Enda, begorrah, we need Pecora !

February 28, 2011

“Of the events of the war I have not ventured to speak from any chance information, nor according to any notion of my own; I have described nothing but what I either saw myself, or learned from others of whom I made the most careful and particular inquiry. The task was a laborious one, because eyewitnesses of the same occurrences gave different accounts of them, as they remembered or were [partial to] one side or the other. And very likely the strictly historical character of my narrative may be disappointing to the ear. But if he who desires to have before his eyes a true picture of the events which have happened, and of the like events which may be expected to happen hereafter in the order of human things shall pronounce what I have written to be useful, then I shall be satisfied. My history is an everlasting possession, not a prize composition which is heard and forgotten.” Thucydides


SO Martin Mansergh says it wasn’t a wipeout.

Lets see, perhaps the only group one could think of that gave the FF quislings a vote, was the older generation, who voted for FF out of gratitude for their pensions, medical cards and nostalgia for the past.

Good to see the Irish electorate restore the dignity of Irish citizenry.

So, it was a complete wipeout. Enjoy!

Its better to look ahead. Enda Kenny during the election campaign was insistent that we should get to the bottom of what happened in the banks that gave rise to their demise.

Consider the following: (p73, Restoring Stability After The Great Depression, ‘The Corruption of Capitalism’, Richard Duncan)

“In March 1932, The US Senate Committee on Banking and Currency convened what came to be known as Pecora Committee Investigation, named for committee counsel Ferdinand Pecora. The committee was authorized:

…to make a thorough and complete investigation of the operation by any person, firm, co-partnership, company, association, corporation, or other entity of the business of banking, financing, and extending credit; and the business of issuing, offering, or selling securities…

For the next two years, counsel Pecora summoned and interrogated the high and mighty of the US financial industry. Among the corporations investigated were National City Bank (which later became Citibank); J.P. Morgan & Co; Chase National Bank; and Dillon Read & Co. Those subpoenaed included Richard Whitney, president of the New York Stock Exchange, who was later jailed for embezzlement, and JP Morgan, Jr. himself.

The country was mesmerized by the hearings, which was widely covered in newspapers and radio. Under close questioning, many of the country’s most powerful bankers and financiers were revealed to be unscrupulous, foolish or both. Pecora uncovered widespread conflicts of interest and other unethical practices throughout the indudtry, particularly related to securities underwriting.

The banking committee compiled more than 12,000 printed pages and received 1,000 exhibits in evidence. Its report concluded:

“The cost of the investigation has been approximately $250,000. The expenditures, however, have been justified manyfold by the incalculable benefits flowing to the American people from the hearings in the form of enlightenment as to the practices which cost them so dearly in the past and in the form of remedial measures designed to prevent such practices for all time in the future. The Federal Government has been or will be reimbursed many times over by the receipt of additional income and penalties imposed on the basis of testimony developed at the hearings. To date (June 6, 1934) assessments and deficiencies and penalties have been levied by the Bureau of internal Revenue in a sum exceeding €2,000,000 as a direct result of the revelations before the subcommittee.”

The outcome of the Pecora hearings was a wave of legislation designed to bring the financial industry under much tighter government control.”

Shortly after the Securities Act of 1933 was set up to ensure investors received ‘adequate and truthful information’ regarding the securities sold. Securities and Exchange Commission (SEC) was established the following year.

The Glass-Steagall Act (officially the banking Act of 1933) was instituted with measures such as the extension of federal oversight to all commercial banks, the separation of investment banking from commercial banking, a bank could do one or other but not both. Investment banks would not be allowed speculate with customers deposits. The FDIC (Federal Deposit Insurance Corporation) was set up to ensure depositors against loss. Ceilings on interest rates were put in place and certain types of deposits, interest on demand, were done away with.

In what was a landmark reform at the time and one that has huge significance in relation to Ireland’s recent history, particularly the failure role of the Irish Central bank in its regulatory role in the Irish economy, “Two years later, the Banking Act of 1935 reorganized the structure of the central bank, concentrating power over the monetary system within the Board of Governors of the Central Reserve System and the Federal Open Market Committee in Washington at the expense of the 12 Federal Reserve Banks. The Act made the Federal Reserve Board’s power to alter the reserve requirements of banks permanent. When it was first granted, this power had been considered only a temporary emergency measure. The Act also changed the status of the FDIC from temporary to permanent. Finally, it granted the Federal Reserve the power to set margin requirements for securities lending.”

The above regulations lasted until 1970 in the USA when pressure was mounted to begin the process of deregulation that led to the systemic collapse of 2008.

Ireland can initiate its own hearings and begin to set its own house in order. A subset of the above regulations can immediately be developed to initiate greater regulatory control over the Irish banking industry.

At European level, there is an even more urgent need to duplicate the above regulations, to legislate specifically for banking within the Stability Pact. Any such reform, should incorporate wider membership among peripheral Central Banks operating at national level into a proportional membership of the governorship of the  ECB.

This could extend control of  oversight of national EZ Central banks into a regulatory structure under the ECB in a more democratic and better regulated  banking structure, if only to avoid the repeat of regulatory failures similar to that of Irish Central Bank and the Irish Regulatory system in recent past.

Failure to impose such reforms that should be imposed upon the ECB and Irish Central Bank along with a burden sharing of bondholders and restructuring of Irish private banking debt, should see the immediate cessation of Ireland’s membership of the EZ.



One Response to “Enda, begorrah, we need Pecora !”

  1. Trich said

    I concur CB.

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