The Huffington Post featured this “New Agenda For America” on its front page and posted a giant graphic on the front page of the Business Section.

I was honored to be included in this list of distinguished Progressive thinkers, and a copy of my article, which originally appeared on the New Deal 2.0 Web site, appears below:

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Today, we have the highest level of income inequality in our nation’s recorded history. We must address the structural flaws in our economy that created, and continue to widen, this divide. History teaches that extreme inequality leads to political instability. We cannot assume that we are immune.

In President Obama’s words, the middle class is experiencing “the American Dream in reverse.” Rising long-term joblessness and the possibility of 13 million foreclosures (more than one in every four American mortgages) create the potential for the former middle class to move from frustration to anger — an anger sparked by reduced circumstances and the belief that they have been treated unfairly.

With each job loss or foreclosure, another family — now on a down-ward spiral — potentially loses its faith in our basic economic system and our basic system of governance. America’s ongoing vitality requires that people trust that these systems work, and that our democracy is self-correcting. With rising income inequality, this trust is now at risk.

America has never been a nation of haves and have nots. If the gulf widens, it’s hard to imagine that our future will be marked either by a healthy economy or a healthy democracy.

The only other time in our nation’s recorded history that income inequality approached current levels was 1928, just before the Great Crash. The New Deal eliminated the excesses of an unsustainable system. It was not easy then, and it will not be easy now. But, it is essential.

“The modern history of finance, combined with ever advancing technology, clearly shows that the locus of the next crisis is not predictable. We will always be creating regulations to prevent the causes of yesterday’s failure.”

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Last week The Wall Street Journal ran an article titled, Citi Management Gets Generally Good Review. The Journal reports that an “outside review of Citigroup Inc.’s management team has concluded that it is generally in good shape,” and explains:

The review, conducted this summer for Citigroup’s board by recruiting and consulting firm Egon Zehnder International, was triggered by the government’s stress tests of top banks last spring. Companies found to need more capital were required to conduct assessments of their management and report the findings to federal regulators.

This evaluation of Citigroup’s management is an indicator of how lack of accountability ultimately permeates any system that acknowledges firms are too big to fail.

In my book on practical entrepreneurship, one of the points I made was that when you go out on your own, as every small business person knows, there “is no grade of A for effort,” or particularly rewards for poor results that reflect “events beyond your control.”  When you run a smaller company, it does not matter how talented you are, how manifestly brilliant your plan is, or even if a totally unforeseeable, once in three decades hurricane, wipes out the total stock in your warehouse:  If expenses exceed cash flow, the business fails and you are out of a job.

Similarly, the question of whether Citigroup has talented leadership is irrelevant. I suspect that the CEO is  brilliant.   However, by definition, the leadership of the bank performed poorly. The bank leadership, made decisions with negative ramifications that are almost unimaginable. The bank performed so poorly that it’s failure cost the taxpayers billions of dollars and required  the government to put the institution on life-support.  Moreover, this was all done because management performed so poorly hat it not only imperiled the bank but the entire financial system of the nation. Now, a Bloomberg survey, predicts that Citigroup will report a 2.6 billion loss for the third quarter, even as many other financial institutions have stopped bleeding.

In these circumstances, it seems inappropriate to even inquire about the managerial talent of the bank’s management. In any situation where market forces prevailed, the corporation would no longer exist, because of management’s poor decisions.

What’s particularly concerning here is that this type of report is probably a harbinger of what will happen if we adopt the Treasury Department’s proposed “too big to fail” plan.   Under the currently proposed reform plan,  our increasingly concentrated financial system will remain in place with additional regulations and the requirement that every firm maintain  up-to-date plans for its dismantling should it fail.  Let’s look at the reality of a situation where the government is confronted by a large firm, that has taken excessive risks, and should now be accountable for its action:

1.) The situation confronting the federal government will look eerily like the events surrounding Citigroup today.

2.) By definition,  the potential failure will have been caused by something unforeseen by regulators or management. Otherwise, it will not have occurred.

3.) Since it was not foreseeable, management (and probably regulators) will shun accountability. This aspect of  the culture of our financial system and the behavior of regulators is one lesson of today’s crisis.

4.) The threatened  entity will argue that — despite the in-place plans for unwinding required under the proposed Treasury legislation– recent developments demonstrate that no one really understands the consequences of the interconnections in the system. In addition, as vividly demonstrated in the failure of AIG, the institutions that will be affected by this failure will add to this chorus of voices calling for government intervention.

