Bill Moyers asked me to join his conversation this week with Michael Perino – a law professor and expert on securities law - who is working on a detailed history of the 1932-33 “Pecora Hearings,” which uncovered wrongdoing on Wall Street and laid the foundation for major legislation that reformed banking and the stock market.
My role was to talk about potential parallels betweeen the situation in the early 1930s and today, and together we argued out whether the Pecora Hearings could or should be considered a model for today.
Bill has a great sense of timing. On Wednesday night the Senate passed, by a vote of 92-4, a measure that would create an independent commission to investigate the causes of our current economic crisis; we taped our discussion on Thursday morning. In the usual format of Bill’s show, a segment of this kind would be 20+ minutes, but I believe that tonight our conversation will occupy the full hour (airs at 9pm in most markets; available on the web from about 10pm).
Speaker Pelosi has also come out in favor of some sort of commission, so there is momentum (and detailed negotiations). But many big questions are still on the table, including: what should be the scope of an enquiry, will it have subpeona powers, and who will run it? And how exactly should we consider benchmarking this against the Pecora Hearings?
Popular anger during a major crisis is completely standard – I can’t think of a country that has avoided this. Not many countries can control that emotion and channel it into a productive conversation. Even fewer can figure out how to turn that into meaningful legislation – let alone enforcement of new rules that make sense.
The US has the kind of democracy that could do this. But, as Michael Perino emphasized effectively, given the power of the big finance lobby (now and in the early 1930s), even we need to get lucky.
Perhaps we can tilt the odds slightly in our favor using one edge that was not available in 1932. Write up your suggestions for how to organize the hearings, questions to ask, witnesses to call, and more. Even better, provide the details – substantiated – of what went wrong, and make specific suggestions about the lines of enquiry to pursue. Put these in a comment here or, if you prefer, The Hearing on WashingtonPost.com – this is already starting to get the right kind of attention on Capitol Hill.
This is not a call to populism. This is a call for ideas that can constructively rebuild financial services in this country and, much more broadly, restructure our economy in sensible and sustainable ways. Ultimately, the Pecora Hearings had impact because they affected the country’s debate – and because top leaders paid attention. Surely, we should aim for the same.
By Simon Johnson