Bill Moyers asked me to join his conversation this week with Michael Perino – a law professor and expert on securities law - who is working on a detailed history of the 1932-33 “Pecora Hearings,” which uncovered wrongdoing on Wall Street and laid the foundation for major legislation that reformed banking and the stock market.
My role was to talk about potential parallels betweeen the situation in the early 1930s and today, and together we argued out whether the Pecora Hearings could or should be considered a model for today.
Bill has a great sense of timing. On Wednesday night the Senate passed, by a vote of 92-4, a measure that would create an independent commission to investigate the causes of our current economic crisis; we taped our discussion on Thursday morning. In the usual format of Bill’s show, a segment of this kind would be 20+ minutes, but I believe that tonight our conversation will occupy the full hour (airs at 9pm in most markets; available on the web from about 10pm).
Speaker Pelosi has also come out in favor of some sort of commission, so there is momentum (and detailed negotiations). But many big questions are still on the table, including: what should be the scope of an enquiry, will it have subpeona powers, and who will run it? And how exactly should we consider benchmarking this against the Pecora Hearings?
Popular anger during a major crisis is completely standard – I can’t think of a country that has avoided this. Not many countries can control that emotion and channel it into a productive conversation. Even fewer can figure out how to turn that into meaningful legislation – let alone enforcement of new rules that make sense.
The US has the kind of democracy that could do this. But, as Michael Perino emphasized effectively, given the power of the big finance lobby (now and in the early 1930s), even we need to get lucky.
Perhaps we can tilt the odds slightly in our favor using one edge that was not available in 1932. Write up your suggestions for how to organize the hearings, questions to ask, witnesses to call, and more. Even better, provide the details – substantiated – of what went wrong, and make specific suggestions about the lines of enquiry to pursue. Put these in a comment here or, if you prefer, The Hearing on WashingtonPost.com – this is already starting to get the right kind of attention on Capitol Hill.
This is not a call to populism. This is a call for ideas that can constructively rebuild financial services in this country and, much more broadly, restructure our economy in sensible and sustainable ways. Ultimately, the Pecora Hearings had impact because they affected the country’s debate – and because top leaders paid attention. Surely, we should aim for the same.
Originally published at the Baseline Scenario and reproduced here with the author’s permission.
3 Responses to “The Next Big Hearing? (Bill Moyers Tonight)”
Kudos to all those in the financial and federal government industry who road the wave of enormous wealth over the last decade or so. You got what you wanted right? Lots of stuff, big houses, great vacations, etc… Oh, pay not attention to those that cry out “excessivism”. The government sactioned your wealth creation, and heck, who electst the government? Yup, the people. The average Joe and Jane.P.S. Just be sure to not let any religous pangs get into your conciousness. Don’t read the bible. Be fore warned, if you do you might actually feel a bit responsible for the financial melt down. I mean, you are all pretty smart peole are you not? So, you can figure out on your own the messages in the bible. Or, is that just a best selling book for entertainment pruposes, not to be taken to heart.
It is essential that someone like William Black have a leadership role in organizing and running the hearings. He has clearly demonstrated his ability to cut through the standard litany of BS protestations from the finance industry execs that “no one could have predicted this …”. When the FBI raised the alert in 2004 of systemic fraud in the mortgage industry and the rating agencies ignored this, blessing the financial industry’s mortgage-derived securities with AAA ratings, you have a situation where fraud is being abetted. Joe Public knows that if he or she turned a blind eye to this kind of scam at their workplace, they would be dogmeat for a prosecutor.Black and Robert Kuttner both have recounted how tactics and strategies that are fiscally toxic in the long term can be manipulated to deliver outstanding short term results that permit unscrupulous corporate con-artists to drive responsible competitors out of business and poison the larger business environment. Meanwhile these “masters of the universe” spread campaign contributions and lead the chorus for deregulation.S&L crisis, Russian and Asian collapse, Long Term Capital, the Dot-Bomb, Enron, WorldCom, now the collapse of the banking industry and credit markets. We don’t have leeway here, the rest of the world is not going to finance coming years of deficits without a legitimate housecleaning in the US. And unlike the majority of the US public (so many of whom lack any significant savings and consequently are more consumed with fear of losing their own job than paying attention to the systemic regulatory challanges, gov’t hearings, etc), foreign publics and news organizations are paying close attention to what is going on here. If there is no broad demonstration of accountability, our overall financial standing will sink like a rock.
The place to begin would be rating agencies, selling snake oil. Triple A’s low risk, high return, sounds like bait and switch, or at least misrepresentation.Investors that were burned by this, (first holding losses) and they dont trust the ratings anymore, (markets wont return until rating agencies are respected, I dont think they will be respected until after they are investigated (slippery slope opinion))And the agencies now say, “ohh well we changed our models”, it sounds like fraud, where they not paid to give AAA? and they walk away scott free? after miss labeling $1 trillion worth of risk?(well, did this happen in the 80′s were the “ratings agencies” involved in Savings and Loans, BCI banking?)and now Dr. Ben is using them to spew out funds? ironic.Second would be to look for the squeakers, I bet there are hundreds of individuals that “warned” the banks, and investors. Just set up an anonymous phone line, and people will pinpoint those who disregarded warnings (because of payoffs or ignorance?) And those that call in with evidence can testify.It must of been a big bed, Wall Street, Ratings, Banks, regulators?