In testifying before the Joint Economic Committee of Congress last April, Nobel laureate Joseph Stiglitz put it this way:

“Before a crisis, every financial institution will claim that it does not pose systemic risk; in a crisis, almost all (and those that would be affected by a collapse) will make such claims.”

5.) The financial industry, aided by its well-documented political influence, will rally to argue that regulators risk further harm to the economy and the total  financial system by shutting down the institution.

Under these circumstances, what are the odds that accountability will be enforced and the otherwise bankrupt institution will be closed? Perhaps 10%.

6.) So, the government will ultimately prevent this  too large institution from failing and our economy will grow even weaker, as these institutions further distort the efficient allocation of capital, engage in high risk activities because of moral hazard,  maintain pay scales unrelated to their actual profitability, and through their size and implicit (or explicit) government subsidies stifle competition and distort the market for their services.

Critics of this argument will correctly point out that the Treasury  plan also mandates multiple new safeguards to create a less risky financial system. This is true, and these reforms are unquestionably valuable. However, they cannot be enough.  The modern history of finance, combined with ever advancing technology, clearly shows that the locus of the next crisis is not predictable. We will always be creating regulations to prevent the causes of yesterday’s failure.

Sheila Blair, the head of the FDIC, recently argued that the doctrine of  “too big to fail” must end. According to The New York Tines, in speaking to a meeting of the Institute for International Finance, she said:

“I believe that the new regime should apply to all bank holding companies that are more than just shells and their affiliates, regardless or not whether they are considered to be systemic risks,”

Yes, all entities must be accountable for their results and subject to shut-down.  However, as suggested above, government authority is pointless when potential systematic risk is permitted to exist.  When the moment of decision comes, this shut-down authority will never be exercised.

Recently, as part of the New Deal 2.0 blog of the Roosevelt Institute, I argued that we needed smaller financial institutions, whose failure could occur unimpeded by the government, without creating a risk to the overall economy. This will require enormous  political will, and is the kind of hard decision that we must not avoid.

One of the reasons the reforms of the Roosevelt Administration stabilized the nation’s banking system for almost a century was that it did not shrink from such hard choices. In last week’s article, I pointed out that then, as now, the choice was between large super-financial institutions (favored by the industry) and mandating smaller, focused entities — as ultimately required by Glass-Steagall.  New Deal  efforts succeeded because FDR and his Administration did not shrink from making this hard decision and fighting to bring it to life.  Ultimately,  market-based failures are the only way to ensure accountability.  Today’s Citigroup report shows how easy it becomes, once market judgments are removed, to prevent the disciplines that govern all of the other sectors of the economy.

This is not an argument that Glass-Steagall in its original form would have prevented the current crisis. Rather, it is an argument that the principles of Glass-Steagall provide a valuable guide for how we could reform today’s system.  By separating companies according to lines of business, the nation gains the following advantages:

• A more robust financial system. Different types of entities (commercial banks, underwriters, insurers) would all be pursuing different business models. In this diverse marketplace, they would be unlikely to follow the lemming-like strategies that made the entire system so vulnerable to securitized mortgages, or whatever becomes the popular product-of-the-moment.
• Decreased potential for systematic risk. This combination of smaller institutions, pursuing divers profit-making strategies, will  decrease the possibility that the failure of any one firm will create a systematic risk to the financial system.
• Capital would be allocated more appropriately. The efficient allocation of capital is the ultimate purpose of our financial sector, so this benefit should weigh heavily, if not absolutely, in our thinking. As entities focus on specific aspects of financial activity, capital would flow to them, and be allocated in the larger society more efficiently.  We have witnessed how larger entities have systematically allocated capital to high risk activities (often with zero-sum benefits for society),and failed in this fundamental mission.
• Less distorting market power in the financial sector.  No one believes its good for the government to be involved in setting executive wages.  One reason this has happened is because the largest financial institutions lack effective competition, so profits (or perceived profits or industry norms resulting from excess profits) have permitted pay to skyrocket. Greater competition, which becomes possible as existing entities decrease in size,  has the potential to lower the market distorting advantages of the largest firms. Over time, in this  more competitive market without government subsidies, the excess profits now going into executive pay would disappear.
• A less fragile financial system. More is better. Any system that is dependent on a limited number of entities or components is  inherently weak. Whenever possible, NASA create a backup capability in spacecrafts on the assumption that individual systems will fail–no matter how carefully they are checked — and this creates an unacceptable risk. Our financial system is now like a vulnerable spacecraft with no backup systems.
• The benefits of greater competition. Effective competition creates innovation, new approaches to business problems, innovative services, and a generally healthier, more dynamic system. America desperately needs that kind of customer-focused creative, innovation in our financial system today.
• Better regulatory oversight.  Do we really believe that in the future regulators will  be able to understand the risk dynamics of our huge financial entities? Smaller, focused entities have fewer moving parts and require less expertise in multiple arenas. To the extent the nation needs effective regulation, it’s far more likely to occur under these circumstances.
• Decreased political power that distorts markets. Wealth inevitably leads to the accumulation of political power. This power is inevitably used to protect entrenched interests.  One of the strengths of America has always been that we are a  land where many voices are heard. In a more diverse financial system, different participants are likely to have different viewpoints, and I would argue that the political influence of a few large entities is inherently higher than the sum power exercised by a diverse industry.

