Mike’s piece today on the failure of Congress to pass a mortgage cramdown bill -- which would allow bankruptcy judges to modify loans and is a major element of
“„In the course of its investigation, the Senate Banking Committee, which brought on as its counsel a former New York assistant district attorney named Ferdinand Pecora, heard testimony from the lords of finance that cemented public suspicion of Wall Street. Along the way, the investigations formed the rationale for the Glass-Steagall Act, the Securities Exchange Act, and other financial regulations of the Roosevelt era.
“„The crisis today is not solely one of bank misbehavior. This is also about the failure of the regulators — the Wall Street policemen who dozed peacefully as the crime of the century went off beneath the window.
“„We have all heard the official explanation for this failure, that “the structure of our regulatory system is unnecessarily complex and fragmented,” in the soothing words of Treasury Secretary Tim Geithner. But no proper Pecora would be satisfied with such piffle. The system was not only complex, it was compromised and corrupted and thoroughly rotten even in the spots where its mandate was simple.
“„After all, we have for decades been on a national crusade to slash red tape and stifle regulators. Over the years, federal agencies have been defunded, their workers have grown dispirited, their managers, drawn in many cases from antiregulatory organizations, have seemed to care far more about industry than the public.
“„Consider in this connection the 2003 photograph, rapidly becoming an icon of the Bush years, in which James Gilleran, then the director of the Office of Thrift Supervision (it regulates savings and loan associations) can be seen in the company of several jolly bank industry lobbyists, holding a chainsaw to a pile of rule books. The picture not only tells us more about our current fix than would a thousand pages about overlapping jurisdictions; it also reminds us why we may never solve the problem of regulatory failure. To do so, we would have to examine the apparent subversion of the regulatory system by the last administration. And that topic is supposedly off limits, since going there would open the door to endless partisan feuding.