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Little Eric Cantor, the prancing political prissy who serves as the GOP’s House majority leader, apparently thinks he’s too slick to get caught in an outright legislative lie – or maybe he thinks we rubes are too dumb to figure out that he’s trying to slick us.

Either way, a crude deceit is at the very heart of his “Working Families Flexibility Act,” which he recently slid through the House. It eliminates a central piece of America’s middle-class framework, namely the 8-hour workday and 40-hour week. Under the 1938 Fair Labor Law, bosses can make hourly employees work extra, but only by paying an overtime wage for the added hours.

Cantor claims his bill would improve this New Deal protection by letting corporate managers require extra hours on the job without overtime pay by offering “comp time” to the employees. In other words, work more hours now in exchange for taking-off those same number of hours later on.

With a wink at corporate lobbyists, Eric slyly refers to this switch as “women-friendly,” allowing working moms the flexibility to decide when to take time off. Therein lies the lie. (more…)

A century ago, workers were a lot more “flexible” than they are now. Veritable Gumbies in the mills and mines and factories they were, distorting their lives to slog 10 or 12 hours a day, six – even seven – days a week.

Then came the 40-hour week. And weekends. And eventually sick days. And paid vacation days. Now, bosses at mills and mines and factories regard these rules as coddling and consider the workers accustomed to them as unyielding to corporate demands.

The GOP has an app for that. It’s called the Working Families Flexibility Act. This legislation that the Republican majority in the U.S. House is expected to pass this week would force some old-time flexibility into 21^st century workers. The forced flexibility act would award bosses the power to “offer” compensatory time off instead of overtime pay. Bosses, not workers, would determine when the comp time could be taken. The proposal puts control in corporate hands, obliging wage earners to bend over backward for bosses exactly like their Gumby ancestors were compelled to.

Trade unionists and labor rights activists died to achieve the goal of eight-hour days and 40-hour weeks. They were shot and beaten in the streets during demonstrations organized by the eight-hour movement. Their slogan was: “Eight hours for work; eight hours for rest; eight hours for what we will.”

Finally, in 1938, President Franklin Delano Roosevelt signed the Fair Labor Standards Act (FLSA) as part of the New Deal, which gave workers and families rights and security that previously had been exclusive to the wealthy.

FLSA enforces the 40-hour week with a simple measure. It requires employers to pay time and a half to wage earners for each hour worked beyond 40 in a week. That creates a financial disincentive for bosses to order work beyond 40 hours. That also creates a financial incentive for companies to avoid overtime pay by hiring more workers. That was a significant bonus during the Great Depression. (more…)

“To those who say that our expenditures for Public Works and other means for recovery are a waste that we cannot afford, I answer that no country, however rich, can afford the waste of its human resources. Demoralization caused by vast unemployment is our greatest extravagance… I stand or fall by my refusal to accept as a necessary condition of our future a permanent army of unemployed… [W]e must make it a national principle that we will not tolerate a large army of unemployed and that we will arrange our national economy to end our present unemployment as soon as we can and then to take wise measures against its return.”–Franklin D. Roosevelt

With unemployment still hovering at over 9 percent nationwide, and with some economists and historians arguing that the present economic crisis should not be referred to as the “Great Recession,” but as the “Great Depression II,” a good deal of anticipation has arisen over what President Obama will propose in his message to Congress on Thursday. Despite widespread Republican opposition to further government spending, many economists and business leaders — not to mention liberal members of the Democratic Party — argue that what the country desperately needs is another stimulus package. A jobs program could provide hope and relief to the millions of long-term unemployed, restore confidence, and stem the U.S. economy’s steady slide back into recession. Even the ever demure Chairman of the Federal Reserve, Ben Bernanke, has indicated that “putting people back to work” must be made a priority if the country wishes to avoid long-term damage to the economy. (more…)

By Robert L. Borosage
Co-Director Campaign for America’s Future

Less than a week after launching his presidential campaign, Newt Gingrich’s candidacy has already been declared “done” and “over” by conservative pundit Charles Krauthammer. Gringich’s mouth – always faster than his brain – has been gorging on foot. He’s provided Democrats with great ad copy, denouncing the Republican plan to end Medicare as “radical” and “right wing social engineering.” He managed an astounding 360 overnight, from having “consistently favored” an individual mandate on health care to calling it unconstitutional the next day. He’s received well deserved scorn for dog whistle race bait politics in http://www.washingtonpost.com/politics/gingrich-promises-to-slash-taxes-calls-obama-food-stamp-president/2011/05/13/AF9Q602G_story.htmldeclaring Obama the “food stamp president.”