My earlier article on the principles of Glass-Steagall received a number of valuable comments.  Many raised important suggestions and valid criticisms. However, I was nonetheless left with one lingering question: What did the authors of the comments specifically suggest we should do?

We all know moral hazard is a problem. We know too big to fail is a problem. To it’s credit, the Treasury has proposed one solution. I have proposed the outlines of another, because I cannot see a workable alternative to a break-up of financial firms.  At the Joint Economic Committee (JEC) hearing, Stiglitz argued for a breakup modeled on a Glass-Steagall model, saying,

“We have little to lose, and much to gain, by breaking up these behemoths, which are not just too big to fail, but also too big to save and too big to manage,”

In the same spirit, MIT economist Simon Johnston argued at the JEC hearing for revising the antitrust laws thereby requiring a break-up based on regional size or type of business. Recently, at The New York Times Economix blog, Johnson similarly wrote, “We need to go back to Brandeis who, with his extensive experience on the interface between politics and law, thought that breaking up big firms was essential.” Right now, we need to solve this big question: Should some version of the Treasury plan be adopted or should the nation mandate some form of break-up? The earlier article led to many comments that said, in effect, “I agree that the Treasury proposal will not work but I don’t know that we need to break up the banks.”

So, here’s the challenge, and the nation desperately needs an answer.  If you disagree with the Treasury plan, and you disagree that the banks should be broken-up, what specifically should we do?

This is the second article in a three-part series on the FCIC and financial regulatory reform. The article originally appeared at the New Deal 2.0 blog, where I am a Braintruster.

As a candidate, President Obama decried the removal of Glass-Steagall without an adequate regulatory replacement.  In March 2008, speaking at Cooper Union  in New York City, he said:

“..we have deregulated the financial sector and we face another crisis. A regulatory structure set up for banks in the 1930s needed to change, because the nature of business had changed. But by the time the Glass-Steagall Act was repealed in 1999, the $300 million lobbying effort that drove deregulation was more about facilitating mergers than creating an efficient regulatory framework.”

Now,  Secretary Geithner has proposed a revised regulatory structure, that relies on a super-regulator to oversee entities that are “too big to fail.”  Last week, in testimony before the House Financial services Committee Paul Volcker, the former Chairman of the Federal Reserve, expressed skepticism about the concept of adequately regulating banks that were “too big to fail” and suggested a system that separated high risk activities from commercial banking. He effectively advocated an updated version of the Glass-Steagall Act,  although Volcker avoided using this term . As discussed below, I agree.

The decisions we make in our current  effort have the potential to influence the nation’s prosperity for at least a generation. The principal job of the financial system is to allocate capital appropriately.  When it does its job well, the economy has the greatest chance of thriving.  When it performs poorly,  productive activities are unable to acquire the capital they need.  Today, we are experiencing the results of an extreme failure on the part of the financial system to direct capital appropriately.

With so much at stake, the American people deserve a full explanation for why one vision of the financial system is superior to another.  As a consequence, this post is linked to a petition asking the Financial Crisis Inquiry Commission and the Treasury Secretary to explain in detail their reasons for recommending, or not, a system that relies on a highly concentrated, limited number of interlinked financial entities who are clearly “too big to fail,” and who mix activities that are vital to the health of the nation with high risk activities that are frequently described as a casino.

To date, I have been shocked to discover that I cannot discover any coherent statement by the Executive Branch which explains the rationale for its current proposal as opposed to the type of system  advocated by Paul Volcker and others.

This petition does not advocate a specific position. Rather, it is a request that the Financial Crisis Inquiry Commission fully meet its mandate to inquire, and that the Executive Branch fully explain its reasoning.

