He wants to examine the financial sector's "greed, stupidity, hubris and outright corruption" -- from traders on the ground to the board room. "It's important that we deliver new information," he said. "We can't just rehash what we've known to date." He understands that if he fails to make news or to tell the story in a way that is comprehensible and compelling enough to arouse Americans to demand action, Wall Street and Washington will both keep moving on, unchallenged and unchastened.
Angelides gets it. But he has a tough act to follow: Ferdinand Pecora, the legendary prosecutor who served as chief counsel to the Senate committee that investigated the 1929 crash as FDR took office. Pecora was a master of detail and drama. He riveted America even without the aid of television. His investigation led to indictments, jail sentences and, ultimately, key New Deal reforms -- the creation of the Securities and Exchange Commission and the Glass-Steagall Act, designed to prevent the formation of banks too big to fail.
As it happened, a major Pecora target was the chief executive of National City Bank, the institution that would grow up to be Citigroup. Among other transgressions, National City had repackaged bad Latin American debt as new securities that it then sold to easily suckered investors during the frenzied 1920s boom. Once disaster struck, the bank's executives helped themselves to millions of dollars in interest-free loans. Yet their own employees had to keep ponying up salary deductions for decimated National City stock purchased at a heady pre-crash price.
Now substitute bad Latin American debt for bad mortgage debt, and you have a picture of Citigroup at the height of the housing bubble. The reckless Citi executives of our day may not have given themselves interest-free loans, like National City Bank execs did, but they often walked away with the short-term, illusionary profits while their employees were left with shredded jobs and shredded 401(k)s. Among those Citi executives was Robert Rubin, who, as the Clinton Treasury secretary, ever loyal to his roots, helped repeal the last vestiges of Glass-Steagall (after years of Wall Street assault). And when he did so, Wall Street banksters cheered -- and somewhere Ferdinand Pecora rolled over in his grave.
Rubin has never apologized, let alone been held accountable. But he's hardly alone. Even after all the country has gone through, the titans who fueled the bubble are heedless. As Paul Volcker, the regrettably powerless chairman of Obama's Economic Recovery Advisory Board, said recently, there is not "one shred of neutral evidence" that any financial innovation of the past 20 years has led to economic growth.
Even now -- despite its near-death experience, despite the departures of Weill, Prince and Rubin -- Citi remains as imperious as it was before 9/15. Last week, ABC World News was stiffed by Citi, which refused to answer questions about its latest round of outrageous credit card rate increases and instead e-mailed a statement blaming its customers for "not paying back their loans." This from a bank that still owes taxpayers $25 billion of its $45 billion handout!
If Citi, among the most egregious of Wall Street reprobates, feels it can get away with business as usual, it's because it fears no retribution. And it got more good news last week. Now that Chris Dodd is vacating the Senate, his chairmanship of the Banking Committee may fall next year to Tim Johnson of South Dakota, home to Citi's credit card operation. Johnson was the only Senate Democrat to vote against Congress's recent bill policing credit card abuses.
Though bad history shows every sign of repeating itself on Wall Street, it will take a near-miracle for Angelides to repeat Pecora's triumph. Our zoo of financial skullduggery is far more complex, with many more moving pieces, than that of the 1920s. The new inquiry does have subpoena power, but its entire budget, a mere $8 million, doesn't even match the lobbying expenditures for just three banks (Citi, Morgan Stanley, Bank of America) in the first nine months of 2009. The firms under scrutiny can pay for as many lawyers as they need, to stall, between now and Dec. 15, deadline day for the commission's report.
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
8
5
4
