The Investigate Wall Street Now(!) Petition

If you agree with Rep. Bernie Sanders, The New York Times' Frank Rich, The Nation's John Nichols, and noted author Ron Chernow that Congress needs to stop delaying on starting a full investigation of the actual causes and a full prosecution of the bankers and speculators at the heart of the current crisis in our financial markets on Wall Street and our economy (not just Bernie Madoff)-- then call Congress at (800) 828-0498, sign on to this petition, and pass it along to all you know!

As The Nation's John Nichols points out in his Jan. 30th column below:

"What is not so frequently noted is that President Franklin Delano Roosevelt and his congressional allies did not merely act (in response to mess created in 1920's by deregulated Wall Street bankers and speculators)-- they also investigated wrongdoing and pointed fingers of blame at the practices and practitioners that created the crisis. The powerful Senate Banking and Currency Committee, prodded by its brilliant chief counsel, a New York prosecutor named Ferdinand Pecora, unearthed and revealed what the New York Times referred to as 'a secret financial history of the 1920s, demystifying the assorted frauds, scams and abuses that culminated in the 1929 crash.'

Roosevelt and the congressional leaders with whom he was aligned left no doubt that they thought Percora's eyes-wide-open examination--which actually began during the waning days of the failed presidency of Herbert Hoover, the man FDR swept from office--was an essential part of making a clean break with the thoughts and deeds that led to the collapse of the stock market, the shuttering of banks, factory closings, farm foreclosures and mass unemployment."

Recall as well what noted New York Times columnist Frank Rich wrote on this topic January 11th:

"As the financial historian Ron Chernow wrote in the Times last week, we could desperately use a Ferdinand Pecora, the investigator who illuminated the history of the 1929 meltdown in Senate hearings on the eve of the New Deal.
[from "Eight Years of Madoffs": www.nytimes.com/2009/01/11/opinion/11rich.html]

Enough.

The fact is that if enough of us sign on to this petition, pass it along to our friends, and call Congress toll-free at (800) 828-0498, we can effectively send a strong message from the grass roots to Washington that Congress needs to fully empower a latter-day Ferdinand Pecora for the new millennium here and now in 2009-- before our financial markets and our economy collapses further.

[also see "Where Is Our Ferdinand Pecora?" by Ron Chernow (Jan. 6th NYTimes):
http://www.nytimes.com/2009/01/06/opinion/06chernow.html?_r=1]

Ball's in your court, folks-- let's not wait until 2525 to get to the bottom of this!

Joel Tyner
Dutchess County Legislature Environmental Committee Chair
County Legislator (Clinton/Rhinebeck)
324 Browns Pond Road
Staatsburg, NY 12580
[email protected]
DutchessDemocracy.blogspot.com
100WinningProgressives.blogspot.com
(845) 876-2488

p.s. Don't be afraid to send a letter on this to all of us in the Dutchess County Legislature as well-- to [email protected]; there's nothing stopping us from passing a resolution on this on the local level to let Congress know how we feel in the grass roots (and our Co. Leg. offices have been provided with supporting documentation on this issue).

p.p.s. Also see/sign www.PetitionOnline.com/FDRagain-- to finally bring back FDR's Glass-Steagall Act and seriously re-regulate our financial markets and Wall Street (modeled after Robert Kuttner's research @ SquanderingofDemocracy.com).


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"Bernie Sanders: Put Wall Street Under Oath"
posted by JOHN NICHOLS on 01/30/2009 @ 3:06pm
http://www.thenation.com/blogs/state_of_change/403452/bernie_sanders_put_wall_street_under_oath?rel=hp_currently

The current economic crisis is often compared with the Great Depression, especially when it comes to making calls for rapid and sweeping responses to the mess that has been made by Wall Street bankers and speculators.

But what is not so frequently noted is that Franklin Roosevelt and his congressional allies did not merely act. They also investigated wrongdoing and pointed fingers of blame at the practices and practitioners that created the crisis.

The powerful Senate Banking and Currency Committee, prodded by its brilliant chief counsel, a New York prosecutor named Ferdinand Pecora, unearthed and revealed what the New York Times referred to as "a secret financial history of the 1920s, demystifying the assorted frauds, scams and abuses that culminated in the 1929 crash."

