P. S. Why aen’t the guys he nailed now arrested as criminals? If a cop goes bad, he gets into real trouble–not just fired.

After every financial crisis there are investigations and prosecutions of high-profile people, designed to persuade the population that the laws are being enforced and the crooks punished. Such investigations tend to occur well after the fact, when the activity being investigated has ceased to be profitable.

Perhaps the best example of the latter is the prosecution of Martha Stewart for insider trading, in the wake of the stock market crash of 2000. The case garnered huge publicity, allowed for much posturing on the part of regulators, but accomplished little else. It was a classic show trial.

Another good example is the case of Enron, the energy-trading scam which collapsed in 2001. A number of top Enron officials were sent to prison–and rightly so–but the overall investigation and prosecution into the activities of the company was run as a cover-up.

This cover-up began with the initial revelations of trouble at the company, through a press campaign which effectively focused public attention on one area of the company’s operations, and continued with a special internal company investigation of just that area; that investigation, in turn, became the basis for the Congressional hearings and the Federal prosecutions of company officials.

What Enron really was, was a battering ram to force a deregulation of the electric-power industry, to allow for the creation of a spot-market pricing structure similar to the spot market in crude oil. Enron was largely steered in this imperial endeavor by two banks, Lazard and Rothschild, which had also played major roles in the creation of the oil spot market [prior to which oil was sold via long-term--5-10 year contracts--at something like $5 a barrel, if memory serves -gm].

Rothschild had a man on Enron’s board at the time of the collapse, and one of the two men brought in to handle the company’s internal investigation was a former Lazard banker, while the company [Enron] itself was a long-time Lazard client.

With the cover-up in place, the allegations of widespread bribery of public officials to grease the skids for deregulation and other crimes were never investigated, and the controllers of the operation walked away. … [By John Hoefle. Edited for brevity - gm]

Under the surface of the governmental regulation of the securities market, the same forces that produced the riotous speculative excesses of the “wild bull market” of 1929 still give evidences of their existence and influence. Though repressed for the present, it cannot be doubted that, given a suitable opportunity, they would spring back to pernicious activity.

Frequently we are told that this regulation is throttling the country’s prosperity. Bitterly hostile was Wall Street to the enactment of the regulatory legislation. It now looks forward to the day when it shall, as it hopes, resume the reins of its former power.

That its leaders are eminently fitted to guide our nation, and that they would make a much better job of it than any other body of men, Wall Street does not for a moment doubt. Indeed, if you now hearken to the oracles of The Street, you will hear now and then that the money-changers have been much maligned. You will be told that a group of high-minded men, innocent of social or economic wrongdoing, were expelled from the temple because of the excesses of a few. You will be assured they had nothing to do with the misfortunes which overtook the country in 1929-1933; that they were simply scapegoats sacrificed on the altar of unreasoning public opinion to satisfy the wrath of a howling mob blindly seeking victims.

These disingenuous protestations are, in the crisp of a legal phrase, “without merit.” The case against money-changers does not rest on hearsay or surmise. It is based upon a mass of evidence, given publicly and under oath before the Banking and Currency Committee of the United States Senate between 1933-1934, by The Street’s mightiest and best-informed men. Their testimony is recorded in twelve thousand printed pages. It covers all the ramifications and phases of Wall Street’s manifold operations.

The public, however, is sometimes forgetful. As its memory of the unhappy market collapse of 1929 becomes blurred, it may lend at least one ear to the voices of The Street subtly pleading for a return “to the good old times.” Forgotten, perhaps, by some are the shattering revelations of the Senate Committee’s investigations, forgotten the practices and ethics that The Street followed and defended when its own sway was undisputed in the good old days.

After five short years, we may now need to be reminded what Wall Street was like before Uncle Sam stationed a policeman at its corner, lest, in time to come, some attempts be made to abolish that post.

It is in the hope of rendering this service, especially for the lay reader unfamiliar with the terminology and conduct of The Street, that the author has endeavored, in the following pages, to summarize the essential story of that investigation–an inquiry which cast a vivid light upon the unhabitated mores and methods of Wall Street.

Ferdinand Pecora
New York City
February, 1939

The original Pecora Commission, an investigation into the financial machinations which led to the Great Depression, was conducted by the Senate Banking and Currency Committee from 1932 to 1934.

