Pecora Swirling: Appointing the Financial Crisis Inquiry Commission

Reuters is out with an authoritative story
on finalists being considered for the Financial Crisis Inquiry
Commission, the investigative body created by Congress to launch a
full-scale investigation of the financial crisis in the spirit of the
famous early 1930s hearings led by Ferdinand Pecora.

Those famous investigative hearings produced the facts and momentum
for the major New Deal financial reforms. If the Reuters story is
accurate, progressives have a lot of work to do in a few short days
while nominees are being finalized, before the moment is lost.

Under the law creating the commission, which was signed
by President Obama in late May, it is to have ten members, six
Democrats and four Republicans. They are to be appointed by the House
and Senate majority and minority leadership, respectively.

Among the names leaked is just one person with the stature,
expertise, and resolve to run a tough investigation (if she were
chair)--Brooksley Born. As chair of the Commodity Futures Trading
Commission in the late 1990s, Born proposed regulating over-the-counter
derivatives, of the sort that helped crash the economy. For this
attempt to spoil the party, she was excoriated and isolated by an
old-boys' mob that included Alan Greenspan, Robert Rubin, Lawrence
Summers and Gary Gensler. Incredibly enough, Gensler, an Obama
appointee, now holds Born's old job as chair of the CFTC. More than a
decade and several meltdowns later, the Obama administration's 88-page
white paper is ambiguous on the subject of whether and how to regulate
customized derivatives. Born is just the sort of person the commission
needs.

On the Republican side, with one exception, the leaked names could
be an alumni society of the people whose policies helped cause the
collapse. The absolute howler in the list is former senator Jake Garn
of Utah, a tireless proponent of financial deregulation. Among other
travesties, Garn sponsored the Garn-St. Germain Act of 1982, the law
that allowed savings and loan associations to become speculators'
playgrounds, and led directly to the S&L collapse.

Another proposed Republican is Bill Thomas, former chair of the
House Ways and Means, a legislator who never met a financial special
interest he didn't like; and former Republican Senator and presidential
candidate Fred Thompson.

The one commendable Republican on the list--and I hope my support
doesn't spoil it for him--is Alex Pollock of the American Enterprise
Institute. Pollock has been an honest critic of the financial bailout
program and the weak measures undertaken by both the Bush and Obama
administrations to stem the epidemic of mortgage foreclosures. In his
testimony and speeches, Pollock regularly calls for New Deal-style
remedies, such as the Reconstruction Finance Corporation or Roosevelt's
Home Owners Loan Corporation, which refinanced one mortgage in five,
and spared a million families foreclosure.

The only other Democrat on Reuters' leaked list is former Florida
senator and governor Bob Graham, a self-identified New Democrat who
served on both the Senate Banking and Finance Committees. Missing,
except for Born, are people with deep knowledge and informed criticism
of the abuses that led to the crisis.

Some good nominees would be former SEC Commissioner Harvey
Goldschmid, now a law professor at Columbia; Elizabeth Warren, Chair of
the Congressional Oversight Panel; Damon Silvers, the AFL-CIO's top
expert on financial markets and Deputy Chair of the oversight panel;
economists Joseph Stiglitz of Columbia or Nouriel Roubini of NYU or
James Galbraith of the University of Texas or Dean Baker of the Center
for Economic and Policy Research; one-time Wall Streeters and now
astute financial critics Nomi Prins, Rob Johnson, Ron Bloom or Richard
Bookstaber; former financial regulators Bill Black or Ellen Seidman; or
law professors and deregulation critics Frank Partnoy of the University
of San Diego or James D. Cox of Duke.

Perhaps it was too much to hope that this commission would be a
chance to investigate root causes and mobilize public sentiment behind
the sweeping reforms that are needed and not yet forthcoming.
Obviously, Republican House Leader John Boehner and his Senate
counterpart, Mitch McConnell, are not about to put serious critics of
deregulation on this panel. House Speaker Nancy Pelosi and Senate
Majority Leader Harry Reid, however, were astute enough to put
Elizabeth Warren and Damon Silvers in charge of the Congressional Oversight Panel
(COP) that was created as a condition for giving the Treasury $700
billion in bailout funds last fall. Ever since then, the COP has been
the best source of independent thinking and investigation in town.

For the new Pecora Commission, Pelosi and Reid need to do better
than finding a predictable list of retired and safe Democratic
politicians. This is a rare chance to light a real fire on behalf of
deep reform.