Financial Crisis Inquiry, Will Congress Act?

Tipping the balance in an Era of Outrage: Will the Angelides Commission Inspire Congress to Act?

Roosevelt historian David Woolner shines a light on today’s issues with lessons from the past. New Deal 2

There has been a great deal of speculation this week as to whether the newly opened commission on the financial crisis will live up to the reputation of its more famous predecessor headed by Ferdinand Pecora. It is true that Pecora’s ruthless pursuit of the truth brought many of the evil practices that contributed to the 1929 crash on Wall Street to light and even landed some of its kingpins in jail. But the real significance of the Pecora commission did not come during the famous hearings but after — in Congress.

Spurred by Pecora’s determination to leave no stone unturned, and buoyed by the overwhelming support FDR had received at the polls in the 1932 election, Congress was not afraid to take matters into its own hands in the wake of Pecora’s revelations. Some of the most important provisions of FDR’s first hundred days, in fact, were initiated, not by the White House, but by Congress. Perhaps the most significant was the Glass-Steagall Act, which established the Federal Deposit Insurance Corporation (FDIC), separated commercial from investment banking, and shifted greater regulatory power from the Federal Reserve Banks to the Federal Reserve Board in Washington. At first, the newly elected FDR was reluctant to support this bill as it was considered very controversial at the time. But with the public clamoring for action-thanks in large part to the work Pecora-FDR soon came to support it.

Another important and controversial 100 days measure — the Truth in Securities Act-had FDR’s full support. But it was Congressman Sam Rayburn (aided by Felix Frankfurter and other key FDR advisors) who successfully brought this bill through Congress. The 1933 Securities Act was the first major piece of federal legislation aimed at regulating the stock market. It required that investors receive financial and other significant information concerning securities being offered for public sale. It also prohibited deceit, misrepresentation and outright fraud in the sale of securities. Wall Street cried foul at this, but in the aftermath of the financial meltdown of 1929 and the subsequent exposure of the outrageous practices that led to it in the Pecora Commission, Rayburn was able to gain enough support to ensure that it was his bill-the House bill-not the milder Senate version that ultimately became law. As Rayburn put it at the time ‘Today we are forced to recognize that the hired managers of great corporations are not as wise, not as conservative, and sometimes not as trustworthy as millions of people have been persuaded to believe.”

There is no question that FDR was a President bent on engaging in serious reform. He is, and may always remain, the one President who effected the greatest change while in office. In fact we live in a nation — indeed a world — that was profoundly influenced by the reforming spirit of the New Deal. But FDR did not accomplish all of this by himself. Congress too — on both sides of the aisle — played an important part in initiating, drafting, and refining the legislation that gave us the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, the Federal Housing Association, Social Security, unemployment insurance, the Wagner Act, the minimum wage, the GI Bill, and the many other provisions that laid the foundation for the unprecedented prosperity and economic security that followed the twin crises of the Great Depression and the Second World War.

In most if not all of these cases, powerful vested interests did everything in their power stop these measures from moving forward. But heeding the words from FDR’s first inaugural that “this nation is calling for action and action now” and that it was time for all to recognize that “the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit,” Congress decided to do its duty and act in the public’s interest. Recognizing this some years later, FDR noted that the generation that lived up to these great challenges did so because it had “a rendezvous with destiny.” Let us hope that this generation-and its leaders-can rise to the same level of achievement.

Braintruster David Woolner is senior vice president of the Franklin and Eleanor Roosevelt Institute.

First Panel Report

You’ll be happy to note that all four bank CEOs understand that Too Big To Fail shouldn’t exist, and that they’ve spent a lot of time re-examining their compensation packages. We know this because all four bank CEOs took the upmost pain to describe both these things during the opening panel of the Financial Crisis Inquiry Commission this morning in Longworth House Office Building in Washington D.C. Wednesday morning.

Follow the Financial Crisis Inquiry Commission here:

Give All The Bank Bonus Money to Haiti Necessity and Justice demands it! A PETITION TO THE HEADS OF WALL STREET'S BIG BANKS: John Mack of Morgan Stanley, Lloyd C. Blankfein of Goldman Sachs, Jamie Dimon of JP Morgan Chase, Brian Morgan of Bank of America, Robert H. Benmosche of AIG, and Piyush Gupta of Citibank We call on the major banks to give all of the money that they have set aside for bonuses to the people of Haiti in their hour of desperate need. Justice and dire necessity demands that those who have profited while others have lost everything now bail out the people of Haiti. Whatever the full amount of the money that the Bank of America, Goldman Sachs, JP Morgan Chase, Morgan Stanley, Citibank, and AIG have set aside for bonuses, that sum will easily be between 10 to 100 times the amount of the combined aid that the People of Haiti will receive from the entire world. With that kind of money, still very small by comparison to the bail out money that the U.S. government has given to the big banks, the people of Haiti may actually have the possibility of recovering from the unimaginably devastating blow that has cause so much death, destruction and suffering. Wall Street’s bonus money could rebuild Haiti. Like New Orleans and the gulf region of the U.S. 5 years ago, it took a natural disaster to draw attention to the terrible poverty, injustice, and neglect that the people of that region have been historically subjected to. Today, Haiti is like Katrina. Rich bankers who have far more money then they could ever need to provide for their families do much better than those, who like most of the people of Haiti, have nothing to fall back on when hit by an earthquake or a hurricane or any crisis. Rescuing the people of Haiti is not only a humanitarian mission -- it is also part and parcel of the global struggle against social inequality and injustice. As we celebrate once again the birthday of Dr. Martin Luther King Jr., let us never forget that we cannot separate the brutal connection between natural disasters and social inequality. The crisis in Haiti today is made immeasurably worse by the reality that Haiti is the poorest country in the western hemisphere if not the world. We must fight the injustice that is at the root of that poverty, now more than ever. Wall St.'s wealth represents the other side of the injustice equation. That is the reason we are taking our struggle to save Haiti to Wall St.'s big banks. www.nykatrinarita.org www.mayibuyechrishani.com The Militarization of Emergency Aid to Haiti: Is it a Humanitarian Operation or an Invasion? United Nations/US Massacre of Civilians WARNING: VERY GRAPHIC IMAGES OF KILLED MEN, WOMEN AND CHILDREN.

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