And of course, in the run-up to his announcement, he retired the trophy for the most creative excuse for cheating on your wife, declaring that it was his passion for his country that led him astray.

Despite Gingrich’s gift for self-immolation, even with his own candidacy already sapped by the licentiousness of his mouth and his libido, he shouldn’t be dismissed. He has provided the clearest statement of how Republicans will run against Obama and Democrats in the next election – in the Reagan tradition, combining city on the hill economic homilies with back alley racial allusions. Consider Gingrich’s calling card: (more…)

By Leo W. Gerard
USW International President

The electorate is bitter and angry. It’s no wonder. Foreclosures rise while Wall Street bankers, whose recklessness caused this grave recession, grab million dollar bonuses. Unemployment is stuck at 9.5 percent, but corporations continue to ship jobs overseas.

The level of acrimony showed itself Monday in Lexington, Ky., when a group of men supporting Republican U.S. Senate candidate Rand Paul threw a woman backing Democrat Jack Conway to the ground and stomped on her head.

This is not the hope America voted for in the fall of 2008. Now another election is upon us. On Tuesday, voters can choose candidates capitalizing on bitterness, or they can return to hope and provide time for change to play out. Voters can stay the course with the President whose basic philosophy is a Biblical one – that we are all our brothers’ and sisters’ keepers. Or Americans can empower Republicans who believe it’s every man for himself, who espouse the view that a man’s success is his own, and, equally, each man is solely responsible for all of his setbacks.

This midterm election is about how those disparate Republican and Democratic values will play out in legislation. Do Americans want to live in a Republican country that blames individuals for their unemployment in an economy creating only one position for every five jobless workers? Or do Americans want a country that lives by the Democratic philosophy that government must aid, not blame, the unemployed, that it must give a hand up, not a slap in the face, to the suffering?

Hard as it is during troubled times, as difficult as it may feel after some legislative efforts have fallen short of important idealistic goals, let’s build a country of hope, one in which we help our fellow Americans.

That virtuous aim, of course, is the subject of ridicule. Here’s Sarah Palin mocking optimistic Americans at a Tea Bagger event in February, “How’s that hopey-changey thing working out for ya?”

But come out to vote for hope Tuesday anyway; stand up to the malevolent bullies.

What the bullies want is a country where workers are on their own: for health insurance, for income security in their old age, for surviving another Wall Street collapse. For everything.

Unemployment insurance is a good example. Over the past year, the GOP has scorned the jobless, calling them lazy freeloaders. Republicans repeatedly voted against extending unemployment benefits. From the GOP point of view, Wall Street’s crash didn’t cause the economic collapse and high unemployment. No, according to Republicans, each unemployed worker is responsible for his situation, and it’s not the role of government to intervene to help. That philosophy is behind Republican South Carolina Lt. Gov. Andre Bauer’s comment that the unemployed, like stray animals, should not be fed: “You are facilitating the problem if you give an animal or person ample food supply.”

Come out Tuesday and vote for hope, vote to aid the unemployed.

Wall Street reform is another example of Republican “on your own” philosophy. Before the stock market crash of 1929, the unregulated American financial system whipped the economy in wild boom and bust cycles. The frequent crashes and runs on banks were called panics. In Democrat Franklin Delano Roosevelt’s New Deal, Congress imposed rules on Wall Street and the banking industry. For the next sixty years the economy largely avoided panics. Then Congress lifted the regulations, and the crash of 2008 wrecked the economy. Former President Bush responded by proposing and orchestrating the Wall Street bailout. But his party vigorously opposed re-regulation to avoid another economic disaster. The GOP voted against the legislation restoring protections for the economy, investors and consumers. Republicans believe government has no business policing the free market or interceding for investors and consumers because individuals are solely to blame for everything that happens to them.