Roosevelt and the congressional leaders with whom he was aligned left no doubt that they thought Percora's eyes-wide-open examination--which actually began during the waning days of the failed presidency of Herbert Hoover, the man FDR swept from office--was an essential part of making a clean break with the thoughts and deeds that led to the collapse of the stock market, the shuttering of banks, factory closings, farm foreclosures and mass unemployment.

In his first inaugural address, Roosevelt indicted the bankers and speculators, declaring that:

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.

As the current crisis has unfolded, there has been plenty of action -- much of it misguided -- but little in the way of accountability.

This imbalance -- which FDR, Ferdinand Pecora and their allies so wisely recognized as dangerous folly -- may be changing, however.

Congress, having failed to establish a staisfactory system for monitoring the expenditure of last fall's $800 billion Wall Street bailout at a point when it might have been able to require a measure of responsibility on the part of the Treasury Department and the beneficiaries of its largesse, is now endeavoring to determine how the money is being spend.

That makes sense.

But a key senator is bluntly declaring that it would make even more sense -- at a point when allocated funds are being spent and more allocations are being requested -- to try and determine how the crisis was created.

That's what Vermont Senator Bernie Sanders, whose track record of demanding accountability stands him in stark contrast from most of his colleagues, is suggesting.

"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," Sanders wrote in a letter sent Friday to Senate Majority Leader Harry Reid, D-Nevada. "In order 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."

The Vermont Independent is proposing that the congressional oversight panel charged with examining the Troubled Asset Relief Program (TARP), which is chaired by Harvard University Law Professor Elizabeth Warren, should expand the scope of its investigation so that it can study the causes of the economic collapse.

"The TARP Oversight Panel is already in place," explains Sanders, the steadiest Senate critic of wasteful TARP spending and irresponsible bailout schemes. "A sensible next step would be to expand its charge from that of scrupulously examining how the TARP monies are spent, to also exploring why the financial crisis occurred in the first place. The panel should have subpoena power necessary to assure that it receives sound information and direct answers to the questions it is charged with answering."

Seventy-five years ago, in another time of economic turmoil, Ferdinand Pecora said he "put Wall Street under oath."

He did so with the backing of new president and a courageous Congress.
Bernie Sanders proposes to renew the investigation.

Barack Obama and Harry Reid should support Sanders and give Elizabeth Warren the charge and the authority to put Wall Street under oath once more.

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From http://www.nytimes.com/2009/01/06/opinion/06chernow.html?_r=1 ...

"Where Is Our Ferdinand Pecora?"
By RON CHERNOW
Published: January 5, 2009

[Ron Chernow is the author of The House of Morgan and Alexander Hamilton.]

BARACK OBAMA has assigned a top priority to financial reform when the new Congress assembles today. If history is any guide, legislators can perform a signal service by moving beyond the myriad details of the rescue plans to provide a coherent account of the origins of the current crisis. The moment calls for nothing less than a sweeping inquest into the twin housing and stock market crashes to create both the intellectual context and the political constituency for change.

For inspiration, Congress should turn to the electrifying hearings of the Senate Banking and Currency Committee, held in the waning months of the Hoover presidency and the early days of the New Deal. In historical shorthand, these hearings have taken their name from the committee counsel, Ferdinand Pecora, a former assistant district attorney from New York who, starting in January 1933, was chief counsel for the investigation. Under Pecoras expert and often withering questioning, the Senate committee unearthed a secret financial history of the 1920s, demystifying the assorted frauds, scams and abuses that culminated in the 1929 crash.

The riveting confrontation between Pecora and the Wall Street grandees was so theatrically apt it might have been concocted by Hollywood. The combative Pecora was the perfect foil to the posh bankers who paraded before the microphones. Born in Sicily, the son of an immigrant cobbler, Pecora had campaigned for Teddy Roosevelt and been imbued with the crusading fervor of the Progressive Era. As a prosecutor in the 1920s, he had shut down more than 100 bucket shops seamy, fly-by-night brokerage houses and this had tutored him in the shady side of Wall Street.

