Why Congress Won't Investigate Wall Street

Republicans and Democrats would find themselves in the hot seat.

The famous Pecora Commission of 1933 and 1934 was one of the most successful congressional investigations of all time, an instance when oversight worked exactly as it should. The subject was the massively corrupt investment practices of the 1920s. In the course of its investigation, the Senate Banking Committee, which brought on as its counsel a former New York assistant district attorney named Ferdinand Pecora, heard testimony from the lords of finance that cemented public suspicion of Wall Street. Along the way, the investigations formed the rationale for the Glass-Steagall Act, the Securities Exchange Act, and other financial regulations of the Roosevelt era.

A new round of regulation is clearly in order these days, and a Pecora-style investigation seems like a good way to jolt the Obama administration into action. After all, the financial revelations of today bear a striking resemblance to those of 1933. In his own account of his investigation, Pecora described bond issues that were almost certainly worthless, but which 1920s bankers sold to uncomprehending investors anyway. He told of the bonuses which the bankers thereby won for themselves. He also told of the lucrative gifts banks gave to lawmakers from both political parties. And then he told of the banking industry's indignation at being made to account for itself. It regarded the outraged public, in Pecora's shorthand, as a "howling mob."

The idea of a new Pecora investigation is catching on, particularly, but not exclusively, on the left.

It's probably not going to happen, though, in the comprehensive way that it should. The reason is that understanding our problems, this time around, would require our political leaders to examine themselves. [more]