Come out Tuesday and vote for hope, vote to protect hardworking Americans against financial fraud and the machinations of powerful, multi-national financial firms.

Health insurance reform provides one of the clearest examples of Republican “on your own” philosophy. The GOP proposed that “reform” consist of granting individuals small tax breaks, about a quarter the cost of health insurance, while revoking breaks given companies that provide health coverage to workers. This, Republicans said, would “free” companies from providing insurance and “free” individuals to choose their own plans. It would have liberated individuals to negotiate coverage and claims payment with giant, sophisticated, lawyer-laden insurance corporations. If an individual got a bad deal, one that enabled the insurer to drop coverage when he got sick, deny coverage to his sick child or raise rates continuously, well, then, that would be the fault of the individual purchaser. Republicans have promised that if empowered, they will repeal the Democrats’ Patient Protection and Affordable Care Act.

Come out Tuesday and vote for hope, vote to support the health insurance reform law that uses the power of government regulation to shield policy holders from insurer abuses, that lowers costs and that enables nearly all Americans to obtain insurance.

Retirees should be “on their own” as well, Republicans believe. Some in the GOP even contend Social Security is unconstitutional. Others want to cut it or privatize it. What privatizing means is getting the government out of the business of collecting Social Security taxes to ensure that all workers receive benefits after retiring. Instead, Republicans want workers to be on their own to invest for their retirement. If there’s another market “panic” – which could happen if Republicans repeal Wall Street reform – and workers lose their “privatized” retirement savings in the crash, the GOP’s response would be that individuals must take responsibility – their loss is their fault.

Come out Tuesday and vote to keep America’s promise to provide basic income security to all elderly citizens. Vote to be your brothers’ and sisters’ keeper and for them to be yours. Vote for hope.

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Leo W. Gerard also is a member of the AFL-CIO Executive Committee and chairs the labor federation’s Public Policy Committee. President Barack Obama recently appointed him to the President’s Advisory Committee on Trade Policy and Negotiations. He serves as co-chairman of the BlueGreen Alliance and on the boards of the Apollo Alliance, Campaign for America’s Future and the Economic Policy Institute.  He is a member of the IMF and ICEM global labor federations and was instrumental in creating Workers Uniting, the first global union.

Eric Lotke

By Eric Lotke
Research Director at the Campaign for America’s Future

Today’s new unemployment report contains no news, just decimal point changes. It tells us what we already know, that times are bad. The question is whether our great nation can rise to the challenge.

Unemployment remains unchanged at 9.5 percent, with 14.6 million people out of work. In July, we lost 202,000 jobs in the government sector as the census winds down, and we gained 71,000 jobs in the private sector. African American unemployment grew fractionally worse to 15.6 percent, and teenagers to 26.1 percent.

But the micro details don’t change the big picture. People are out of work and out of hope. Mortgages are underwater, savings are in the tank and fewer than half of grown-ups think their kids will be better off.

So what are we going to do about it? Our 200 year old democracy ended slavery and turned the Great Depression into the New Deal. Can we thrive in this century too?

We know what doesn’t work. Asset bubbles and trade deficits. Tax cuts and supply side economics. Shopping for cheap stuff made in China. (more…)

By Robert L. Borosage
Co-Director Campaign for America’s Future

Americans have grown fearful. Most believe, not surprisingly, that the country is headed in the wrong direction. For the first time ever, most Americans believe their children may not fare as well as they have. We spend nearly as much as the rest of the world combined on our military, chasing phantoms across the world. Conservatives in both parties rail about debt and deficits. They line up to support adding another $33 billion in emergency spending for the misbegotten war in Afghanistan, while blocking the $23 billion needed to forestall the layoff of a staggering 275,000 teachers across the country.

