authorized to form a subcommittee of the House Committee on Banking and Currency. The committee became known as the Pujo Committee, although, in fact, its chair took a leave of absence for family reasons shortly after the committee's creation and was replaced by Rep. Hubert D. Stephens, of Mississippi.1

Important

The Pujo Committee report was considered influential in increasing support for ratification of the 16th Amendment to the U.S. Constitution, which authorized Congress to impose a federal income tax.3

On Feb. 28, 1913, the committee’s report was submitted. It concluded that the operations of the nation's biggest industrial and railroad corporations were rapidly becoming consolidated in the hands of a few New York tycoons. Further, it concluded that the vast combined wealth of their companies had allowed them to assert control over the nation's leading banks and other financial institutions. They were able to further their businesses and increase their own profits through a web of "interlocking directorates," in which representatives of their own interests served as directors of other company boards.4

The Pujo Committee's report maintained that a cabal of financial leaders had abused the public’s trust by consolidating control over many of its critical industries, and ultimately its banking system.1 It issued an extensive list of recommendations to address these problems, including proposing rules for clearinghouse associations, the New York Stock Exchange, consolidation in banks, and security-holding companies. The Committee also proposed two new bills to be enacted by Congress:

A bill to amend national banking laws by increasing government oversight and regulation

A bill to prevent the use of the mail, telephone, or telegraph for fraudulent or harmful transactions on the stock exchange5

The Pujo Committee's Influence on Financial Legislation

Although little remembered today, the Pujo Committee was a sensation in its day and influenced several pieces of legislation that had a substantial and lasting impact on the American system. They include:

Establishment of the Federal Reserve system of 12 regional banks supervised by the Federal Reserve Board in order to reduce the power of private corporations to manipulate the nation's money supply.

Creation of the Federal Trade Commission with powers to crack down on companies engaging in unfair competitive practices.

Passage of the Clayton Antitrust Act, which defined a monopoly and made it more difficult to create one by means including restrictions on interlocking directorates among competing businesses.1