Speaker Nancy Pelosi (D-Calif.) told the Commonwealth Club of California in April that she favored creating a national commission to inquire into the 2008 Wall Street collapse to determine what happened and “to make sure it doesn’t happen again.—
[IMGCAP(1)]Last week, the House moved a step closer to the Speaker’s goal by approving creation of a financial crisis inquiry commission as part of a fraud enforcement bill. (The Senate had already approved a similar commission in its version of the same bill.)
Pelosi likened what she had in mind to the Pecora Commission (1933-34) that investigated the 1929 stock market crash. That panel wasn’t actually a commission but a Senate Banking and Currency Committee investigation headed up by New York Assistant District Attorney Ferdinand Pecora after two previous chief counsels had failed.
The Democratic takeover of the Senate and presidency in 1933 certainly put the Banking inquiry on firmer footing, as did Pecora’s aggressive fact-finding. The investigation not only uncovered shadowy practices by major banks, but also shady pool operations by the most active traders on the floor of the New York Stock Exchange.
The upshot of the Banking Committee’s work was enactment of the 1933 Glass-Steagall Act, which separated securities trading from commercial banking (until it was subsequently repealed in 1999), the 1933 Securities Act, and the 1934 Securities Exchange Act, which created the Securities and Exchange Commission (with Pecora as one of its three original commissioners).
When Pelosi spoke in April, she was not sure whether the inquiry should be external or internal. After consulting with her leadership and Caucus members, she opted for an outside commission along the lines of one proposed in January by Democratic Caucus Chairman John Larson (Conn.). The 10-member commission, to be appointed by Congressional leaders (six by the majority, four by the minority), will comprise “prominent— private citizens with “national recognition and significant depth of experience— in banking, finance and related fields. A final report is due Dec. 15, 2010.
As one senior Democratic leadership aide explained to me, Members did not feel Congress had the time or expertise to conduct a thorough inquiry given its already crowded agenda. Moreover, Members wanted to avoid any public perception that the commission’s findings might be politically biased.
Congress has a penchant for creating commissions, especially when it is overwhelmed by the enormity of a problem and its inability to fully grasp its dimensions. Its natural inclination is to hand off a hot potato to a national commission with instructions to report back its finding and recommendations by a date certain — usually 12 to 18 months down the road. High-level, blue-ribbon commissions of distinguished citizens have the patina of being above reproach and politics and are designed to convey to the public Congress’ seriousness in wanting to get to the bottom of a problem.
Over the past few years, we’ve seen such commissions created in the wake of the 9/11 terrorist attacks, following our pre-emptive attack on Iraq, on the proliferation of weapons of mass destruction, and on financing surface transportation infrastructure. In a report released in December, the Congressional Research Service identified 87 commissions created by Congress from 1989 to 2008, 80 percent of which were policy-oriented, 11 percent commemorative and 6 percent investigative.
I call this propensity for delegation “commissionitis.— Others have called it “government by commission— (an extension of the Progressive Era preference for rule by experts rather than by politicians). Whatever the term, it often appears to be a sin of commission by a dysfunctional government unable or unwilling to assume self-responsibility and accountability.
Congress’ preference for delegating difficult tasks to outside bodies is understandable if not totally defensible. Congress has a built-in inferiority complex. It looks at polls indicating a low level of public confidence in Congress and consequently thinks that only an exalted, nonpartisan council of wise men and women will have any credibility with the American people.
Congress seldom puts sitting Members on such commissions for fear it will politically taint the process. The problem with that, however, is that when the outsiders report back their findings, no sitting Members have a stakeholder’s interest in advocating for the commission’s recommendations.
The political advantages of such an approach are blame-avoidance and delay. It takes a long time to get a new commission organized, staffed and operational. In the meantime, the originating body can divert public anger or political pressures to the new group. By the time a commission finally reports, the crisis has often passed and public interest has waned.
The ball may be back on Congressional turf, but Congress feels completely free by then to punt, pass or ignore a commission’s findings. More often than not, commission reports are relegated to dusty shelves in Congress’ bowels — a mausoleum for weighty, unread tomes. This is fine if the problem has self-corrected in the interim or been found to be overblown. It is not OK if it means Congress has simply found a convenient way to quietly bury a problem until it inevitably resurfaces because of lack of adequate attention.
My preference would have been for a joint select committee, or at least House and Senate select committees with authority to hold joint hearings. A problem of this magnitude requires an inquiry at a level higher than a standing committee, yet needs to be held close enough to ensure Congressional ownership and accountability. I fear that until Congress takes responsibility for itself and its constitutional obligations, the people will continue to hold it in low regard for its profiles in shirking.
Don Wolfensberger is director of the Congress Project at the Woodrow Wilson International Center for Scholars and former staff director of the House Rules Committee.