Underworlds of the Capital

I was intrigued that Pearson and Allen's "The Capital Underworld" described a struggle between legal regulation and individual opportunism in Washington that has changed little over the years. In their account of 1920s bootlegging in the nation's capital, Pearson and Allen chronicle the brazen persistence of rumrunners (some going so far as to conduct business under the office window of the head of prohibition enforcement), the war of tactics between lawbreakers and police, and the hypocrisy of Members of Congress who advocated strengthening Prohibition while pulling strings to save themselves from punishment when caught with liquor. These anecdotes parallel modern battles; federal regulators have tried to manage the financial system only to find new loopholes and obscure financial products spring up to evade the rules. Robust enforcement of our nation's laws, and the principles behind them, is clearly as challenging today as it was in the 1920s.

At times, enforcement can seem just as ill-fated as keeping down liquor during Prohibition. The shortcomings of the financial regulatory system were brought home to me when I observed the testimony of Federal Reserve Board Chairman Ben Bernanke to the Senate Budget Committee last week. While agreeing that investors who took reckless risks and helped bring down the financial system should face consequences for their behavior, Chairman Bernanke stated plainly that he did not know how to single those individuals out without harming others. Favoritism also remains a problem; Bernanke was forced to acknowledge that bailing out wealthy financiers is unfair, whatever the necessity of preserving the financial system. It is difficult to stay confident in federal management when competence and impartiality are suspect.

However, for all the faults in the government's attempts to regulate, I find some faith in the effort public officials put into keeping up appearances. Just as a 1920s reporter could end alcohol smuggling outside of the White House by writing it up in a newspaper, lawmakers today are sensitive to criticism and have responded to populist rage by hauling overpaid CEOs before congressional panels. While not everyone who acts against the public interest can be held to account, it is a mark of the strength of our democratic system that we try, even against as determined an opposition as Americans seeking liquor.