Dems' Crash Investigators: Not From Wall Street
Hat tip to bringiton
As LA Times Money blogger Michael Hiltzik says:
There's plenty to investigate. The roots of the economic and financial crisis can be found in the commercial banking, investment banking, mortgage trading, credit and derivatives industries.
Two key questions: Will Angelides and the rest of the panel hire investigators smart enough to ferret out the modern-day Mitchells? And will the panel be willing to preside over a Pecora-style bloodletting?
Graham, official portrait
House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid today announced six appointments to the 10-member Financial Crisis Inquiry Commission, established by Congress to examine the domestic and global causes of the financial crisis. “The American people deserve nothing less than a full explanation of why so many people lost their homes, their life’s savings, and their hard-earned pensions,” said Pelosi.
“As President Obama has said on several occasions, sunlight is the best disinfectant,” said Reid. “The American people are entitled to a thorough examination of what went wrong. ”
Here's a *CLUE* for you, Harry and Nancy: what went wrong is *YOU* *FAILED* to uphold the law -- specifically, the regulations that, for more than 50 years, kept the economy from collapsing in the wake of unremitting greed run amok. The original Pecora Commission figured out for FDR that greed and chicanery on Wall Street caused the crash of 1929. Hence we got the Glass-Steagall Act. From the days of Reagan, an Aggie economics professor named Phil Gramm and the Republicans fought hard to overturn those regulations until the failure of Lehman Brothers made clear to all of us -- even such economic naifs as Reid and Pelosi -- that the NOW NOW NOW NOW mentality, the profits-first, people-be-damned ideology is designed to fail.
It fails 'cause it's reckless. It fails 'cause it's feckless. It fails 'cause it puts profits first and consequences in the "nevermind" category.
On your watch, Nancy and Harry, Glass-Steagall, which governed Wall Street with an eye to sound practices, went away. FAILURE after FAILURE followed, like dominoes tipped into each other in a line. The only persons surprised by this must have been ... you, Harry and Nancy!
Gramm and company brought us the unregulated free market environment in which it became chic to underwrite bad loans with imaginary values and approve loans for borrowers who had no income, no assets, and no collateral to stake on the success of their borrowing. Of course, the Main$tream Media said, nobody could have anticipated anything could go wrong -- except, Brooksley Born did, back when Bill Clinton was considering her for Attorney General (Janet Reno got the post, and Born was appointed to the CTFC), in the 1990s (!!!!!).
While on the commission and after becoming its chair two years later, Born sought comments on the need to regulate derivatives, specifically swaps that are traded at no central exchange, known as the dark market, and thus have no transparency except to the two counter-parties (no actual regulatory scheme was proposed at the time). The request for comments, called the "Concept Release," stated that the growth of trade in derivatives had prompted the CFTC to re-examine its regulatory scheme # ^ " Release #4142-98 CFTC ISSUES CONCEPT RELEASE CONCERNING OVER-THE-COUNTER DERIVATIVES MARKET" 
In fact, what she foresaw quite thoroughly puts the lie to the media (and the government's, largely GOP-driven, reliance on financiers' confidence games and scheming) meme that this was such a shock and surprise. Is her inclusion on the committee partly responsible for the concentrated lack of attention the mainstream media and the left blogisphere are turning on this inquiry? 'Cause, about 15 years ago, she suggested a "dark market" wasn't a good thing to leave running.
This earned her the opposition of Alan Greenspan, Robert Rubin, and Lawrence Summers.
According to the wiki, Specifically, on May 7, 1998, former SEC Chairman Arthur Levitt joined the other members of the President’s Working Group – Treasury Secretary Rubin and Federal Reserve Board Chairman Greenspan – in objecting to the issuance of the CFTC’s concept release, in which Born attempted to shed light on the dark market, citing grave concerns about the possible consequences of the CFTC’s action. In particular, these concerns focused on the risk that such discussion would increase legal uncertainty concerning swaps and other OTC derivative instruments and, thus, reduce their value. They claimed potential turmoil created by the report and concerns about the imposition of new regulatory costs also might have stifled innovation and pushed transactions offshore.Lindsey, Richard R. (July 24, 1998), Testimony of Richard R. Lindsey, Director, Division of Market Regulation.Securities and Exchange Commission.
