Bloomberg is reporting momentum for a cause that Econblog Review has supported from its earliest days- that of a modern-day Pecora Commission to investigate "Wall Street" and the current mess, in Pelosi Wall Street Probe Modeled on Pecora After Market Crash. The major debate appears to be on how the probe is structured. Bloomberg reports:
Members of Congress may be reluctant to tackle the recommendations of such an inquiry because of financial industry donations to political campaigns, said Wall Street historian Charles Geisst.
Financial services has been the biggest contributor in every U.S. election cycle in the last 20 years, according to the Center for Responsive Politics, a Washington research group that tracks campaign money. Its individual and political action committee donations in 2007 and 2008 totaled $463.5 million, compared with $163.8 million from the health-care industry and $75.6 million from energy companies.
Individual and PAC donations from Goldman Sachs Group Inc. which totaled $30.9 million, and Citigroup Inc., at $25.8 million, were higher than those from any other company except AT&T Inc.’s $40.9 million over the last 20 years, the center’s compilation of Federal Election Commission data shows.
“How can you seriously propose a law when you’ve been taking money from ‘The American Poodles for Wall Street’ or whatever fund for the past 10 years,” said Geisst, a professor of finance and economics at Manhattan College in New York and author of “Wall Street: A History.”
Concomitant with this, Naked Capitalism is out with a "must-read" post, Bailout Inspector General to Warn that Public Private Partnership Vulnerable to Fraud. Please read the whole post; here is a sample that quotes the Times.
Mr. Barofsky said the plan posed “significant fraud risks,” especially when it came to buying up securities backed by exotic mortgages made during the peak of the housing bubble, when the excesses of poorly documented loans and no-money-down loans reached their zeniths.
The report said that the Federal Reserve intended its lending program, known as the Term Asset-Backed Securities Loan Facility, or TALF, to finance new lending rather than to buy up existing assets. It warned that the Fed was not currently planning to examine the securities that it would finance, and would be relying instead on the evaluation by credit rating agencies that originally failed to spot the dangers of subprime mortgages.
Apparently the report clearly takes the side of the many academic experts and bloggers who have flayed the plan, and therefore Barack Obama and Timothy Geithner, for being yet another giveaway to Big Finance.
I suspect that the tide is turning. No industry stays on top forever.
From an economic standpoint, if PPIP is in fact doomed in anything like its current form, then we have to hope that Messrs. Obama and Geithner have a Plan B ready. If not, this could be the spring and summer of our banks' discontent- and our discontent as well.
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