NEW YORK (TheStreet) -- Those who do not learn from history are doomed to repeat it -- and in many ways the past decade has been a repeat of the 1920s and 1930s, when a poorly regulated Wall Street brought the economy down and Washington attempted to impose rules and pick up the pieces.
As such, Richard Farley's new book, Wall Street Wars, is a timely look back at Depression era issues that lead to the creation of America's modern financial system. "The same struggles and the same interests, really, that formed the foundational regulatory environment that's really existed now for 80 years, those same issues are arising now in terms of how we're going to respond to 2008," Farley said. "All of our issues are rehashes of what's happened in the past."
But it's not all parallels, he notes. In 1932, the Senate's Pecora Commission investigated the 1929 Crash and found all manner of bad behavior on the part of financial institutions. Those findings were "the point of a spear" that got the public behind firmer regulations, he says.
Wondering why no modern version of Pecora had the same impact? So did Farley, and he asked former U.S. Rep. Barney Frank, who had been deeply involved in crafting the recent reforms. The answer, the Massachusetts Democrat said, was that between cable news, the Internet and all the talking points being promoted via a proliferation of media outlets, it is now impossible to manage the message the way reform-minded officials did in the 1930s.
Farley also notes that the revolving door between Wall Street and Washington goes way back. President Franklin Roosevelt's appointment of Joseph Kennedy, a bootlegger and father of a future president and two U.S. senators, to chair the new Securities and Exchange Commission was met with derision. However, Kennedy won them over by taking on the big fish of the era at the SEC and came to be viewed by Democrats as "the best appointment Roosevelt made."
While he sees the regulatory pendulum swinging toward heavy regulation with the passage of the Dodd-Frank Act, Farley is optimistic about the direction financial regulation is headed, saying: "I think we're in the working-out-the-kinks phase now in a lot of these laws, and I think they will change over time, and become better."