Washington is crazed about debt and deficits, but the real deficit is in fortitude, not finances. Consider the contrast between this country emerging from the Great Depression and World War II and now.

Then our debt was a far greater burden than now — over 120% of GDP. The country had suffered a decade long Great Depression and a global war. The troops were coming home, but the entire economy was mobilized for war. Europe and Japan were devastated. And America was led by Harry S. Truman, a former haberdasher, product of the corrupt Pendergast machine in Kansas City.

But, having won the War, America had the confidence to face its future. Despite the massive debt, Congress passed the GI Bill, educating a generation of veterans. We financed the transformation of military factories to civilian production, investing in the industries — from aerospace to automobiles — that would transform the country. Congress passed subsidies to aid the purchase of homes, stimulating the growth of the suburbs. We passed the Marshall Plan to spur the rebuilding of Europe. A Republican President, Dwight D. Eisenhower, a hero of the war, put a lid on military spending, while building the interstate highway system.

With rare exceptions the country continued to run annual deficits and the accumulated debt continued to rise. But the country grew faster, the broad middle class — the triumph of American democracy — was forged, and the debt as a percentage of GDP declined steadily down to less than 32% when Ronald Reagan took office.

None of this was easy or smooth. There were strikes and upheavals. Inflation and unemployment plagued the post-war transition. The Korean War divided the country.
Conservatives at the time were as timorous and noisome as they are now. Led by Ohio Senator Bob Taft, they opposed the creation of NATO. They railed about deficit spending. They waged war on labor unions. They hunted communists at home and abroad, trampling basic liberties in the process. They conjured up preposterous conspiracy theories about treachery within. American politics were even more poisonous than now. And black GIs returning from the war found that their service did not exempt them from the legalized apartheid that still scarred the country.

But a confident America didn’t let the frightened and the crazed get in the way of doing what was necessary to forge a prosperous future. Eisenhower reaffirmed the New Deal reforms. Social Security was preserved; finance remained shackled; top end tax rates stayed at 90%; labor’s right to organize was weakened but not gutted. A confident and broad middle class replaced the extreme inequality that contributed to the Great Depression. We all grew together.

The contrast with the present day is stark. Now as we remain mired in two costly and endless wars, and emerge from the Great Recession, the timorous have taken control. Our national debt — about 90% of GDP — is far lower a burden than it was after World War II, but our deficit in confidence is far higher.

Instead of forging the new economy needed to revive a broad and prosperous middle class, we are focused on balancing our accounts. With states and localities facing crippling budget crises, with school districts shutting down summer school, eliminating after school programs from athletics to tutorials, laying off teachers and increasing class size, the Congress blocks vitally needed bills to provide aid to states, and to put people to work. The president acknowledges a staggering public investment deficit in the foundations of a new economy — in education and training, modern infrastructure, research and development – and then calls for a three year hard freeze on domestic spending, while the military budget continues to rise. Republicans and conservative Democrats join with the banking lobby to weaken financial reform, with big oil to frustrate the transition to new energy, with the insurance and drug companies to sustain an unaffordable health care system.

Wall Street billionaire Pete Peterson enlists major foundations to rouse fears about debt, with “entitlements” — meaning Social Security and Medicare as his major targets. The president sets up a deficit commission tasked with balancing the budget, not with defining the foundations of a new economy that would enable us to grow our way out of debt and rebuild a prosperous middle class.

President Obama is far better prepared for this moment than Harry S. Truman was. He has been clear about the need to build a new economy out of the ruins of the old. He has detailed core elements of that task — public investments in areas vital to our future, making the transition to new energy, balancing our trade and making things in America once more, shrinking finance and curbing the casino, empowering workers to gain a fair share of the profits and productivity they help produce, fixing our broken health care system — the source of those terrifying long-term deficits that Peterson brandishes and distorts.

But the president is now in retreat. His call to action has been muddled by pollsters and positioning. Conservatives peddle fear and conspiracies as they did after World War II, but this time America’s leaders are cowed, letting the frightened block the bold measures needed to forge our future.

