WASHINGTON -- It's unlikely congressional scrutiny of Wall Street's wicked ways will accomplish much -- unless, of course, Wall Street is arrogant enough to assume Congress is incapable of making life miserable for the securities industry.

True, as Rep. Paul Kanjorski (D., Pa.), the ranking member of the House subcommittee that held hearings Tuesday into analysts' conflicts, noted, Congress is particularly good at viewing these things through the rear-view mirror, at analyzing a problem after the damage is done.

Still, it's better that Congress should pay attention now than stick its head in the sand. This is especially so as the Bush administration is proposing privatization of a good chunk of John and Jane Q. Public's Social Security retirement funds. As a journalist, it was odd and exciting to be a witness at a congressional hearing. The media belongs at the table, however, not simply behind it, because financial-news outlets are part of the story. It's good for Congress to understand the role reporters and broadcasters played in the late bubble.

Some observations:

Rep. Richard Baker (R., La.) gets it. The congressman finds himself the head of a subcommittee that only recently received oversight authority of the securities industry. A Southern gentleman in the way he politely runs a hearing, Baker brings a complex view of capital markets reform to the job. On the one hand, he's got a populist bent and seems incensed by the shenanigans that go on on Wall Street. On the other hand, Baker freely admits that his free-market Republicanism makes him wary of proposing legislation to fix Wall Street's problems.

"I'm not turning my back on the question of a legislative remedy," he said, though he seems intent on using his committee as a bully pulpit rather than an enforcement agency. He comments frequently that he's sensitive to Wall Street's need to make a profit on its brokerage business. Unlike some politicians, Baker isn't narrow-minded in his approach, though he is, to be sure, a politician.

Baker's style offers a nice example of how it's easy for a visitor to Washington to be impressed by the aw-shucks nature of the House of Representatives. A former real estate broker, Baker told a tale of the specifics of Louisiana law that allows a broker to represent two sides of a real estate transaction, with certain restrictions. A Wall Street analyst should have at least as many restrictions as a Louisiana real estate broker, he quipped, to the delight of those in the hearing room.

More substantively, close observers of the congressional process should understand that Baker has more on his mind than keeping Wall Street analysts honest. He told me recently that he plans to undertake the first rewrite of the main laws from the 1930s that regulate the securities industry. Among other things, this would give the industry an opportunity to gain more liability protection in issuing IPOs, a move the Private Securities Litigation Reform Act of 1995 did not address. In other words, the populist Baker likely is willing to play ball with Wall Street, provided it cleans up its act.

Rep. Ken Bentsen (D., Texas), is the quiet star of the committee. A nephew of former Treasury Secretary and Sen. Lloyd Bentsen, the four-term congressman obviously knows more about these issues and is more insightful on them than any of his colleagues. That's no surprise: He's a former investment banker.

Bentsen is a fan of Regulation FD, the SEC rule that requires fair disclosure by public companies of material information. He also gave acting SEC Chairwoman Laura Unger a good grilling, suggesting that the commission already has the authority to go after Wall Street abuses but is ignoring them. In his opening statement, Bentsen made two points. First, Wall Street isn't following existing laws on disclosure. Second, it's in the interest of Wall Street firms to fix the conflict-of-interest problems it has.

Bentsen also wondered aloud if the Wall Street "scandal" is as bad as the "Game Show" debacle of the 1950s. Interesting question. For what it's worth, there's no doubt that Wall Street drank the Kool-Aid this go-round. Consider the disastrous investment Goldman Sachs made in Webvan, for example. They really were believing their own stories. That makes this situation a little different than Payola.

Harvey Pitt's officially taking the helm of the SEC can't happen soon enough. Nothing against acting chief Unger, but a lame duck isn't a good representative of the commission. The full Senate approved Pitt's nomination Wednesday afternoon. The House subcommittee would have been much better served hearing from him Tuesday, but he obviously couldn't attend.

For example, Unger spoke at great length without saying much about the SEC's view on Social Security privatization. The SEC doesn't have a position on Social Security privatization. She simply could have said that. Similarly, Unger's opinion on Regulation FD isn't nearly as relevant as Pitt's. In his confirmation hearings, Pitt made some mildly negative comments about FD. His fuller, empowered, opinion will be of great interest after he is sworn in as chairman.

Wall Street had better be taking careful notes. Congress is better at making noise than making policy. And Wall Street should be frightened at some members' ideas about financial markets policy. Rep. Michael Castle (R., Del.), suggested that the average consumer should be able to read a Wall Street research report. Congressman Castle obviously isn't concerned that an average consumer hasn't paid for a Wall Street research report, as those are intended for clients, who presumably can read them.

Rep. John LaFalce (D., N.Y.), suggested that Congress play a role in not allowing research analysts to be compensated based on investment banking commissions. Congress telling Wall Street how to pay its employees? Nervous yet?

By my count, 18 members of the subcommittee wandered in and out of the hearing at some point Tuesday, a busy day in Congress with votes taking place on numerous issues before Friday's summer recess. Capitol Hill is interested in Wall Street. Wall Street had better not ignore Capitol Hill.
In keeping with TSC's editorial policy, Adam Lashinsky doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Lashinsky writes a column for Fortune called the Wired Investor, frequently guest hosts the TechTV cable television news show Silicon Spin, and is a regular commentator on public radio's Marketplace program. He welcomes your feedback.