The decision by the House of Representatives on Wednesday to follow the Senate and vote for an independent commission to investigate the causes of the financial crisis is a significant win for the cause of accountability and reform on Wall Street.
Assuming that it emerges from a House-Senate conference committee intact—and there is little reason to believe the legislative language would not—then we have the potential of a powerful vehicle for driving the debate on what the new financial services structure should look like.
The commission language is embedded in a financial fraud bill that passed by wide majorities in both houses. That bill would also beef up financial fraud enforcement efforts and extend that enforcement to mortgage lenders and to funds financial institutions received through federal economic recovery programs.
For weeks, we have been calling for a commission modeled after the one led by Ferdinand Pecora for the Senate Banking Committee in the 1930s. That commission documented the legal and ethical lapses that led to the Great Depression and set the stage for the regulatory framework that kept the country’s financial system stable for more than 50 years.
This picked up momentum when House Speaker Nancy Pelosi embraced the idea. On Wednesday, Pelosi’s office released a statement that said the commission “will produce a detailed and clear-eyed examination of what went wrong, which is needed to bring accountability to a financial system that rewards unduly risky behavior, and to help inform Congress as we move forward with common sense reforms to prevent these crises from happening in the future.”
Both the House and Senate provisions call for a 10-member panel that would have subpoena power. There are slight differences on how the members are appointed, but there is agreement that the members would not be current public officials and would be persons with a solid knowledge of the economics of Wall Street and Main Street. The commission would also have the power to refer wrongdoing it uncovers to the appropriate federal and state enforcement authorities.
It is tempting to cynically argue that this commission would simply be a show for a few C-SPAN die-hards that generates a report that will be quickly forgotten. The reality is that this commission can have at least as much impact as Pecora’s commission did in changing the financial and political landscape for reform.
For that to happen, though, it needs tough, smart leadership of the caliber Elizabeth Warren has brought in her role as chairman of the special congressional committee overseeing the Troubled Asset Relief Program. Like Warren, the leader of this commission has to have a firm eye on the interests of working people and on insuring that Wall Street is never again permitted to put the economic well-being of millions of people at risk for the sake of their own insatiable greed—and that those who did have themselves and their behavior exposed.
A panel with that kind of leader at the helm will be a powerful weapon in our push for an economy that works for everyone.