Reviving Pecora's Ghost

Pecora's work led to several resignations of bank executives, but more importantly in created a climate for reform legislation. Pecora's findings helped inform the Glass Steagall Act of 1933 separating investment banking from government-insured commercial banking, the Securities Act of 1933 and the Securities Exchange Act of 1934. Most importantly, it functioned as a public shaming of Wall Street. It thus helped change the political climate so that radical reforms could proceed. President Roosevelt encouraged Pecora's work and he encouraged the public indignation. Pecora was subsequently appointed by Roosevelt as a commissioner of the newly created SEC.

The Obama administration is proceeding very differently, and it has little enthusiasm for a Pecora Commission or for recriminations against financial elites. There has been no dramatic rupture with Wall Street. Rather, Obama's economic team is working hand in glove with the same investment banking firms and commercial banks that invented and underwrote the financial products and subterfuges that creates the collapse.