In our democracy, this request for a full explanation should be unnecessary.  However, I am promoting this extra level of public engagement to ensure our process of full public debate works.

Before reading the rest of this post, click here to sign the petition.

My conclusions, as described below, may change once I see the detailed explanations  requested in this petition. However, at this moment here is why I believe we will be a far healthier society with smaller less integrated financial institutions.

I subscribe to the view that we need an updated version of the Glass-Steagall Act that ultimately restricts the activities of  financial institutions into one of  four types of  entities: commercial banks, insurers, investment banks (including underwriting, brokerage activities, and securities related advice), and speculative trading.  In this updated vision of a Glass-Steagall 2.0, investment banks would not be permitted to issue securities and operate hedge-fund like trading operations.

The definition of freedom, going all the way back to Athens, is the ability to do whatever you want provided you don’t hurt anyone else. Since the financial system has now caused misery for millions of people and received special subsidies from the federal government, the notion that financial institutions have an inherent right to operate in any and all lines of business is simply wrong.  The central question must be what’s best for the nation.

There are five principal questions that should guide the development of financial system reform.

• First, how do we restore trust and confidence in both our financial institutions and in the self-correcting nature of our democracy?

Right now, millions of Americans are suffering economically. Millions of additional people will suffer before this Great Recession ends. This is a cruel reality.  Americans  who thought they would have comfortable lives are waking up to diminished circumstances. They are also increasingly concluding (right or wrong) that rather than increase the total income of our society the financial sector engineered a huge transfer of income from the middle to the top.  People are increasingly angry, cynical and mistrustful.

All of this means that whatever financial reform is undertaken the government must demonstrate that our nation is not, as MIT economist Simon Johnson asserts, run by financial Oligarchs.

The public perceived the financial bail-outs  as favoring Wall Street, at the expense of Main Street.  In addition, millions of suffering people feel like they are suffering, while those at the top–who caused the crisis–are not sharing the pain.  We are at a moment when cynicism, mistrust and anger could  grow to even higher levels in our society. As I wrote in It Could Happen Here, such a reaction move us down the dangerous path to political instability.

The parallel to the era of the New Deal is real. By breaking up the financial conglomerates, the  Glass-Steagall Banking Act of 1933 demonstrated that America was run for the benefit of the general population, and not an elite group. The same symbolism would hold true today. A Glass-Steagall 2.0 would send a strong, and much-needed, message to the American people that we remain a vibrant, self-correcting democracy.

• Second, what does experience tell us about regulatory policy?

The creation of a super-regulator, charged with monitoring entities deemed “too big to fail,” will necessarily lead to an enormous regulatory structure.  Imagine both the complexity and lack of certainty that will be involved in such a regulatory effort.

In his testimony before the House Committee, Volcker similarly expressed concerns on this issue:

…However, the clear implication of such designation, whether officially acknowledged or not, will be that such institutions, in whole or in part, will be sheltered by access to a Federal safety net in time of crisis; they will be broadly understood to be “too big to fail.”

Think of the practical difficulties of such designation. Can we really anticipate which institutions will be systemically significant amid the uncertainties in future crises and the complex inter-relationships of markets? Was Long Term Capital Management, a hedge fund, systemically significant in 1998? Was Bear Stearns, but not Lehman? How about General Electric’s huge financial affiliate, or the large affiliates of other substantial commercial firms? What about foreign institutions operating in the United States?

Regulated markets function best when we are able to establish a few Bright Lines, with clear rules that are known by all the players and, to the maximum extent possible, limited uncertainty.  One of the virtues of breaking up firms by function is it establishes bright lines, and as a nation we know how to run the resulting competitive markets effectively.

In Freedom from Fear, the Pulitzer Prize winning New Deal historian David Kennedy, describes these bright lines as one of the virtues of the original Glass-Steagall Act. He also notes that the Roosevelt Administration faced  very  questions about regulating large financial institutions that are remarkably similar to what we face today:

…the New Deal confronted a choice… it could accede to the long-standing requests of the major money-center banks–especially those headquartered around Wall Street–to relax restrictions on branch and interstate banking, allow mergers and consolidation, and thereby facilitate the emergence of a highly concentrated private banking industry, with just a few dozen powerful institutions to carry on the nation’s banking business…But the New deal did neither…[it separated commercial and investment banks and established what would be the FDIC]

…These two simple measures did not impose an oppressively elaborate new regulatory apparatus on American banking, nor did they levy appreciable costs on either taxpayers or member banks. But they did inject unprecedented stability into the American banking system.”

