Saturday, January 16, 2010

Regulating the Predators

Unfortunately, this country has been down the road of expensive and corrupt banksters before.  In fact, the term "bankster" comes from the Great Depression of the 1930s.

I mean--look out your window.  That economic catastrophe and political corruption is what happens when a society neglects to properly supervise the moneychangers.  The rebuilding of an efficient regulatory structure will require a great deal of political will, but fortunately, our grandfathers provided us with a very good road map.
Ask a Banker! Top Ten Questions for the Financial Crisis Inquiry Commission

Ferdinand Pecora, famous chief counsel for Pecora Commission, Congress' 1932 investigation into the causes of the Great Depression that led to modern financial regulation
By Eliot Spitzer, William Black, and Frank Partnoy / New Deal 2.0
The Financial Crisis Inquiry Commission (FCIC) is holding its first public hearings and will hear testimony from the CEOs of some of the largest financial institutions. This is not the hearing at which experienced investigators would produce fireworks. The FCIC has not used subpoena authority or voluntary requests for information to obtain the background information essential in order to hold a real investigative hearing. In particular, it has not obtained AIG(and Fannie and Freddie’s) emails and other critical internal documents such as their financial models, internal accounting records, and loss reserve data that are readily available and vital to understand what caused the crisis. Any aircraft crash investigator knows how critical it is to find the “black box” that records the information that is typically essential to finding the cause. In the financial context, these AIG, Fannie & Freddie emails and internal accounting and risk records are the “black box” that any competent investigator would demand to review.
FCIC should use this first public hearing for two quiet purposes. The primary goal should be to develop information. The subsidiary goal is to put the CEOs on record as to what went catastrophically wrong, which will allow the FCIC to judge their candor as the facts are developed. The FCIC, and the nation, need the utmost candor. The CEOs must testify under oath, as is the norm now for witnesses testifying before the House Financial Services Committee. Precisely because it is the norm it does not impute any wrongdoing to any witness. more

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