Bankers' Show Trial Begins

“If we ignore history, we are bound to bail it out again.”

That was the opening note of the bipartisan Financial Crisis Inquiry Commission struck today by its chairman, Phil Angelides, the former state treasurer of California.

In an atmosphere that Madame Defarge would have loved, America's bankers are now in the dock of public opinion, which has been boiling over more than a year after Bush and Obama handouts to save them followed by bad behavior that makes the aristocrats of the Ancien Regime look like Robin Hoods.

As they face TV cameras, bailout barons may be in for more than a public flogging. This Commission is "authorized to hold hearings; issue subpoenas either for witness testimony or documents; and refer to the Attorney General or the appropriate state Attorney General any person who may have violated U.S. law in relation to the financial crisis."

But seasoned Washington observers know enough not to expect a parade of tumbrels to the guillotine. The bottom line (as the bankers themselves might put it) is how tough will be the regulations that the White House and Congress, both compromised by their Wall Street ties, will have the guts to impose when the Commission lays out its findings of greed and arrogance that will surprise no one.

Meanwhile, there is catharsis for politicians and public to belabor bankers who are giving themselves huge bonuses while pleading their innocence in creating the smashup that has cost everyone else in the American economy to suffer.

The Commission's work is being compared to that of the Pecora hearings of the 1930s after the stock market crash that led to tighter regulation of Wall Street, including the Glass-Steagall Act, which separated commercial and investment banking but was killed off a decade ago, opening the way to today's mess.

Bringing back Glass-Steagall would be a step in the right direction but, after the Commission's autopsy is finally finished months from now, that may seem like only a beginning of what needs to be done to rein in these Marie Antoinettes, who are still feasting away as the crowds gather at the Bastille.

If the Tea Party people want to vent their anger, they should take a good look at what politicians of both parties are willing to do about this bunch.

Update: An informed verdict on the bankers' first day from Paul Krugman: "Well, if you were hoping for a Perry Mason moment--a scene in which the witness blurts out: 'Yes! I admit it! I did it! And I’m glad!'--the hearing was disappointing. What you got, instead, was witnesses blurting out: 'Yes! I admit it! I’m clueless!'...

After hearing the heads of JPMorgan Chase and Goldman Sachs claim that the disaster was unavoidable, like a hurricane, "the commission’s chairman, was not amused: The financial crisis, he declared, wasn’t an act of God; it resulted from 'acts of men and women.'...

"Do the bankers really not understand what happened, or are they just talking their self-interest? No matter. As I said, the important thing looking forward is to stop listening to financiers about financial reform."