New Pecora Commission Looks Unlikely To Aggressively Probe Financial Mess

July 17, 2009 5:12 a.m.

Earlier this week, we told you over at TPMDC about the newly named members of what’s being called the Pecora II commission, which has been given the crucial task of getting to the bottom of the financial crisis.

The stakes are high here. If we’re ever to come to a full understanding of the causes of an episode that has created enormous pain, dislocation, and anxiety for a large number of Americans — allowing us to craft policies to ensure it doesn’t recur — we need an effective commission. In other words, one that’s capable of conducting an aggressive investigation that goes after the truth and lets the chips fall where they may, even if that means publicly calling out powerful Wall Street interests and lax Washington regulators. And not one that settles for making a few polite recommendations while protecting its political overseers — as too many Washington commissions have done in the past.But so far, the evidence suggests that’s not what we’re likely to get.

From the start, Congressional Republicans managed to game the rules of the commission so as to allow their appointees to effectively hamstring it. Then, they named commissioners — particularly their choice for the powerful vice chair post — whose backgrounds suggest they’re likely to do just that.

The panel is made up of six Democratic appointees and four Republican ones — but without the ability to issue subpoenas, it’s largely toothless. And the final bill requires that for it to do so, at least one of the commission’s Republicans must vote in favor — a change from the original language, which required only a majority vote or the agreement of the chair and vice chair. A Senate staffer told TPMmuckraker that Republicans threatened to withdraw their support for the whole idea of a commission if this change wasn’t made.

In other words, because congressional Republicans — led by John Boehner and Mitch McConnell — played hardball, the commission’s GOPers can effectively neuter the panel if they stick together.

None of the three rank-and-file Republican appointees seem like good candidates to break ranks. Peter Wallison is a fellow at the American Enterprise Institute, who has been a prominent advocate of the favored conservative notion that Fannie Mae and Freddie Mac are the true culprits in the crisis, and who argued this week in the Washington Post against creating a consumer protection commission for financial products — an idea seen by many as a cornerstone of any effort to reform the financial regulatory system. Doug Holtz-Eakin, for his part, was John McCain’s top economic adviser at the time when the GOP presidential nominee declared the fundamentals of the economy strong. And Keith Hennessey is a former economic adviser to President Bush and a former aide to Sen. Trent Lott.

But it’s the identity of the Republican-appointed vice chair — whose support is required by law for the commission to perform several other key functions, like hiring staff — that’s the really ominous sign. That’s Bill Thomas, the Republican former congressman from California, who earlier this decade chaired the House Ways and Means committee.

During his years in Congress, Thomas, who now works for a major DC lobbying firm, acquired a reputation as a smart, highly-skilled and acutely partisan supporter of big business, who once tried to have Democrats forcibly ousted from a capitol meeting room, and was accused of being literally in bed with a corporate lobbyist.

Thomas was known in part for his surly manner — Hill staffers named him both the meanest and the hottest-tempered member of the House in a survey conducted by the Washingtonian magazine (he came in second on “brainiest”). Even the normally courteous Washington Post referred in a straight news story to his “abrasive manner” and judged that his “self-confidence borders on arrogance.”

Thomas was also a committed partisan. In 2003, he was forced to apologize on the House floor after summoning Capitol Police and ordering them to forcibly evict Democrats from a meeting room amid a spat over pension legislation. (The officers declined to do so.)

And in late 2006, after Republicans had lost control of Congress, Thomas reportedly used his last days before retiring to pursue a scorched earth strategy, playing budgetary tricks to preemptively sabotage the incoming Democrats’ agenda.

As the Wall Street Journal reported (sub. req.) at the time:

Like a retreating army, Republicans are tearing up railroad track and planting legislative land mines to make it harder for Democrats to govern when they take power in Congress next month.

Already, the Republican leadership has moved to saddle the new Democratic majority with responsibility for resolving $463 billion in spending bills for the fiscal year that began Oct. 1. And the departing chairman of the House Ways and Means Committee, Rep. Bill Thomas (R., Calif.), has been demanding that the Democrat-crafted 2008 budget absorb most of the $13 billion in costs incurred from a decision now to protect physician reimbursements under Medicare, the federal health-care program for the elderly and disabled.

The unstated goal is to disrupt the Democratic agenda and make it harder for the new majority to meet its promise to reinstitute “pay-as-you-go” budget rules, under which new costs or tax cuts must be offset to protect the deficit from growing.

But it’s Thomas’s ties to business interests that bode perhaps most poorly for the commission’s chances. As Ways and Means committee chair, Thomas helped pass Bush’s business-friendly 2001 tax cuts, and he also played a key role in the 2003 Medicare Prescription drug bill. As Ezra Klein, writing last year in the American Prospect, put it, Thomas “larded the legislation with health savings accounts, private insurers in Medicare, a prohibition barring the government from bargaining down drug prices, and much else on the conservative wish list.” According to other reports, Thomas received significant contributions from hospital chains and other industry groups that had a major stake in the legislation.

Those ties to business interests also seeped into Thomas’s personal life.
The Bakersfield Californian reported in 2000 that the married Republican was enjoying an “intensely personal relationship” with a woman named Deborah Steelman. That would have been between Steelman, Thomas, and his wife — except for the fact that Steelman was a Washington lobbyist who had represented companies like Johnson & Johnson, Bristol-Myers, Squibb and Pfizer that had crucial business before Thomas’s committee. Neither Thomas nor Steelman denied charges of an affair.

Since Thomas left Congress, his ties to corporate interests don’t appear to have loosened. In 2007, he joined the powerhouse Washington lobby firm Buchanan Ingersoll and Rooney. Interestingly, Thomas didn’t register as a lobbyist, according to Ron Platt, who at the time ran the firm’s government relations sector. Instead, Platt told TPMmuckraker, Thomas provided strategic advice for the firm’s corporate clients, and helped its lobbyists anticipate future policy directions, particularly on health-care issues, his specialty.

Still, Thomas brought with him to Buchanan Ingersoll a longtime top aide, Bill Winters, whose own lobbying work for Buchanan may offer a window into his boss’s milieu — as well as raising issues in its own right. According to lobby disclosure reports examined by TPMmuckraker, in the last two years Winters has represented some of the very financial institutions — including SIFMA, the key trade group for the securities industry, as well as PNC Financial bank — that would be most threatened by an aggressive Pecora commission. One wonders whether Winters will be lobbying his longtime boss.

We hate to be cynical. But based on how things have started off, it’s hard to have much confidence that this much ballyhooed effort is going to be able to get to the bottom of its own arse, much less one of the most complex and harmful financial crises in history.

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