With “These two simple measures” FDR and his Administration made the hard choice that ensured a stable system for over half a century.  Rather than accept the status quo, they created a new system that operated effectively, and with far less regulatory oversight than would otherwise have been required.   Our contemporary government must now act with a similar resolve.

• Third, what solution will minimize risk while ensuring that our financial system fulfills its responsibility to appropriately allocate capital?

This question has two parts. First, the absolute failure of the existing financial system  suggests there is no reason to believe larger institutions allocate capital more efficiently than smaller, focused entities.  In fact, recent events suggest that larger horizontally integrated institutions may do the reverse.  It’s possible that financial entities in multiple lines of business are  systematically allocating capital away from the patient investments that most benefit our society and channeling capital into short-term high-risk activities involving trading and speculation.

So, the answer to this question revolves around what types of entities create the greatest risk for the society, sine greater size does  not seem to lead to more efficient allocation of capital.  The answer is straightforward. As many observers have repeatedly noted,  institutions that are too big to fail pose a clear risk to the financial system.

In fact, Neal Barofsky, the Tarp Inspector, recently expressed sentiments that our level of risk has increased during the past year. Since the start of the financial crisis, the size of the remaining banks has increased, making the system more concentrated and more dependent on the few remaining players. As a consequence, Barofosky believes the financial system “may now be a far more dangerous place”.

Second, the potential problems associated with large financial institutions is not simply their size, but the extent to which they inevitably become interconnected.

Third, if there is one thing we learned in this crisis it’s that regulators must be willing to regulate. The Federal Reserve, which the Geithner plan proposes as the super-regulator, failed utterly in preventing the sub-prime mortgage debacle. Do we really believe that any entity will be able to effectively regulate, or even understand, the risks associated with the activities of our existing financial conglomerates?  In contrast, smaller focused institutions will pose less risk to the system if one fails and be easier for regulators to understand.

Fourth, the bright lines provided by clear legislation create market guidelines that are far less likely to be arbitrarily weakened with changes in the philosophy of the Executive Branch.

Finally, a system composed of smaller focused financial institutions will be more resilient as different types of institutions will be following different business models.  Today, our limited number of financial institutions seem to gravitate to toward the newest, profitable financial innovation.  If the innovation goes south–such as securitized mortgages–all of the institutions, and the entire system are endangered.  Smaller, focused entities must necessarily pursue a plethora of business models, which provides some immunity from this type of contagion.

• Fourth, what impact will the policy have on competition and accountability?

As many others have said, institutions that are too big to fail are ultimately not accountable. Period.

It is this lack of accountability which has severely undermined the faith of the American people.  In the absence of the possibility of the downside, discipline disappears, high risk is the obvious course of action, and the rest of the society wonders why entities that never pay the price for failure warrant high compensation if they succeed. In a capitalist economy, risk and reward are meant to be intimately linked.

There is another important factor at work here as well. The original Glass-Steagal Act effectively served as an antitrust constraint in the financial sector as well.  Since the beginning of the crisis, concentration in the financial services industry has risen.   By correctly shaping a Glass-Steagall 2.0, we can restore higher competition to this arena.

• Fifth, should the plan give special deference to the status quo?

The answer must be no. First, shareholders remain whole. They receive stock in each of the individual entities created from a larger whole. Second, none of the benefits associated with financial supermarkets that were articulated at the time the original Glass Steagall act was repealed actually materialized.

In his April 2009, Joseph Stiglitz testified before the Joint Economic Committee of Congress and eloquently addressed this question:

“The only justification for allowing these huge institutions to continue is that there are significant economies of scope or scale that otherwise would be lost. I have seen no evidence to that effect. Indeed, as I have suggested, these big banks are not responsible for whatever dynamism there is in the American economy. The touted synergies of bringing together various parts of the financial industry have been a phantasm; more apparent are the conflicts of interest—evidenced so clearly in the Worldcom and Enron scandals earlier this decade. In short, we have little to lose, and much to gain, by breaking up these behemoths, which are not just too big to fail but also too big to save and too big to manage.”

This discussion is not a statement that,as some have asserted,  repealing the original Glass-Steagall Act was the cause of the current financial crisis. Rather, a Glass-Steagall 2.0 would address new realities, and would benefit from what we have learned in this crisis. It is, however, a statement that the fundamental approach of simplicity embodied in the original Glass-Steagall Act is how we should now orient our policies.

