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Financial Crisis Inquiry Disappointment

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April 15, 2010

The Financial Crisis Inquiry Commission (FCIC) has been widely criticized for its lame efforts at investigating the causes of the financial crisis.  As I pointed out on January 11, a number of commentators had been expressing doubt concerning what the FCIC could accomplish before the commission held its first hearing.  At this point — just three months later — we are already hearing the question of whether it might be “time to pull the plug on the FCIC”.   Writing for the Center for Media and Democracy’s PRWatch.org website, Mary Bottari posed that question as the title to her critical piece, documenting the commission’s “lackluster performance”:

The FCIC is a 10-person panel assembled to report on the meltdown to President Obama later this year.  The New York Times reported last week what was becoming increasingly obvious: the commission was in shambles.  The commission waited eight months before having its first hearing.  A top investigator resigned due to delays in hiring staff, no subpoenas have been issued and partisan infighting means few new documents have been released that would aid reporters in piecing together the crime scene, even if  FCIC investigators are not up to the task.  Worse, it seems like the majority of staff  have been borrowed from the complicit Federal Reserve.

These problems were on full display in last week’s hearings.  The three days of hearings were marked by some heat, but little light.

The FCIC’s failure to issue any subpoenas became a major point of criticism by Eliot Spitzer, who had this to say in a recent posting for Slate :

The Financial Crisis Inquiry Commission has so far been a waste.  Some momentary theater has been provided by the witnesses who have tried to excuse, explain, or occasionally admit their role in the cataclysm of the past two years.  While this has ginned up some additional public outrage, it hasn’t deepened our knowledge about what critical players knew or did.  There is a simple reason for this:  The commission has not issued a single subpoena.  Any investigator will tell you that you must get the documentary evidence before you examine the witnesses.  The evidence is waiting to be seized from the Fed, AIG, Goldman Sachs, and on down the line.  Yet not one subpoena.

Rather than accept Robert Rubin’s simple disclaimers about Citigroup, why hasn’t the FCIC combed through the actual communications among the board, the executive committee, the audit committee, and the risk-management committee?  Why hasn’t the FCIC collected AIG’s e-mails with the Fed and Goldman Sachs?  Unless the subpoenas are issued, we will lose the chance to make the record.

As Binyamin Appelbaum pointed out in The Washington Post back on January 8, if a financial reform bill is eventually passed, it will likely be signed into law before the mid-term elections in November – one month before the FCIC is required to publish its findings.  As a result, there is a serious question as to whether the commission’s efforts will contribute anything to financial reform legislation.  Given the FCIC’s unwillingness to exercise its subpoena power, we are faced with the question of why the commission should even bother wasting its time and the taxpayers’ money on an irrelevant, ineffective exercise.

Although Mary Bottari’s essay discussed the possibility that the FCIC might still “get its act together”, the cynicism expressed by Eliot Spitzer provided a much more realistic assessment of the situation:

Americans have been betrayed by Washington over financial reform.  Our leaders have failed to get the evidence, failed to push back when clearly inadequate explanations were provided, and failed to explore the structural reforms that will work.  Pretend tears will drip from bankers’ eyes after the consumer protection agency is created.  Then their wolfish teeth will slowly break into a grin, the pure delight that Washington has failed to do anything meaningful to restructure the banking sector.

Just when it was beginning to appear as though we might actually see some meaningful financial reform find its way into law, we have been reminded that Washington has its own ways – which benefit the American public only by rare coincidence.




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