[Peace-discuss] Fw: Time for a Grand Inquest on the Financial Crisis

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Sent: Tuesday, March 31, 2009 11:09 PM
Subject: Time for a Grand Inquest on the Financial Crisis


> Time for a Grand Inquest on the Financial Crisis
>
> by Robert L. Borosage Co-Director of the Campaign for
> America's Future
>
> Posted March 31, 2009 - 05:45 PM (EST)
>
> <http://www.huffingtonpost.com/robert-l-borosage/time-for-a-grand-inquest_b_181475.html>
>
> Treasury Secretary Tim Geithner has called for
> "sweeping regulation" of the financial community,
> beginning a discussion of how we restructure the
> banking system -- in and out of the shadows -- as we
> emerge from what Robert Kuttner calls the Great
> Collapse. Literally trillions have already been
> committed in loans, guarantees, swaps, direct equity to
> stave off a complete financial collapse, even as the
> real economy declines.
>
> But before we decide on the salvation, we need a public
> probe of the fall. What caused the Great Collapse? We
> need a grand inquest -- either a special congressional
> committee or an independent commission like the 9/11
> Commission armed with subpoena power -- to expose
> misbegotten policies, malpractices, and mistaken ideas
> that allowed the wizards of Wall Street to transport us
> over the cliff.
>
> In the 1930s, the dramatic hearings by the Senate
> Banking and Currency Committee became known as the
> Pecora Commission, after Ferdinand Pecora, the fierce
> former assistant prosecutor from New York who served as
> general counsel. Born in Sicily, the son of an
> immigrant cobbler, Pecora was a crusader. As counsel,
> he hauled the barons of Wall Street before the
> committee, and took them apart with often withering
> cross examination. By the time Pecora was done, the
> hearings had captivated the country's attention and, as
> Ron Chernow reports, Senator Burton Wheeler of Montana
> was comparing the bankers to Al Capone and the public
> began calling them "banksters," rhyming with gangsters.
>
> The Senate committee unearthed the assorted frauds, the
> abuses, the ponzi schemes that led to the 1929 crash.
> And in doing so it provided both the case for reform
> and built a public demand in support of it.
>
> The hearings came under fierce criticism. Wall Street
> bankers charged that they were "undermining
> confidence." Some Senators scorned them as running a
> "circus," and in fact, some of the excesses deserved
> the tag.
>
> Yet, Pecora was deadly serious. By the time the
> hearings ended in May 1934, they had generated 12,000
> printed pages of testimony -- providing the source that
> historians have mined ever since to fuel their
> descriptions of the era. And they paved the way for
> reform: the Securities Act of 1933, the Glass-Steagall
> Act of 1933, and the Securities Exchange Act of 1934.
> In recognition, Roosevelt named Pecora to be a
> commissioner of the new SEC.
>
> We need the same fearless investigation now. As
> Elizabeth Warren, the brilliant head of the
> congressional oversight panel on the bank bailout has
> noted, no one has exposed the record of pervasive fraud
> and misdealing that was at the base of the housing
> bubble. Her panel doesn't have subpoena power, and has
> no little difficulty getting documents from the
> Treasury. There have been scattered congressional
> hearings on different aspects of the folly, some quite
> good. But none have laid out a systematic record of
> what went wrong, hauling miscreants before the
> committee, using subpoena power to expose the extent of
> the malfeasance -- for example, the extraordinary
> percentage of mortgages that revealed signs of fraud on
> the face of the loan, and yet were marketed as sound by
> ratings agencies, banks and hedge funds that never
> looked at the underlying documents.
>
> A broad, public investigation is also vital to help
> provide citizens with a clear narrative of what went
> wrong. It will counter the pernicious efforts on the
> right to cook up the notion that a powerful poverty
> lobby created the crisis by forcing hapless banks to
> make loans to the unqualified because of the Community
> Reinvestment Act.
>
> There are many reasons for Congress to duck an inquest.
> An honest inquiry will show that the de-regulatory
> follies took place under presidencies of both parties
> -- Reagan, the two Bushes, but Clinton also. The
> inquest would undoubtedly embarrass some of the former
> Clinton appointees now at the center of the Obama
> economic team, like Lawrence Summers. Many of the
> legislators who voted for deregulation, including
> dismantling the Glass-Stegall Act, would, no doubt,
> prefer that the past remain in the mists.
>
> But serious reform of the banks -- and that
> restructuring that is vital -- will take new laws, new
> authority, and most likely more money from the
> government. That will require public support that can
> only be engendered by a clear view of what went wrong,
> by a sense that the most extreme wrong-doers are being
> brought to justice. Exposing the regulatory failures,
> the legal changes, the ideological blindness, the
> institutional structures, and the compensation packages
> that propelled the reckless gambling that eventually
> brought down the house is vital if we are to understand
> what must be changed and can mandate change to it.
>
> If the banks are revived without the inquest, then
> Congress will find it hard to drive the restructuring
> and re-regulation essential to a new, more balanced
> economy. This will take courage -- and a modern day
> Ferdinand Pecora with the necessary fire in his
> stomach.
>
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