Whether or not you agree with this proposal, please sign this petition. The essence of a democracy is a full, often messy, generally contentious debate. What’s most important now is that this happen, and that everyone be as informed as possible.

The Financial Crisis Inquiry Commission (FCIC), which started work last week, will have a significant impact on the health of our democracy. When the FCIC completes its efforts, we will either be stronger or weaker as a nation. There is no middle ground. We must fervently hope that the Commission rises to this challenge with a comprehensive investigation.

The work of the Commission is important for two reasons. First, by openly educating the public about the causes of the financial crisis it will pave the way for reform. Existing interests will inevitably resist change. Reform becomes far easier when its advocates can point to a roadmap of specific problems that must be addressed. This is one of the central lessons of the Pecora Commission’s work. By clearly demonstrating why the Great Crash occurred, the Pecora Commission created the rationale, and the necessary public support, for legislative initiatives such as the Glass-Steagall Act, and the establishment of the Securities and Exchange Commission.

Second, America is becoming an angry nation, with diminished faith in its institutions. There is a growing sense among all but the wealthiest Americans that “the game is rigged” against them. The public perception of the work of the FCIC will inevitably affect, for better or worse, our basic level of trust in the nation’s democratic system.

In Trust, Francis Fukuyama demonstrated that societies with high trust are vibrant and productive, because individuals trust their interests will be protected. In the absence of trust, rigid work rules, contracts, litigation, and a range of other costs are created as everyone in the economy attempts to protect him or herself. In 1972, Kenneth Arrow, the Nobel laureate wrote, “Virtually every commercial transaction has within itself an element of trust.”

As discussed in It Could Happen Here,trust is a central element of a healthy democracy as well as a healthy economy. When trust disappears, people become increasingly cynical. As this cynicism grows, citizens become disengaged from the political process: There’s no point in voting or working toward any civic-related goal if you cynically believe nothing will ever change. At the same time, government becomes increasing ineffective as people no longer believe elected officials will fulfill their responsibilities or promises. As a result, a cynical society can quickly become a paralyzed society.

Ultimately, cynicism can also play a role in shifting a paralyzed society toward actual political instability. One of the causes of the collapse of the Soviet Union was the extraordinarily high degree of cynicism toward the government. Two centuries earlier, the government of Louis XVI was almost universally mistrusted before the French Revolution. In part, because cynicism has never been a central aspect of the American character, we have always regarded our nation as immune to such extreme circumstances.

I fear that one result of the development of our trader nation culture—which encourages us to see our participation in the economy with a “heads I win tales you lose attitude”– is unhealthy, growing cynicism.  Last week, I wrote an article that appeared on my blog, The Business Insider,, the New Deal 2.0 blog, in The Huffington Post and elsewhere. The article critiqued the data and conclusions of a front page Wall Street Journal article that inaccurately down-played the extent of economic inequality. The article attracted hundreds of comments across the Web. The vast majority of these comments effectively said: What else did you expect? I discovered that cynicism is the reigning sentiment.

We are not becoming a nation of whiners. Far worse, we are becoming a nation of cynics.

To date, the growing cynicism of the American public is sadly justified. No one on Wall Street has apologized. No one has accepted responsibility for causing the crisis. While jobless victims of this crisis face increasing foreclosures, many of the firms that caused the crisis are—with government assistance—returning to past habits.

Few of us were alive at the time of the Pecora Commission. However, many of us remember an equally famous investigation that gripped the attention of the country: The Senate Watergate Committee (formally known as the Select Committee on Presidential Campaign Activities). In a bipartisan effort, Senators Sam Ervin and Howard Baker led the country through a national catharsis that exposed wrongdoing in the Executive Branch and restored vital trust in our democratic institutions.

Both of these investigations reflected essential, self-correcting mechanisms that have allowed our democracy to flourish for over two centuries: The ability to hold individuals—no matter how powerful or wealthy—equally accountable for their actions, to publicly acknowledge when something has gone wrong, and to enact meaningful reform.

The work of the FCIC represents both a similar opportunity and a potential danger. By shining a bright light on the causes of this crisis, the FCIC has the chance to once again demonstrate that no one is approve reproach and to provide a clear map of the problems that successful reform must address. With these results, the FCIC can demonstrate that the American system continues to work, and enhance trust in our democratic system.

The danger is that the FCIC does not fulfill this critical mandate, and it is ultimately perceived as failing to have aggressively searched for the truth. If this happens, my hypothesis is the nation will almost inevitably slide further on the path toward paralyzing cynicism. What happens then?