It didn’t make the front pages, and it didn’t lead any nightly news broadcasts. But that doesn’t mean Senator Richard Shelby’s (R-AL) recent criticism of his colleagues on the U.S. Senate Committee on Banking, Housing, and Urban Affairs isn’t important.
On May 10, Shelby rose during a committee hearing to complain that the Senate’s efforts to reform the US financial system and prevent future meltdowns have been bungled by, in so many words, putting the cart before the horse.
Shelby said that while for some, the report released by the Financial Crisis Inquiry Commission (FCIC) “represents a comprehensive record of the crisis,” he sees it as “a missed opportunity.”
“As I have said many times, before Congress considered how to reform our financial regulatory structure, we should have first determined the underlying causes of the crisis. Without a comprehensive understanding of what went wrong, Congress would not be able to determine how our regulatory structure failed and what reforms were needed.
“I noted that this Committee responded to the Great Depression by launching the so-called Pecora Investigation. That investigation went on for more than two years and laid the foundation for groundbreaking legislation including the Banking Act of 1933, which created the FDIC, the Securities Act of 1933, and the Securities Exchange Act of 1934, which created the SEC.”
I share the Senator’s regret – a Pecora Commission-style approach would have been the best way to unearth what really sparked the Great Recession of 2008.
But while I sympathize with his regret at how much more the FCIC could have achieved (putting to one side its excellent reporting and the patient work of Phil Angelides, its chairman), I do not share his pessimism when he complains that “in the end – [the FCIC] did not matter.” The case for financial reform remains very strong, and now is the time for its supporters to press forward, not hang back.
Shelby’s remarks came just a day before a top hedge fund manager was convicted on insider trading charges. The Galleon Group debacle is just the PR coup that Senator Shelby and other backers of serious financial reform need to help push for a sweeping investigation of the financial crisis back onto the agenda.
Senator Shelby’s remarks on Tuesday were tinged with a sense of defeat. If he feels defeated, he might do well to recall the words of Charles Eliot, a former president of Harvard, who once wrote that “when a good cause has been defeated, the only question its advocates need ask is, ‘When do we fight again?’”
Senator Shelby – your cause is a good one, and it hasn’t been permanently defeated, so get back into the fight.