The investigation was run by Ferdinand Pecora, a former prosecutor who hauled some of the most prominent bankers in the nation before the committee. Pecora smashed the myth of public service the bankers and their publicists had so carefully crafted, and helped build the public support President Franklin Roosevelt required to force Congress to pass tough regulatory reforms.

The situation today is even worse than the one faced by FDR. Then, the U.S. still had a strong agro-industrial base and a citizenry which understood that infrastructure and production were the pillars upon which the economy stood. Today, those pillars have been severely weakened by deindustrialization and globalization, and our people blinded by the myth that economics is based upon finance.

February 3, 2009 (LPAC)–In a Jan. 30 letter to Senate Majority Leader Harry Reid and other Senate leaders, Sen. Bernie Sanders (I-Vt.) demanded an investigation into what caused the current financial crisis. “We have an enormous responsibility to explain to the American people what led to this financial crisis, how did we get here, who is responsible, and what we can do to make sure that this never happens again,” wrote Sanders.

“To accomplish this very important goal we need to examine what responsibility should be borne by individuals, corporations, and institutions for the poor decisions and foolish investments that have in large measure created this monumental crisis.”

Sanders proposed the investigation be conducted by the TARP Oversight Panel, chaired by Harvard law professor Elizabeth Warren.

In its favorable coverage of Sanders’ call, the Nation magazine headlines its piece “Bernie Sanders: Put Wall Street Under Oath.” Wall Street Under Oath was the title Ferdinand Pecora gave his book on the 1932-34 hearings he conducted, that exposed the criminality of the British-allied Wall Street financiers, and laid the groundwork for FDR reining them in.

To bolster Sanders’ call, the Nation cited Pecora’s hearings and quoted from FDR’s first inaugural address:

“Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.

“True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.

“The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.”

Nancy Pelosi runs the House of Representatives. One would think she can get this story whatever degree of coverage her little heart desires.

She, aided by her friends in the “financial community” are also in a position to steer this in the direction of a “limited hangout” and scapegoating direction.

So far, we (the few who know these hearings are taking place) are seeing the tip of the iceberg. Laundering of hundreds of billions of dollars of drug syndicate money is an area yet to be explored more thoroughly, to mention but one facet. The relationship between the biggest financial houses and the dismantling of industries essential to U.S. national security is another. It goes on and on…

I can’t beleive that clients don’t demand safeguards. When I worked for an Investment Management firm, we had to do tons of compliance documentation for clients. We had to submit monthly trading report summaries, brokerage reports, etc. The clients checked everything. (Let me add that the firm I worked for was squeaky clean, and devoted a lot of time to remaining so.) We were not custodians. We had to balance our monthly statements to the custodian bank’s statements to the penny.

The SEC – Please. They have limited jurisdiction, as many people do NOT know. They were going to start regulating hedge funds, but then the decision was made that they weren’t. I get the impression that the SEC is filled with young people who aren’t motivated to do anything hard. I don’t think they understand how money moves. It would be laughable if it weren’t sad.

Get better people, and incent them to find fraud.

I could say a lot more, but I won’t. I have no confidence in the SEC. You know the TV series “The Office”? Enough said.

Unfortunately new and advanced techonology has allowed many opportunities for dishonest people to expose this country and the citizens to financial chaos. The foxes are guarding the henhouse so no one is being held accountable. Oh gee, there’s that word again, it keeps coming up. ACCOUNTABILITY. See this is what many people push. They make victims out of people instead of making them accountable. Everyone, from the poor to the rich, from people in the welfare line to people in our government. “It’s not my fault I had all those kids without being married”, “oh, I didn’t know I couldn’t deduct my kids summer camp on my taxes”, “oh, I don’t know why I didn’t pay taxes on that income even though the IRS told me I owed it years ago”. Who do these people think they’re kidding??

The SEC needs to all be brought up on Federal charges. Any and all assets of those who are accountable for pursuing these types of cases, should be seized. Any goodies Maddof has socked away should be added to all of it in an attempt to compensate investors. And JAIL TIME.

As an American, I thank Harry for his deceny and integrity. He gave a good, sensible, to the point statement at the hearing.