Tuesday, July 28, 2009

Let the Financial Inquest begin

Let The Financial Inquest Begin

By Isaiah J. Poole
July 15, 2009 - 2:43pm ET

Now that congressional leaders have named the members
of the Financial Services Inquiry Commission-what is
often referred to as the "Pecora Commission"-we are
going to see once again who is prepared to lay the
groundwork for real financial reform and who is going
to stand in the way.

Both Democratic and Republican leaders have named a
total of 10 members of the commission, six Democrats
and four Republicans, who are charged with identifying
the decisions and actions that led to the current
financial crisis. The good news is that House Speaker
Nancy Pelosi and Senate Majority Leader Harry Reid have
named a commission chairman-Phil Angelides-who has a
solid record of standing on the side of sound financial
regulation and accountability. The unfortunate news is
that at least some of the Republican appointees have a
track record of standing for precisely the opposite and
of spreading falsehoods about the roots of the crisis.

Angelides was the treasurer of the state of California
from 1997 to 2007, and in that position also sat on the
boards of the largest and second-largest pension funds
in the country, CalPERS (for state employees) and
CalSTRS (for state teachers). William Greider of The
Nation wrote about Angelides' pioneering and
progressive-minded role on these pension fund boards
back in 2005:

Angelides has become a favorite target of the
corporate critics--and a visible point man for
pension-fund activism ... Angelides has pushed
both funds to adopt a whirlwind of reforms-dumping
tobacco stocks, blacklisting ten "emerging
markets" that ignore international labor
standards, redeploying capital to neglected
sectors like inner-city redevelopment and
innovative environmental technologies, and, above
all, peppering scores of corporations, banks,
brokerages, financial markets and federal
regulators with critiques and demands for change.

In a 2007 interview, Angelides offered his assessment
of what he accomplished during his term as treasurer:

We transformed the treasurer's office into a force
for progress. We showed that the capital, money,
in a free enterprise society could be applied to
do good things for people--billions of dollars of
investment in inner cities, investments in
renewable energy, in environmental technology,
using our pension funds to stand up for
shareholders who had been defrauded in the
marketplace, making the case for investment in
education and higher education, in the knowledge
and skills of our people. We showed that
government can make a difference.

Contrast this with one of the Republican appointees,
Peter J. Wallison, a fellow at the American Enterprise
Institute. One of his latest acts of intellectual
dishonesty was an op-ed for The Washington Post
attacking the proposed Consumer Financial Protection
Agency as "elitist." Wallison doesn't appear to see
anything wrong with the widespread practice, for
example, of mortgage companies selling subprime loans
steeped in obfuscatory language, and doesn't see why
companies should be held responsible when consumers are
taken in by the subterfuge. Wallison also authored an
article for Bloomberg last year that brazenly argued
that financial deregulation had nothing to do with
causing the financial crisis-an extremist view that
even former Federal Reserve Chairman and deregulation
apostle Alan Greenspan abandoned.

Another Republican appointee, Keith Hennessey-who was
the last White House chief economic adviser under
President George W. Bush-was a chief architect of the
very troubled Troubled Asset Relief Program (TARP) and
presumably has a vested interest in defending the Bush
administration policies. Bill Thomas, the former
Republican chairman of the House Ways and Means
Committee, was a longtime, reliable protector of
corporate interests in Congress who helped architect
the Republican tax cuts that are now key drivers of the
nation's deficit. Douglas Holtz-Eakin, a top operative
in Sen. John McCain's presidential campaign, has
advocated some populist positions on breaking up "too-
big-to-fail" banks.

The Republican appointees, however, set up a dangerous
dynamic in which an honest dialogue about the shape of
reform is short-circuited by rigid ideology and worship
of the status quo. That must not be allowed to happen.

Look to Angelides and the other Democratic nominees to
be the bulwalks against that type of obstruction. A few
of the have particularly promising track records.
Brooksley Born, who was director of the Commodity
Futures Trading Commission under President Clinton,
warned about the dangers of deregulation in the
derivatives trading markets. Byron Georgiou, a Las
Vegas-based businessman and attorney, not only has one
of the most respected blogs in financial regulation,
but has also defended investors against abuses by
financial firms.

Here's what Campaign for America's Future co-director
Robert Borosage is hoping for:

The commission must act boldly to investigate and
expose the abuses of Wall Street that left
millions of Americans suffering. This is our best
opportunity to identify the people and practices
that got the country into this mess. ...

I trust that both the Democratic and the
Republican appointees will reflect the mandate
provided by the vast majority of Americans who
want a no holds barred investigation that exposes
the practices, legal and illegal, that are at the
base of the financial collapse.

The Commission should hold public hearings across
the country, from California to Wall Street,
exposing the systematic malfeasance that inflated
the housing bubble, and gave bankers multimillion
dollar personal incentives to gamble recklessly
with other people's money.

Only by exposing the systematic malpractices that
got us to where we are can we gain a foundation
for broad reform. The Commission can play a
critical role in insuring the public understanding
and support for the change that we need.

It is clear, though, that if progressive activists are
not shining a bright light on this commission and its
work, iit could-despite the best intentions of people
like Angelides-become nothing more than another stage
for Washington blather, resulting in yet another pile
of paper to collect dust on the policy shelves. With
the damage that has been done by the policy missteps of
people in both parties, we cannot afford, and cannot
tolerate, having this commission be anything less than
the springboard for bold changes in the financial

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