With crinkly black hair and flashing eyes, Pecora was an earthy populist who appealed to Depression audiences. He was fond of playing pinochle and was often portrayed with a thick cigar clamped between his teeth. When he was hired for $255 per month by the Senate committee, Pecora was earning less money than most Wall Street mandarins disbursed weekly in pocket change.

Pecora was meticulous in preparation and legendary in stamina, mastering reams of material and staying up half the night before interrogations, aided by John T. Flynn, an Irish-American journalist, and Max Lowenthal, a Jewish lawyer. As Flynn wrote, I looked with astonishment at this man who, through the intricate mazes of banking, syndicates, market deals, chicanery of all sorts, and in a field new to him, never forgot a name, never made an error in a figure, and never lost his temper.

As Pecora relentlessly grilled the most famous names in finance, the nation relived the 1920s boom in a collective act of national remembrance. The hearings started in a modest committee room, but as the public was swept up in the drama, they shifted to a stately caucus room, illuminated by chandeliers and flashbulbs. As it gained momentum, the inquiry expanded until it shined a searchlight into every murky corner of Wall Street. Pecora exposed a stock market manipulated by speculators to the detriment of small investors who could suddenly attach names and faces to their losses.

Bankers had been demigods in the 1920s, their doings followed avidly, their market commentary quoted with reverence. They had inhabited a clubby world of chauffeured limousines and wood-paneled rooms, insulated from ordinary Americans. Now Pecora defrocked these high priests, making them seem small and shabby.

On Black Thursday of 1929, the nation had applauded a seemingly heroic attempt by major bankers, including Albert Wiggin of Chase and Charles Mitchell of National City, to stem the market decline. Pecora showed that Wiggin had actually shorted Chase shares during the crash, profiting from falling prices. He also revealed that Mitchell and top officers at National City had helped themselves to $2.4 million in interest-free loans from the banks coffers to ease them through the crash. National City, it turned out, had also palmed off bad loans to Latin American countries by packing them into securities and selling them to unsuspecting investors. By the time Pecora got through with the bankers, Senator Burton Wheeler of Montana was likening them to Al Capone and the public referred to them as banksters, rhyming with gangsters.

With a public aching for retribution, Pecora was playing with combustible chemicals, and Wall Street complained that he was destroying confidence. President Franklin Roosevelt retorted that the bankers should have thought of that when they did the things that are being exposed now. It was hard for Wall Street to mount a legitimate defense as Pecora pilloried them daily.

His prosecutorial methods grew questionable when he turned to the mysterious world of private banking, exemplified by the House of Morgan. In implacable style, Pecora badgered Morgan partners into admitting that they had paid no taxes for 1931 and 1932 an incendiary revelation when the country was undertaking huge public works projects to combat unemployment. That the Morgan men had avoided taxes because of stock market losses was lost amid the hubbub.

No less inflammatory was exposure of Morgans preferred list by which the banks influential friends participated in stock offerings at steeply discounted rates. The renowned names on the list, including Calvin Coolidge, the former president, and Owen J. Roberts, a Supreme Court justice, shocked the nation with its unseemly association of money and power.

One Morgan partner, George Whitney, lamely explained that the intent was to safeguard small investors by preventing them from assuming such risk. To which Pecora responded tartly in his best-selling book, Wall Street Under Oath, Many there were who would gladly have helped them share that appalling peril!

Such was the furor over the Morgan testimony that Senator Carter Glass of Virginia shook his head and sighed, We are having a circus, and the only things lacking now are peanuts and colored lemonade. Seizing on the comment, a press agent for the Ringling Brothers Circus took advantage of a pause in the hearings to pop Lya Graf, a midget in a blue satin dress, on the lap of the portly and surprised J. P. Morgan Jr. The committee chairman, Senator Duncan Fletcher of Florida, pleaded with newspapers not to print the pictures, which only made them rush to do so.

The photo of Morgan with a circus midget planted on his lap became the signature shot of the hearings, emblematic of Wall Streets fallen state. An embittered J. P. Morgan Jr. said Pecora had the manners of a prosecuting attorney who is trying to convict a horse thief.
Whatever their failings, the Pecora hearings laid the groundwork for financial reform legislation. By the time they ended in May 1934, they had generated 12,000 printed pages of testimony, collected in several thick volumes. These documents have served generations of historians. Our national narrative of stock market mayhem in the 1920s is largely composed of characters and anecdotes gleaned from their pages.

