Banking Law

Tomorrow morning, our very own Truth Commission starts hearings into the causes of the financial crisis in which we wallow and how best to ensure that it all "never happens again." You might think that a deliberative body like the U.S. Congress might want to await the findings and recommendations of the "Financial Crisis Inquiry Commission," which is allegedly bi-partisan, before actually enacting legislation to "reform" the financial system. That would be the prudent course. That might help to ensure that our legislators don't screw up a flawed regulatory system even worse than it already is by the brutal application of the law of unintended consequences, by fixing what doesn't need to be fixed, and by either not fixing what does need fixing or fixing it in a way that turns what's "fixed" into a malfunctioning mess of goo.

Yeah, that would be the smart way to do it.

Which is why the House passed a massive regulatory reform act last year and Senate Democrats are hell-bent-for-leather to make sure that something just as poorly thought through makes it through the Senate this year. Doing it the right way takes time, and time works against the panic purveyors who see their shot to stampede a p.o.ed public into looking the other way while the federal government grows even bigger and extends it tentacles into every nook and cranny of the financial machinery so that it works in a fair and balanced fashion, as determined by bureaucrats and politicians, those best suited by intellectual endowments and actual, hands-on experience, to ensure that a bubble never gets blown so big again. Human nature reigned in and re-engineered by financial gurus like Barney Frank and Chris Dodd. That's the ticket!

The Commission itself appears to be something of a boondoggle. While appointed in July, it's only recently started to staff up. However, it looks like it will keep some staffers paying the rent and buying groceries until it issues its final report, due in December of this year.

It has new offices in downtown Washington, a few blocks northeast of the White House. Funded to the tune of $8 million, it aims to employ between 40 and 50 investigators and other staffers.

Look, at least it should be entertaining. We can also hope that when people are grilled, their won't be the idiotic political posturing that goes on in Senate and Congressional committee hearings. Commission members also promise that they won't sugarcoat the role that politicians played in fomenting the crisis, which we've seen in congressional hearings that paint everyone but the politicians as "evil doers." 

Lawmakers say the commission was modeled after the Pecora Commission, a panel that was convened after the 1929 Wall Street crash and other events leading to the Great Depression.

The Pecora panel's findings led to an overhaul of federal banking laws, including the creation of the Glass-Steagall Act of 1933. Glass-Steagall divided investment banking from government-insured commercial banking; ending that separation in the 1990s was seen by some critics as contributing to the current crisis.

It's modeled after a commission that held hearings, conducted investigations, made findings, and made recommendations to Congress, after which Congress enacted "game-changing" legislation. Not in this case, however. This time around, Congress is shooting from the hip, then asking questions. We'll have to see if Congress shoots itself (and the country) in the foot by trying to be so quick on the draw. What's your guess?