The Fight Over the New Pecora Commission

There have been some good pieces out in the last few days by Dean Baker and Bob Kuttner on the politics of a modern version of the 1930s Pecora Commission on what happened to cause the Great Depression. The original Pecora Commission was an essential reason why FDR was able to be so successful in enacting sweeping New Deal programs to regulate the banks and stock speculators that had caused the crash. As Dean and Bob allude to, the modern version might not be so effective, but that's all up to Speaker Pelosi, Senator Reid, and (indirectly) the Obama administration. What I'm guessing that Dean and Bob are reacting to is the same rumors that I'm hearing: that Brooksley Born may be the only real progressive on financial issues appointed to the commission.

That would be a tragedy. A strong commission with subpoena powers and a serious mandate from Congress could really dig into the dirty deeds that Wall St. traders purposed that caused this crash. The education of the media and the public that could come with such an investigation would be invaluable. If instead you appoint a commission where a majority of members want to obscure what happened, and in fact want to protect the Wall St. system we have now, you both lose any chance of engaging the public and you make the people angry at both government and the bankers all the more suspicious.

I have said to my friends in the White House over and over again what to me is a plain and obvious truth: another year of economic pain, and a majority of the country is going to be spittin' mad. The only question is whether they are mad at the bankers and de-regulators who caused this mess, or mad at the Obama administration for not doing enough to solve it.

President Obama told Wall Street CEOs awhile back that he was the only thing that stood between them and pitchforks. As a person who has been involved in national politics for a very long time now, I am absolutely certain about one thing regarding next year's election: if Democrats protect Wall Street from the populist "pitchforks", they will be skewered by the pitchforks themselves.

Comments

[joebhed]

I doubt there will be any real substance for the public good in naming the commissioners to Pecorino II
I'll be satisfied with any focus on integrity and enough knowledge not to become flumoxed at people making things up on the spot as national policy.
Paulson, Bernanake and Geithner would be nowhere near the first witness I would call.
That would be Nassim Taleb.
The reason for Mr. Taleb is because in trying to figure out how you got to exactly where you are, the first thing you really need to know is where you are.
A recovering recession?
Approaching the decline of the slope of the line of that depicts how godawful things are?
Approaching the abyss II ?

Nassim Taleb has been saying that economists have failed to correctly identify the real cause of all this financial transgression, and because of that they are making gross errors in their recommendations as to how to get out of it.
He has been almost exclusively discussing the the real "economic environment" in which we find ourselves. And he says we can NEVER begin to correct our way out of this mess without understanding the basic reality of the economic environment, which is, LISTEN UP, "there is too much debt".

[Jannsmoor]

It is all about "accountability." Without accountability, no lessons are learned, no problems are fixed, no future is safeguarded.
Accountability requires either a Pecora Commission style investigation, or that we the people force our government to take the necessary reforms, which they are far from currently undertaking.
Reforms include:
1. Dismantle the Wall Street Profiteers - end Too Big to Fail.
2. Take some action against the rating agencies. Rating Mortgage Backed Securities AAA had to be at least reckless, if not downright criminal.
3. Banks are chartered under a regulatory scheme that WE THE PEOPLE can define. That means an end to usary, ridiculous fees, salary caps for execs, etc.
4. Take home owner occupied mortgages out of the hands of the Wall Street Profiteers. They have proven themselves far too eager to gamble with people's lives and livelihoods. Fannie Mae and Freddie Mac should take them all.
5. Set home mortgage interest rates at 3%. That will stop the housing decline, save what's left of the middle class, and recharge the economy.
6. Completely reform the SEC. They are a complete failure.

[Peabodies]

There is a great need for a Pecora Commission, and other commissions to investigate and reveal the mind-boggling abuses of power that took place during the past administration. I had hoped Attorney General Eric Holder, and the majority in Congress would have already begun. I am not reassured by their attitude of "let's not dwell on the past and just move forward". Has there ever been such a spineless bunch??