Needless to say, our current circumstances are far different than those at the end of World War II. Then we were victorious; now we are losing in Afghanistan. Then we were unified; the entire nation had sacrificed in the Depression and the war. Now we are divided, more unequal than ever; and the wars are fought by professionals out of the public consciousness. Then we had pent up private savings from years of wartime rationing; now household debt remains near record levels. Then the rest of the world was devastated; now America faces a surging and mercantilist Asia, an export addicted Germany.

But these are circumstances, not fate. The real contrast is in our confidence. Americans have grown fearful. We doubt our ability to pursue a common purpose. For good reason, we lack faith in our institutions – whether government or business or the banks. But instead of steeling our spine, we are daunted by the obstacles. Bluster substitutes for courage. We focus on balancing our accounts, not forging our future. That is a recipe for decline.

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Robert Borosage and Campaign for America’s Future Co-Director Roger Hickey are co-editors of the book, The Next Agenda: Blueprint for a New Progressive Movement.

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Follow Robert L. Borosage on Twitter: www.twitter.com/borosage

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This piece first appeared on The Huffington Post

Robert Kuttner
Co-Founder and Co-Editor of The American Prospect

With public attention focused on everything from the oil disaster, the diplomatic isolation of Israel, to Al and Tipper’s separation, the final legislative push for financial reform begins this week as House and Senate conferees commence their work. This is the moment when lobbyists for the banking industry hope to kill provisions that they were unable to block in the House or Senate. This is no time for reformers to relent.

Much of the conference will be in public session — a break with recent practice — but backroom deals are likely to determine the final outcome. Efforts by progressives and friendly media are desperately needed to keep the pressure on to strengthen, rather than weaken, reform. According to the Center for Responsive Politics, more than 1,400 former legislators and Hill staff now work for the banking lobby. The industry has about 1,800 paid lobbyists in all, compared to about 60 mostly volunteer lobbyists from several dozen consumer and labor organizations working (on their own time) under the banner of Americans for Financial Reform (AFR).

Here is a brief user’s guide to the proceedings.

The House and Senate conferees will formally be appointed on Tuesday, and the conference’s real work will begin Thursday. Financial Services Chairman Barney Frank has promised that debates will be open and televised, and that key votes will be recorded. That’s a good start, but invariably a lot of the deals will be struck in private after consultation with administration officials and industry lobbyists. Americans for Financial Reform has requested that key proposed amendments be posted for public review, and Frank agrees in principle.

However, excessive delay works to the benefit of industry lobbyists. There is concern that despite the transparency of the process, the industry will work with Republicans and conservative Democrats to stretch out the conference beyond the deadline target of July 4, and use the delay to weaken the bill.

Despite the David-Goliath nature of this fight, a lot of good provisions are in either the House or Senate bills, and the challenge will be to make sure that the final law includes the stronger rather than the weaker version. Among the key fights:

Derivatives: Senator Blanche Lincoln’s language requiring that all derivatives trades be cleared on public exchanges, that no banking company with deposit insurance may also trade derivatives, and that sundry other loopholes be closed, survived fierce industry opposition and only lukewarm support from the administration. Whether or not Lincoln wins her own primary Tuesday, this measure has increasing support of House and Senate progressives. A companion measure by Sen. Maria Cantwell, which did not make it into the senate bill, would close more loopholes and require adequate capital for all such trades. This approach now appears to have the support of both Senate Banking Chair Chris Dodd and House Chair Barney Frank, as well as Gary Gensler on behalf of the administration. Banks want to continue their gambling games, and this is the number one target of the big banks to kill.

Consumer Protection: The House bill includes a free standing consumer financial protection agency, but it would be hobbled by the requirement that it report to a committee as well as limits on its jurisdiction. The Senate version nests the proposed agency as an independent body inside the Federal Reserve, but without many of the restrictions. This is one of the few provisions that enjoys the hands-on personal support of President Obama. The challenge of the conference is to retain the best features of both bills.

