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Consider:

The investment side of your Bank is sitting on a ton of bad loans to various Latin American nations. The loans used to look good: The rates were, of course, sky high. But with the world in recession, many of these same Latin American nations are just this side of defaulting. If they do default, it could be very bad for the Bank. Sure, the investment side of the Bank would suffer the most, but the defaults would also impact the profit-and-loss sheet of the Bank as a whole. Not good.

The solution? Whip up your stockbrokers —they work on the other side of the Bank—and get them to go sell these “dogs” to the hoi polloi. Gussy the bonds up good, put a fancy name on the package, and, hopefully, the public will love ‘em. You’ll not only get the bad debt off your balance sheets, you’ll get a broker’s fee from the suckers who saved your skin in the first place. Gooooood.

Or consider this:

The Big Bank—the commercial side of your Bank—financed the investment side’s pool operation in copper stocks. Your stockbrokers then went out and sold the public a million and a half shares of copper at $120 a share. It’s now selling for $5 and change.

Annnnh, you say. Stuff happens!

Indeed it did and pretty much exactly as I outlined—but in 1929, not 2009.

For most of the next 70 years, there was no chance of a repetition of these kinds of shenanigans. And why not? Two words: Glass-Steagall.

The Glass-Steagall Act of 1933 forced banks to choose between being investment banks or being commercial banks. No longer could they be both. No longer could this hand slip the money under the table and into that hand. Nor could the commercial bankers blithely send their customers scampering over to the next-door office to do their stockbrokerage business—after having provided them with margin loans. No, thanks to Glass-Steagall, the Big Bank holding companies of the Twenties were no more.

But then along came Phil Gramm, egged on by the Wall Street Journal crowd—abetted, too, by the Clinton Treasury Department (Read: Bob Rubin and Larry Summers, assisted by a young Tim Geithner)—and they changed everything. And not for the better. With the stroke of a pen on November 12, 1999, President William Jefferson Clinton signed into law the Gramm-Leach-Bliley Act, which, in effect, repealed Glass-Steagall.

Americans didn’t realize it at the time, but the world of 1920s finance—ginned-up deals, suckers ripe for the plucking, and nobody to regulate much of anything—had returned with a vengeance. The only real difference, needless to say, was the computer, which simply made the thing go faster. A regular Merry-Go-Round of Mad Money.

And no Glass-Steagall to stop it.

* * *

One of the Obama team’s favorite canards is that we just don’t have the time to “look backwards.” We have too much on our plates to deal with today. So say they.

Funny, isn’t it then, that the impulse behind Glass-Steagall—one of the great legacies of the New Deal—lay in the very same Ferdinand Pecora who led the Senate Banking Committee’s “backwards-looking” investigation into the origins and causes of the 1929 Crash?

The so-called “Pecora Committee” investigation not only didn’t impede President Franklin Roosevelt’s work to get the country back on its feet, it actually made long-term, lasting reform possible. With revelation following revelation, all of it played out prominently in the national press, the Pecora Committee set the national agenda for change.

Just as importantly—and the former University of Chicago law professor Obama should know this as well as anyone—the Pecora Committee, like the Teapot Dome Committee and the later Truman and Watergate Committees, left us with invaluable historical records of how these things—financial and political skullduggery, a world-wide crash and the subornation of our government by a President and his minions—happened in the first place. Are we not, after all, still learning the lessons of the Pecora Committee and the Watergate Committee? Teapot Dome, too.

No, Obama surely knows this. And no one knows it better than the bankers themselves. It is what they—and the keepers of the Banking Culture, the Summers and Rubins and Geithners—fear the most.

For the key to all that they have done so far in the name of the American Public lies in but one word: Opacity. Everything—or almost everything—they do is cloaked behind layers and layers of deliberate obfuscation. Better that the poor, feeble, foolish American Public not understand.

* * *

Fortunately, some of us do believe in history.

The Teapot Dome investigation was carried out by the Senate Committee on Public Lands. Significantly, the leading figure on the committee, the man who shouldered the weight of the investigation, Montana Democrat Thomas J. Walsh, was in the minority. The Senate was then in Republican hands—as was the graft-ridden Harding presidency. But Walsh was tenacious—and brilliant. One man, one bone, one big scoop.

The Senate select committee chosen to investigate rampant corruption in World War II defense industries was headed by the previously little-known, second-term Missouri Senator Harry S. Truman. Its seven members were (all but one, Tom Connally of Texas) junior senators, and, as Truman’s biographer David McCullough says, “distinguished only by their ‘unspectacular competence.’” Yet, the committee, under the inspired leadership of the dogged Truman, made headline after headline, ferreting out corruption. But for the work of the Truman Committee there would surely never have been a Vice President—or a President—Harry S. Truman.

Of the Watergate Committee, yet another Senate select committee, we know a very great deal. It too was a seven-member committee. Two of the seven senators are probably only remembered by their families: the Republican Gurney of Florida and the Democrat Montoya of New Mexico. The others, though, all had their moment in the sun—and then some. The Senate Watergate Committee is just as often referred to as “the Ervin Committee,” after its shrewd chairman, Sam Ervin of North Carolina. But Daniel Inouye of Hawaii and, especially, the cagey Herman Talmadge of Georgia, played their parts. The iconoclastic Republican Lowell Weicker of Connecticut could be as tough as the Democrats; while the Ranking Republican, Senator Howard Baker, began as the White House’s mole in the committee but became famous for asking when the President first knew about it—it being the break-in at the Watergate.