[KHAAANNN]

At the same time we NEED a new "Truman Commission" to investigate the slimy war-profiteering that was and still is going on.
The "Truman Commission" ripped the cover off of the FALLACY that "All Americans pulled together during WWII". MANY MANY Businessmen (and Wall Street Bankers) made lots of money off of the deaths of U.S. Servicemen early in the war and the Truman Commission put the fear of God (and the wrath of the U.S. Public) into them. At the very least, it stopped the more egregious war-profiteering that was going on.

[DonL]

vooter, I agree that that we need housecleaning, but the rest of your ideas are, to my mind, pretty stupid. The gold standard won't solve anything--so you can take $100 somewhere and get some gold. BFD. You will now have to carry it around with a scale to buy a hamburger. Plus, limiting available currency to gold will stifle economic growth since there is not enough gold to actually fund the money supply of the US, let alone the world. Besides, money is fictional anyway--why is an ounce of gold inherently more "valuable" than an ounce of tin, lead, dirt, or dirty laundry?

Abolishing the Federal Reserve will accomplish exactly what? And, I agree that commissions like the 9/11 Commission were for whitewashing only, I still believe that a strong commission can bring about some change.

Go back to the 13Th Century and leave modern economics alone.

[vooter]

"You will now have to carry it around with a scale to buy a hamburger."

Where did I say to make gold our currency? I said, and I quote, "Put the U.S. dollar back on a gold or silver standard."

"Plus, limiting available currency to gold will stifle economic growth since there is not enough gold to actually fund the money supply of the US, let alone the world."

This is so wrong that it's actually funny. If there were ONE ounce of gold on Earth, there would be enough to fund the money supply of the U.S. and the world. That one ounce would simply be worth a quadrillion dollars, or whatever the current money supply is. On a more realistic basis, let's look at the total U.S. debt, which, including future obligations such as Medicare, Medicaid, and Social Security, is estimated to be around $53 trillion. Divide that by the total amount of gold ever mined (which the Gold Council estimated in 2006 to be about 5.5 billion ounces) and you get a gold price of $9,636 per ounce--which is not only not out of the realm of possibility, but is in fact almost the exact price that some precious metals commentators have suggested gold could reach.

[DonL]

So let me get this straight. Instead of the government's ability to issue debt instruments to pay for itself, you want to tie our money to gold or silver. Then, you would peg the price of gold or silver to whatever you need it to be so, in essence, you would fund your currency by changing the price of gold metal. Not convinced.

[vooter]

"A strong commission with subpoena powers and a serious mandate from Congress could really dig into the dirty deeds that Wall St. traders purposed that caused this crash."

Oh, please...you want *Congress* to authorize an investigation of Wall Street? LOL.... If you can't see that we are SO FAR beyond the point of some investigation headed by some commission doing any good, then I can't help you. Here's what we need to do: Abolish the Federal Reserve. Put the U.S. dollar back on a gold or silver standard. Stop issuing fractional reserve "Federal Reserve Notes" and begin issuing "U.S. Notes" from the Treasury, per the Constitution (JFK tried to do this in '63, before he was...uh, "interrupted"). Otherwise, prepare yourself for civil war, because it's coming--as sure as the sun rises and sets. This isn't some bump in the road that needs to be fixed--the U.S. government has been hijacked by criminals. We need a houseclean­ing...NOW.

[ccairnes]

I think if you read a little history you will find out why we went off the gold standard. It's interesting.

Today's money has very little to do with the folding stuff in your wallet, but it is still legal tender. The day I dread is when money becomes all plastic and electronic and a person can't have anything in his pocket and it's all in the banks, or not.

Re the commission, I would like to see a really good one happen so people have a better understanding about what has occurred and those responsible are held accountable. I hope the people do demand it and keep demanding it, along with single payer heath care, prosecution of war crimes and environmental crimes and election fraud that gave us a Supreme Court appointed President. Don't count on the media though, they are too business covering people's sex lives, tattoos and other foolishness.

[fcsakes]

Hear, hear!