Kinda looks like she's not the only one who saw bad things coming. Angelides was the former California state treasurer who unsuccessfully challenged California's Governator in 2006. That July he expressed his support for gay rights, and pledged to legalize same-sex marriage if elected governor, stating "I would sign the marriage equality bill because I believe if we can get behind people to build a lasting relationship, that is a good thing."
During his campaign Angelides called for repealing tax breaks on corporations and half-a-million-dollar-plus incomes for individuals to increase public and higher education funding in California. His plan would halt and repeal increases made in the tuition fees of the University of California system, and the California Community College system. He opposed sending National Guard troops to the California-Mexico border and wants to seek closer ties with the then-President of Mexico, Vicente Fox, claiming that it will help both the economies of California and Mexico. He supported the Vinod Khosla Clean Alternative Energy Initiative (prop. 87) to assess oil company profits by $4,000,000,000 over the next ten years and use the proceeds to invest into research for alternative energy such as ethanol. The measure makes it illegal for oil producers to pass the cost onto consumers. It also would reduce California's oil dependency by 25% over the next ten years, and would increase the use of renewable energy sources such as wind and solar power.
Angelides wrote Barbara Boxer in 2006, urging her as a member of the Senate Committee on Commerce, Science and Transportation to support net neutrality, and he Angelides endorsed the Clean Money Initiative (Prop. 89). The initiative would provide public finances to candidates who can obtain at least 750 $5.00 contributions from voters and who have participated in at least one primary and two general election debates. It would also place new restrictions on contributions and expenditures by lobbyists and corporations. Looks to me like he's got a good solid track record as a progressive, if not an outright liberal; wonder why his appointment didn't get a bigger fanfare?
Back to that WSJ article:
Speaker Pelosi and Majority Leader Reid appointed Phil Angelides as chairman of the Commission. The statute requires the House Speaker and the Senate Majority Leader to jointly appoint a commission chair.
Mr. Angelides, one of Speaker Pelosi’s three appointments to the commission, served with distinction as the elected California State Treasurer from 1999 to 2007. He has earned national recognition as an effective public and private sector leader with broad expertise and accomplishments in the fields of investor protection, housing, finance, and corporate and financial market reform.
The Commission will conduct a comprehensive examination of, and hold hearings on, more than 20 specific areas of inquiry related to the financial crisis, including the role of fraud and abuse in the financial sector; state and federal regulatory enforcement; tax treatment of financial products; credit rating agencies; lending practices and securitization; unregulated financial products and practices; and corporate governance and executive compensation. The Commission will also examine the causes of major financial institutions that failed or were likely to fail had they not received exceptional government assistance. The Commission will provide its findings and conclusions in a final report due to Congress on December 15, 2010.
In addition to Angelides, the Speaker also appointed:
John W. Thompson, who is Chairman of the Board of Directors of Symantec Corporation, a leading security software provider.
Majority Leader Reid appointed Heather Murren, a retired Managing Director for Global Securities Research and Economics at Merrill Lynch and Byron Georgiou, who is a Las Vegas-based businessman and attorney.
The Republicans have also appointed members, as the LA Times money blogger reports:
The ideological gulf on the panel is wide, from Angelides and former Sen. Bob Graham (D-Fla.) on the left to Douglas Holtz-Eakin, former economic advisor to GOP presidential candidate John McCain, and Peter Wallison, an executive of the conservative American Enterprise Institute, on the right. The risk is that the commission will either fragment along ideological lines or, in an effort to craft findings that garner unanimous approval, it will muffle its guns.
Pecora had more leeway. He was a lifelong renegade, an anti-Tammany Democrat who had supported Republican Teddy Roosevelt's breakaway Bull Moose presidential candidacy in 1912. Ron Chernow described him in his book "House of Morgan" as "fearless and incorruptible," and noted that he had turned away numerous job offers from Wall Street. Pecora was determined to hang some pelts on his wall. Among those he bagged was Charles Mitchell, chairman of National City Bank of New York (ancestor of today's Citigroup), who was forced to resign after Pecora (and others) laid bare his financial manipulations.
I look forward to the final report. Maybe they'll debunk this alleged wizardry once and for all, eh?
As the Times noted: Alan Greenspan had the ear of Washington from 1987 to 2006. He was sworn in by President Reagan, top, and was kept on by new presidents of both parties.