It's a little hard to tell where this is going, but Nancy Pelosi and Harry Reid finally
released the list of names to man what's come to be thought of as their new Pecora hearings into the causes of the financial crisis. Former California Treasurer Phil Angelides, who lost out to Arnold Schwarzenegger for governor in that freewheeling 2006 election, will lead the panel. Is Angelides another Ferdinand Pecora, who really drove and shaped the '30s hearings into a broad condemnation of Wall Street and banking? The better question is: Do Democrats in Congress, notably Pelosi and Reid, have any interest in digging deeply into a crisis that clearly involves many important Washington personages of both parties? The fact that it took them so long to get this going suggests not.
It's actually sort of strange that the former treasurer (and a real estate developer to boot) of the state closest to the edge of fiscal meltdown is getting to oversee this commission. Does operating in California give you battlefield experience? Or is Angelides (and Pelosi) viewing this as a bully pulpit to set him up for another run at the governor's job?
The White House at least seems to be headed in a different, more conciliatory direction than the tub-thumpers for a real Pecora-type investigation. Given its eagerness to compromise on a variety of regulatory reform measures, it's a little hard to imagine that the administration wants a bread and circuses run by Angelides to break out, distracting attention from healthcare or climate change legislation or rehashing the deregulatory sins of, say, Lawrence Summers. (It's also a little hard to imagine Barney Frank tolerating any interference into what he clearly views as his issues.) This isn't the Great Depression, despite the severity of the crisis; and by the time Angelides & Co. finish their final report at the end of next year, not only will most regulatory reform be completed but the pain and panic should be fading. They're arguably fading right now.
And given the length of time since the crisis became clear, what exactly will this bipartisan panel investigate? After all, the 9/11 Commission was dealing with matters of national security, many of which were buried away. That's not the case here. The real task of this commission will be to take the plethora of mooted causes -- deregulation, global imbalances, high pay, derivatives, CRA, the GSEs, financial consolidation, lax regulation, overleveraging, lack of transparency, governance, regulatory arbitrage, and not least (at least politically) personal malfeasance and Goldman, Sachs & Co. (NYSE:GS) -- and put them in some sort of order. Were their Ur causes? Which were the primary causes, the secondary causes; which were symptoms? Will they tackle fundamental regulatory issues arising from the crisis, such as regulatory capture or too-big-to-fail? Will they offer a blueprint for a new regulatory system after changes have already been made? Will they suggest ways to deal with bubbles?
You never know about these things. Expectation on Pecora was low at first, although he was an aggressive New York City prosecutor by training. Pecora was also the chief counsel to the Senate Banking and Currency Committee, a potentially more powerful position (depending on the chairman, in Pecora's case long-serving Florida Democratic Sen. Duncan Fletcher, who had earlier led the committee investigating the sinking of the Titanic) than chairman of a relatively open-ended bipartisan commission with a hodge-podge of members. Angelides is predominately a politician. One of his higher-profile campaigns as treasurer was to align himself with the governance campaigns at Calpers and Calstrs (as treasurer he was an ex-officio member of both boards) and he has long viewed those funds as opportunities to make a case for social causes like environmentalism. So at the very least it would be surprising if there weren't a major "governance" component -- a subject that is amorphous enough to conveniently avoid embarrassing anyone.
- Robert Teitelman
See the article in The New York TimesRobert Teitelman is the editor in chief of The Deal.
Continue reading below
