The Politics of Pecora

by Christopher Hayes, The Nation, 07/13/2009

If there's one thing that everyone seems to agree on, it's that the current financial crisis is complicated. There's two problems with this. First, it's not, fundamentally, true. The causes for the crisis are fairly simple when you strip away the artifice and lingo. (Most notably an $8 trillion housing bubble that the financial over-class insisted wasn't a bubble.) But more importantly, the perceived complexity of the issues are being cynically manipulated by those responsible to stem the tide of popular anger and insulate themselves from the wholesale reforms that are necessary.

In a piece on the bailout, Matt Taibbi referred to this posture of condescension as the "eye-roll." As soon as you ask a question -- why did you think housing prices would go up forever -- you are treated to the eye-roll which is the posture of those in power to the supposed ignorance and idiocy of those attempting to figure out just how they broke the world.

The point is that complexity has an enervating affect on the polity: people can only marshal anger and action about the crisis if they feel that at some basic level they understand it. Before we have politics, or a broad call for reform, we must have some broadly shared understanding of what went wrong and who's responsible. That's why a new Pecora Commission is so vital.

The original commission was created during the Great Depression as a fact-finding enterprise, to figure out how things could have gone so wrong. The hearings attracted tremendous attention and their uncovering of the self-dealing and corruption on Wall St. laid the ground work for future regulatory reforms.

The Obama administration has attempted to skip first step of this process. They've brought together the relevant stakeholders to craft a plan for financial reform, but have bypassed the necessary step of educating the public on their stake in the reform fight's outcome.

Unless and until the public feels knowledgeable enough to get angry, to fight for specific policies and solutions, the crafting of a new financial order will be left to the existing players. And they are sure to tip the scales in their favor and endanger the entire economy all over again.

If we've learned one thing in this decade, it's how dangerous it is to allow elites to make decisions based solely on conversations they have with themselves. A new Pecora Commission holds out the promise of giving the public a voice.