Credit Rating Agencies: It was the corruption of credit rating agencies that made possible the sub-prime meltdown. Reform of these private agencies, such as Moody’s and Standard and Poors, was not even part of the original legislation. But a surprise amendment by Sen. Al Franken requiring random assignment of agency ratings rather than payment of the agencies by clients narrowly passed the Senate and was included in the bill. There is no House counterpart, and industry is gunning for this one. But the House does provide that credit rating agencies are legally liable for deceptive practices.

Cover Auto Dealers: New and used car dealers are among the most notorious purveyors of deceptive bait-and-switch financing. But the auto industry, which operates in every congressional district, worked with Senate Republicans on a parliamentary maneuver to win an exemption for car dealers; a similar provision is in the House bill. There is an outside chance that this could be reversed. Both Dodd and Frank are sympathetic to reversing this outrageous carve-out.

Bring Back Glass-Steagall: Among the crucially important provisions that did not make it into either final bill is the Merkley-Levin amendment which would draw a bright line separating taxpayer-insured commercial banks from financial firms that gamble and trade derivatives and other risky other securities for their own accounts (the “Volcker Rule.”) There is still a decent chance that this could make it into the final bill.

Break up the Biggest Banks: Another key provision that developed significant support but that was defeated in a floor fight was the Brown-Kaufman amendment to limit the percent of deposits held by any one bank, and thereby break up the biggest banks. But this measure will be back another day.

Duty to Clients: Among the most instructive revelations of the hearings, investigations and debates was the disclosure that big Wall Street houses routinely bet against their own customers. An amendment providing that investment banks have a fiduciary duty to their clients was not included in the final senate bill, but has increasing support.

Fix the Mortgage Mess: The House and Senate bills both have modest reforms to tighten mortgage standards but no major breakthrough to end the logjam on refinancing distressed mortgages so that besieged homeowners can keep their homes. This is also a fight for another day.

Despite its limitations, the financial bill is a start that progressives need to defend. Given where we began, this process has come a long way. At the outset, the administration was backing a far weaker bill. House Financial Services Chairman Barney Frank was hobbled by the presence of fifteen pro-industry “New Democrats” on his committee who weakened the bill at every opportunity. As recently as March, Senate Banking Chairman Chris Dodd was on the verge of making a bipartisan deal with Committee Republicans for a measure that would have been reform in name only.

But as the public has begun paying more attention, as AFR has grown into the most effective financial reform coalition ever; and as heroic progressive legislators have moved their colleagues, the bill has gotten better over time. Other progressive leaders such as Elizabeth Warren and AFL-CIO President Rich Trumka have pushed public opinion, key legislators, and the Obama Administration. All of this is no small achievement, given how esoteric most of these issues are to most voters.

The big fight to secure these gains begins this week. As I’ve observed before, even Roosevelt took seven years and several pieces of legislation before the New Deal structure of financial reform was completed. One thing is certain: Wall Street will continue pulling out all the stops to preserve its corrupted and discredited business model. Reformers need to redouble their own efforts.

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Robert Kuttner’s new book is A Presidency in Peril. He is co-editor of The American Prospect and a senior fellow at Demos. In addition, he is the author Obama’s Challenge.

By Robert Reich
Former U.S. Secretary of Labor, Professor at Berkeley

The Labor Department reports this morning that the private sector added a measly 41,000 net new jobs in May. But at least 100,000 new jobs are needed every month just to keep up with population growth.

In other words, the labor market continues to deteriorate.

The average length of unemployment continues to rise — now up to 34.4 weeks (up from 33 weeks in April). That’s another record.

More Americans are too discouraged to look for a job than last year at this time (1.1 million in May, an increase of 291,000 from a year earlier).

Of the small number of jobs created by the private sector in May, many came from temporary help services.

Which is one reason why the median wage continues to drop.

Why are we having such a hard time getting free of the Great Recession? Because consumers, who constitute 70 percent of the economy, don’t have the dough. They can’t any longer treat their homes as ATMs, as they did before the Great Recession.