Pecora not only documented a litany of abuses, but also paved the way for remedial legislation. The Securities Act of 1933, the Glass-Steagall Act of 1933 and the Securities Exchange Act of 1934 all addressed abuses exposed by Pecora. It was only poetic justice when Roosevelt tapped him as a commissioner of the newborn Securities and Exchange Commission.

Our current stock market slump and housing bust can seem like natural calamities without identifiable culprits, creating free-floating anger in the land. A public deeply disenchanted with our financial leadership is desperately searching for answers. The new Congress has a chance to lead the nation, step by step, through all the machinations that led to the present debacle and to shape wise legislation to prevent a recurrence.

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From http://www.motherjones.com/news/feature/2009/01/trillion-and-counting.html ...

"$3.43 Trillion & Counting: The Real Cost of the Wall Street Bailout"
By Nomi Prins
Mother Jones: January/February 2009 Issue

$154
8/9/07: Fed and European Central Bank inject $154 billion into financial system.
$38
8/10/07: Fed injects another $38 billion.
$17.25
8/23/07: Fed injects $17.25 billion.
$31.25
9/6/07: Fed adds $31.25 billion in reserves to US money markets.
$29
3/24/08: Fed agrees to lend $29 billion to facilitate Bear Stearns acquisition by JPMorgan Chase.
$200
3/27/08: Fed injects $200 billion of Treasury securities.
$300
7/30/08: $300 billion Federal Housing Administration bailout passed.
$200
9/7/08: Quasi-nationalization of Fannie Mae and Freddie Mac accompanied by a Treasury pledge to back $200 billion of their losses.
$155
9/16/08: Fed agrees to pay $85 billion for 80\% stake in AIG. Also adds $70 billion in cash to keep credit flowing after Lehman Brothers fails.
$235
9/18/08: Fed injects $180 billion to shore up money markets and $55 billon in overnight lending to US banking system.
$480
9/29/08: Fed announces it will supply $330 billion to other central banks, triples supply of corporate short-term loans to $225 billion.
$700
10/3/08: $700 billion bailout fund passed.
$37.8
10/8/08: Fed authorizes another $37.8 billion for AIG.
$540
10/21/08: Fed injects $540 billion into money market funds.
$144
10/27/08: Fed opens emergency commercial paper window, lends $144 billion in three days.
$100
11/6/08: $100 billion added to commercial paper facility.
$27.5
11/10/08: Fed gives AIG another $27.5 billion.

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From http://www.thenation.com/doc/20090105/prins?rel=hp_currently ...

"Throwing Good Money..."
by NOMI PRINS
This article appeared in the January 5, 2009 edition of The Nation.
December 17, 2008

[Nomi Prins is a senior fellow at Demos, a nonpartisan public policy think tank. Before becoming a journalist, she served as a managing director for Goldman Sachs in New York. She is the author of Other People's Money: The Corporate Mugging of America and Jacked: How "Conservatives" Are Picking Your Pocket. She is a frequent commentator on CNBC and the BBC.]

Three months ago, the country was galled by Treasury Secretary Henry Paulson's offhand request that taxpayers hand over billions to a tanking financial sector with no strings attached. Lawmakers keen on salvaging the bailout rushed to add amendments intended to ensure proper oversight of the Troubled Asset Relief Program (TARP). The bill that passed established a Congressional Oversight Panel, a tiny, underresourced but committed watchdog team that on December 10 issued its first report in the form of Questions About the $700 Billion Emergency Economic Stabilization Funds. The panel wrote, "We are here to ask the questions that we believe all Americans have a right to ask: who got the money, what have they done with it, how has it helped the country, and how has it helped ordinary people?"

So far, the answers are: the banks that made billions and risked more; they've stockpiled capital injections in reserves while withholding credit; and it hasn't helped any ordinary people. The Government Accountability Office put it bluntly: "Treasury has not yet set up policies and procedures to help ensure that [TARP] funds are being used as intended."