There are those—including people I admire and trust—who think the current investigation should not be conducted from the Hill but by an independent commission, modeled after the 9/11 Commission. The theory is that by appointing a “non-political” independent commission we might avoid the usual Congressional grandstanding.

But having watched many of the 9/11 Commission hearings live—and having rolled my eyes just about every time former Republican Governor Jim Thompson of Illinois got hold of the mike—I don’t really believe that. And Thompson was merely the most egregious grandstander among that lot.

Nor do I find it comforting to think that President Obama might well pick the likes of 9/11 Co-Chairs Governor Tom Kean and former Representative Lee Hamilton to run such a commission. Hamilton, it should be remembered, pretty well botched the Iran-Contra hearings. He’s every smart Republican’s “favorite Democrat.”

No, no, please not that again: A couple of Old Aunties—or, rather, a couple of tired Old Uncles.

And, let’s not forget 9/11 Commission executive director Philip D. Zelikow. He’s been trying his best to resurrect his image lately, but, readers of New York Times reporter Philip Shenon’s The Commission will recall that the former Condi Rice co-author was no one’s idea of a bi-partisan team leader. He might well also have been, like Fred Thompson (the Republican counsel on the Watergate Committee), its White House mole. The Tired Old Uncles chose him. Let that be a lesson to us.

No, I’d say that, looking at it broadly, you don’t want “the outside experts,” you want the politicians. For one thing, you want someone who can put the issues in simple, clear language. The plot line has to be understandable. It has to be the opposite of opaque.

* * *

So where does that leave us? And who is to run this thing?

Ideally, I would think that there should be a select Senate Committee to investigate the financial crisis, and it should be small, seven to nine members at most. There are obvious candidates to chair the Democratic side of such a committee. Carl Levin has proven an outstanding investigator, whether as chair of the Banking Committee, which he once was; and now at Armed Services. The same could be said of Pat Leahy of Judiciary. But their plates are probably full.

Who then?

I’d propose Jack Reed of Rhode Island. He’s a senior member of the Banking Committee and one of the outstanding members of the Senate. It’s not for nothing that Obama considered him for Vice President at one point. Then there’s Democratic Majority Whip Dick Durbin of Illinois, who had the good sense and honesty to blurt out the other day how Congress was owned by the banks. Good on him! He’s also senior enough to be chair.

Into the mix could go Russ Feingold of Wisconsin, Ron Weyden of Oregon, Byron Dorgan of North Dakota, and Amy Klobuchar of Minnesota. If, for whatever reason, Reed were not chosen as chair, I’d propose as a junior member his outstanding counterpart from Rhode Island, Sheldon Whitehouse, who might just be the best questioner in the Senate today.

No doubt Chuck Schumer of New York would think himself invaluable on such a committee, but Schumer is the very epitome of the Banking Culture and is, besides, one of the biggest grandstanders in either house of Congress. No one in the Senate loves the sound of his own voice more. Oh, and, no Evan Bayh, the Bankers’ Best Friend. No, no, no Nanette to Evan!

The biggest problem of all, though, is Dick Durbin’s ostensible boss Harry Reid. Mike Mansfield, lo those thirty-plus years ago, had the very good sense to choose Sam Ervin to run the Watergate Committee. To paraphrase Lloyd Bentsen, Harry Reid ain’t no Mike Mansfield. He ain’t even a Tom Daschle, much less a George Mitchell.

Which leaves the House and Nancy Pelosi. She actually does seem to want to investigate the financial collapse.

House committees are by nature large—huge even. At full committee hearings no one ever seems to have time enough to follow-up. That would never do in this matter. The members will need time to probe, to examine and to cross-examine. It would be good if at least some—like Sheldon Whitehouse on the Senate side or Artur Davis on the House side—had themselves once been prosecutors.

A special House committee would also have to be small—again, seven to nine members—and select. The Speaker thus would get to choose the chair. In her perfectly reasonable desire to bounce Jane Harman, Pelosi badly botched the House Select Intelligence Committee chairmanship. She can’t pick another Silvestre Reyes. The person she picks to run this committee has got to have chops. Three names come to mind: John Lewis of Georgia; Ed Markey of Massachusetts; and Lloyd Doggett of Texas. You could do a lot worse than one of these.

Strange to say, you might even get a Republican or two from either the House or Senate who has something to contribute. It’s always possible. As Simon Johnson keeps reminding us at his “The Baseline Scenario,” what this thing comes down to are the two sides: The Banking Culture (which is AC/DC when it comes to the parties) and a broad array of conservative/moderate/liberals—Republicans and Democrats alike—who are opposed to the Banking Culture. There is hope there.

* * *

And lastly?

There are the particulars. Such a select committee, whether Senate or House, would need a chief counsel, a Sam Dash. It would need a chief investigator too. There would have to be a significant budget and there would have to be subpoena powers. The chief counsel, in particular, should be allowed to question the witnesses at the public hearings. We could do worse than the estimable Elizabeth Warren.

But, ultimately, it will come down to the chair.

Just one righteous man or woman—a Harry Truman, say, or a Tom Walsh—that would be enough.

Opacity is all for the moment. It ought not be.

We need to know what’s behind the curtain.

Too big to fail?

Bust the myth.

Bring on the truth.

We need a Pecora.

Now.

[This is the final part of a three-part series on The Pecora Committee and its modern implications. Part one can be found here. Part two, here.]