Businesses won’t rehire if there’s not enough demand for their goods and services.

The only reason the economy isn’t in a double-dip recession already is because of three temporary boosts: the federal stimulus (of which 75 percent has been spent), near-zero interest rates (which can’t continue much longer without igniting speculative bubbles), and replacements (consumers have had to replace worn-out cars and appliances, and businesses had to replace worn-down inventories). Oh, and, yes, all those Census workers (who will be out on their ears in a month or so).

But all these boosts will end soon. Then we’re in the dip.

Retail sales are already down.

So what’s the answer? In the short term, more stimulus — especially extended unemployment benefits and aid to state and local governments that are whacking schools and social services because they can’t run deficits.

But the deficit crazies in the Senate, who can’t seem to differentiate between short-term stimulus (necessary) and long-term debt (bad) last week shot it down.

In the longer term, we need a new New Deal that will bolster America’s floundering middle class. Expand the Earned Income Tax Credit and extend it up through the middle class. Finance that extension through higher marginal income taxes on the wealthy, who have never had it so good.

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Cross-posted from Robert Reich’s Blog

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Robert Reich served as the nation’s 22nd Secretary of Labor and now is a professor of public policy at the University of California at Berkeley. His latest book, “Supercapitalism,” is out in paperback. For copies of his articles, books, and public radio commentaries, go to www.robertreich.org.

Robert Kuttner
Co-Founder and Co-Editor of The American Prospect

In 1932 through 1934 the Senate Banking Committee, led by its Chief Counsel Ferdinand Pecora, ferreted out the deeper fraud and corruption that led to the Crash of 1929 and the Great Depression. The Pecora Committee’s findings helped change the political mood, and laid the groundwork for the sweeping financial reforms of Roosevelt’s New Deal. Roosevelt himself often conferred with Pecora, encouraged him, and depended on Pecora’s work to build the public support for reform. He appointed Pecora to one of the newly created results of his handiwork, the Securities and Exchange Commission, though Pecora was disappointed not to be its chairman.

President Obama has now signed legislation, The Fraud Enforcement and Recovery Act of 2009, which among other things creates an investigative commission inspired by Pecora.

The new Financial Markets Commission has a sweeping mandate, including subpoena powers, to investigate all the causes of the collapse. The list is as comprehensive as one could wish for.

FUNCTIONS OF THE COMMISSION.–The functions of the Commission are–

(1) to examine the causes of the current financial and economic crisis in the United States, specifically the role of–

(A) fraud and abuse in the financial sector, including fraud and abuse towards consumers in the mortgage sector;

(B) Federal and State financial regulators, including the extent to which they enforced, or failed to enforce statutory, regulatory, or supervisory requirements;

(C) the global imbalance of savings, international capital flows, and fiscal imbalances of various governments;

(D) monetary policy and the availability and terms of credit;

(E) accounting practices, including, mark-to-market and fair value rules, and treatment of off-balance sheet vehicles;

(F) tax treatment of financial products and investments;

(G) capital requirements and regulations on leverage and liquidity, including the capital structures of regulated and non-regulated financial entities;

(H) credit rating agencies in the financial system, including, reliance on credit ratings by financial institutions and Federal financial regulators, the use of credit ratings in financial regulation, and the use of credit ratings in the securitization markets;

(I) lending practices and securitization, including the originate-to-distribute model for extending credit and transferring risk;

(J) affiliations between insured depository institutions and securities, insurance, and other types of nonbanking companies;

(K) the concept that certain institutions are ”too-big-to-fail” and its impact on market expectations;

(L) corporate governance, including the impact of company conversions from partnerships to corporations;

(M) compensation structures;

(N) changes in compensation for employees of financial companies, as compared to compensation for others with similar skill sets in the labor market;

(O) the legal and regulatory structure of the United States housing market;

(P) derivatives and unregulated financial products and practices, including credit default swaps;

(Q) short-selling;

(R) financial institution reliance on numerical models, including risk models and credit ratings;

