Econintersect: Nearly four years after the crash of 1929 Ferdinand Pecora (pictured) received broad powers of investigation to determine what had caused the crash and the subsequent collapse that led to the Great Depression. It is now nearly four years after the Great Crash of 2008 and perhaps it is just the right time to have a new commission, a modern Pecora panel. This is the proposition in a lengthy Sunday column in The Washington Post by Barry Ritholtz. He takes the occasion of Pres. Obama’s announcement of a Justice Department investigation into the role of fraud in the financial crisis during last week’s State of the Union address.
A year ago there were reports that the FCIC (Financial Crisis Investigation Commission, Philip Angelides, Chairman) might have information that would lead to criminal referrals to the Justice Department. However, at the same time Yves Smith was reporting that insiders had told her the FCIC was set up to fail and William K. Black was pointing out that some of the Angelides commission members were actually architects of the crisis.
With nothing happening on the criminal investigation front in the year since it seemed that the opinions of those like Smith and Black might be the final word. Ritholtz is suggesting that the administration may finally be ready to pursue alleged criminal activity in the financial sector, even if it is rather specialized. The name of the Justice Department unit is “Mortgage Origination and Securitization Abuses.” However, once the net is cast the catch may lead wider afield than the limited scope of the original title.
Many of the cases investigated will refer to activities now up to eight or more years old. Ritholtz points out that statute of limitations may begin to apply and some criminals may escape on account beating the clock. However not all crimes uncovered will be too old and, even for those that are too old, information will be collected that could lead to new regulation enforcement and new laws, if needed, to prevent future crimes.
Note: A recent GEI News article “Banker Confesses Regret” discussed some of the Pecora Commission history and related it to the current era.
A Modern Pecora Commission could right Wall Street wrongs (Barry Ritholtz, The Washington Post, 29 January 2012)
Insiders: FCIC Was Set Up to Fail (Yves Smith, GEI Opinion, 14 February 2011)
How Can the Architects of Crisis Investigate It? (William K. Black, GEI Opinion, 31 January 2011)
FCIC May Recommend Prosecutions (GEI News, 25 January 2011)
Banker Confesses Regret (GEI News, 2 December 2011)