Ever heard of the Pecora Commission? It was a Congressional investigation into the banking practices of the twenties, set up in 1932 at the lowest point of the Great Depression. Ferdinand Pecora was the head of the commission, and can best be described as a bona-fide bad*ss. He believed that the entire financial system of the nation was rotten to the core, and riddled with crime, fraud, and the wholesale corruption of the governmental agencies that allegedly existed to watch over them.
Obviously, he was right.
Obama doesn’t seem the type to hunger for throwing bankers in jail. But there are plenty of ambitious Democratic Congressmen who are, and who will see our current crash as a tremendous opportunity to raise their standing, benefit their party, and serve the American people at the same time. Furthermore, it’s a reasonable assumption that banks today are just as corrupt as those back then; not because bankers are inherently evil, but simply because that’s how people behave when no one’s watching. Currently, though, the banks have a ton of institutional power and a potent lobbying force to protect themselves from this sort of thing.
If a bank is nationalized and then reprivatized, its lobbying incentives change instantly. It’ll still act to maximize the business prospects…but all of a sudden, it has no reason to defend past management. In fact, it has an incentive to cooperate in order to secure more favorable terms. So I would imagine banking CEOS have to be terrified of the possibility; they’re facing not just the loss of their positions, but legal and political consequences.