(S) the legal and regulatory structure governing financial institutions, including the extent to which the structure creates the opportunity for financial institutions to engage in regulatory arbitrage;

(T) the legal and regulatory structure governing investor and mortgagor protection;

(U) financial institutions and government-sponsored enterprises; and

(V) the quality of due diligence undertaken by financial institutions;

(2) to examine the causes of the collapse of each major financial institution that failed (including institutions that were acquired to prevent their failure) or was likely to have failed if not for the receipt of exceptional Government assistance from the Secretary of the Treasury during the period beginning in August 2007 through April 2009;

It’s hard to improve on that. Whether the commission carries out this mandate, Pecora-style, will depend entirely on who its chair and members are, and whether they hire a tough staff. The ten commission members are to be appointed, three by the Speaker of the House, three by the Senate Majority Leader, and two each by their Republican counterparts. The Staff Director is to be hired jointly by the Chair (a Democrat) and the Vice-Chair (a Republican). Interestingly, none are to be appointed by the White House, and President Obama has already issued a signing statement reserving the right to invoke executive privilege in cases where materials or testimony from the executive branch are requested under subpoena.

To get a flavor of what the original Pecora Committee did, consider this observation from Donald A. Ritchie, associate senate historian, in his study, “The Pecora Wall Street Expose”"

With the power of the subpoena, his staff would descend upon a banker or broker, and go through is records, file drawer by file drawer, page by page, selecting and photostating documents. Staff lawyers and accountants would assemble this material to reconstruct motivations, discrepancies, delinquencies, and frauds involved. They drew a multitude of charts, tracing every event and statistic. After narrowing down the documentation, they outlined the subject’s transactions in chronological narrative on letter-sized sheets with citations in the margins to specific documents which could prove each assertion.

Will the new Financial Markets Commission be this diligent in exposing the facts and kindling public demands for sweeping reform? You can be sure that House Speaker Pelosi and Senate Majority Leader Harry Reid will be getting friendly calls urging them not to make appointments that will embarrass the administration.

Three names have surfaced in the financial press as possible chairs, supposedly based on leaks from the Democratic leadership: Paul Volcker, 81, the former Fed Chairman, Arthur Levitt, Jr., 78, SEC Chairman during the Clinton era, and retired Supreme Court Justice Sandra Day O’Connor, 79. Volcker, an honest conservative, has turned against financial deregulation in recent years, and Levitt was a reasonably tough SEC chair, who bucked (and sometimes buckled) in the face of intense Congressional pressure from both parties not to crack down on abuses. Levitt now advises one of the most powerful private equity companies, the Carlyle Group, not exactly a constituency for tough reform.

Here are two better names:

*Paul Sarbanes, the retired Senate Banking Committee chairman. Sarbanes, a well-liked senator with admirers in both parties was both highly expert, incorruptable, and tough. In the fight to get what became the Sarbanes-Oxley Act, cracking down on accounting fraud, he showed real leadership. Sarbanes, now a vigorous 76, stepped down in 2006.

*Harvey Goldschmid, probably the most expert and public-minded SEC commissioner in recent decades. Goldschmid, 69, is now a law professor at Columbia. He was seriously considered by President Obama to chair the SEC, but was passed over in favor of the somewhat weaker Mary Schapiro.

It is important that this investigation be conducted not by a figurehead, but by one with the knowledge, passion, and predisposition to build the public case for sweeping reform, and without fear or favor.

Some Republicans, such as Richard Shelby, the ranking minority member on the Senate Banking Committee, are as disgusted with the Wall Street corruption as progressive Democrats are, though that does not describe the minority leaders in either house, Sen. Mitch McConnell and Rep. John Boehner, who will make the Republican appointments.

This could be one of those rare, historic commissions that changes the course of history — or it could be window-dressing. Stay tuned.

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Robert Kuttner is co-editor of The American Prospect and a senior fellow at Demos www.demos.org. His recent book is “Obama’s Challenge: America’s Economic Crisis and the Power of a Transformative Presidency.”