The fact is, no accountability is possible until the recipients of the bailout funds are forced to operate with the transparency that democracy requires--and this goes for TARP benefits as well as for other aid. There's a shroud of secrecy around the loan facilities set up by the Federal Reserve and other Treasury Department measures (together totaling more than $7 trillion) now propping up Wall Street. In return for loans, the Fed has taken on nearly $3 trillion in credit-risky collateral, including subprime and other underwater asset-backed securities like lower-standard mortgages, small-business loans and securitized credit card payments, none of which can be sold into the capital markets. In addition, Treasury agreed to back $1.4 trillion of FDIC guarantees if needed, and Congress voted to back a half-trillion of Fannie Mae, Freddie Mac and FHA mortgages. Cash injections and backups have become regular features of federal banking policy.

All of this should be sounding alarm bells about what exactly is going on between Wall Street, the Fed and the Treasury. Yet opacity remains the rule: Bloomberg News's repeated attempts to use the Freedom of Information Act to discover details of the Fed's lending program for financial firms have been stymied.

Some basic moves toward greater transparency and accountability are necessary if we are even to begin to ensure that the bailout money is not being squandered.
For starters, the firms that want to be rescued by the government must make clear their true position.

Quantifying the scope of risk and magnitude of further potential losses is key to determining a bottom-line value to this crisis. This requires more disclosure from Wall Street, including lists of assets and market prices for the assets (which are super-low, given the collapse of liquidity for these assets, but still worth knowing). Every institution that wants a loan on ridiculously good terms from the Fed or a bailout from the government should have to disclose this information. It might be an ugly number--which, like all bad news, will rattle the stock markets--but it will come out sooner or later and should be revealed now.

Second, financial firms must fully disclose the leveraging (or borrowing) in which they have engaged using these assets as collateral. They should be required to explain their leverage procedures to Congress, as well as to the Fed.

Subprime mortgages have been blamed for the financial crisis, but we're spending more than five times more money (in Fed loans, injections, bailouts and guarantees) than the value of every subprime loan in the country combined. Of the subprime loans issued during the boom years between 2003 and 2007, roughly $1.5 trillion are outstanding. If the system wasn't so leveraged, and each of them defaulted to zero (which hasn't happened), they would represent a $1.5 trillion loss. It should be clear by now that something other than subprime loans defaulting--or a "housing correction," as Paulson puts it--is wrong with the system. How were those loans packaged and leveraged into what amounts to a $140 trillion global pyramid of junk?

That is hard to answer, because the way individual loans got dispersed multiple times throughout the global financial system is not transparent. Still, if legitimate borrowers were allowed to renegotiate payable loan terms (and stay in their homes), certain related losses propagated by the existing financial framework would cease. FDIC head Sheila Bair adopted this strategy when the FDIC took over failed Pasadena-based bank IndyMac, and she suggested a similar one to stop 1.5 million foreclosures at a $24.4 billion cost, yet TARP funds have not been opened to this more see-through approach.

Indeed, instead of having to explain their leveraging procedures, the most leveraged companies are getting the best deal. Former investment banks Goldman Sachs and Morgan Stanley were allowed to become bank holding companies, thereby widening the net for which the government is on the hook, and giving them the same status as consumer-oriented institutions. These were the same companies that got the SEC to approve their ability to leverage themselves thirty to one, instead of twelve to one. They are inhaling the Fed lending facilities and government bailout money and brokering new FDIC-backed bonds, even though they created their own problems. Instead of egging them on, the SEC should be reducing the high leverage ratios that still exist.

During a time of supreme weakness and lack of transparency, it's an especially bad idea for the government to allow institutions that were already "too big to fail" to merge with other institutions, thereby creating bigger, riskier firms. But in the cases of Bank of America-Merrill Lynch, Wells Fargo-Wachovia and JPMorganChase-Washington Mutual, that is what has been happening. Other mergers are in discussion. Not only will their enhanced size prove a bigger risk to the public if they fail; their merged balance sheets will by definition be more difficult to understand and monitor, even if the current regulatory structure was effective.

Instead, we should be talking actively about reregulating the banking industry and maintaining financial entities in manageable pieces. Before it was gutted by deregulation, the Glass-Steagall Act protected the government and taxpayers by isolating rather than combining risky firms with more consumer-oriented ones. Perhaps the exact details of the 1933 legislation would require modification, but reviving its essence would go a long way toward solving this financial crisis--and avoiding future ones.