Bill Black has been calling for a Pecora-style commission for a long time. I asked him if he had a comment on Nancy Pelosi’s call such a commission to investigate the crisis in the financial community:
Speaker Pelosi’s announcement that she favors a Pecora investigation into the causes of the ongoing crises is very encouraging. Public support for such an investigation has been surging and played a decisive role in encouraging Speaker Pelosi’s position. We need to continue that public support and ensure both that Congress promptly begins a Pecora investigation and that it is a real investigation. Mr. Pecora was the former prosecutor that Congress hired during the Great Depression with the missions to determine the abuses that contributed to the crash, identify the key people that had led the abuses, and recommend reforms to limit future abuses and crises. He was chosen because of his reputation for vigor and integrity and he employed staff, including investigative reporters, that made his investigation successful.
Here are keys to ensuring that Congress authorize a successful investigation.
- We need to select a single person to run the investigation with a reputation for integrity and a track record of investigative success. We should not use "majority" and "minority" counsel. The parties need to settle on one person they trust.
- The investigators need to be backed with Congressional subpoena authority.
- The investigators, not the legislators, need to lead the questioning.
- The investigators need authority to hire competent, vigorous, and adequate staff.
- There must not be any limits on what they can investigate
- We need public investigations, though they can of course interview witnesses in private first.
The Pecora Commission was established by the Senate Banking committee in 1932 to investigate the crash of 1929. It was named after Ferdinand Pecora, final chief counsel of the commission, who exposed — among other things — that J.P. Morgan hadn’t paid taxes in years. The investigation led to the Securities Act of 1933, the Glass-Steagal Act of 1933, the Securities Exchange Act of 1934 and the creation of the Securities and Exchange Commission in 1935.