Financial Crisis Inquiry Commission: A User’s Guide

What you need to know to follow the long-awaited Financial Crisis Inquiry Commission hearings.

This week begins the long-awaited first hearings of the Financial Crisis Inquiry Commission (FCIC). This is a bi-partisan 10-member commission created by Congress to investigate the causes of the financial collapse. It is mandated to create a special report by December 15th, 2010, and will be holding hearings year round. The Commission is expected to have their webpage — fcic.gov - go live today. I’ll be blogging the FCIC live from the hearings through Thursday right here. First, an overview.

The FCIC is modeled in part on the Iraq Study group, and in part on the New Deal’s Pecora Investigation. Pecora, in the testimony he found, uncovered a variety of abuses that mobilized the public to pass the banking regulation that provided the financial sector for the postwar boom in the real economy: Glass-Steagall, the Securities Act, and the Securities Exchange Act. Several members of the FCIC are hoping to have policy recommendations available for Congress in their final report.

As for the committee itself, there are a lot of hopeful signs. Brooksley Born, who was pushed out of her job in the late 1990s by Larry Summers, Robert Rubin and Alan Greenspan for trying to bring Credit Default Swaps (CDS contracts) under the regulatory umbrella, a story well told in the Frontline documentary: The Warning, is on the commission. Keith Hennessey, who in addition to being a blogger, was Director of the National Economic Council for President Bush in 2008 (may want to use subpoena power to learn more about what was being hidden from him by Paulson, Geithner and Bernanke during the crisis), is also on the committee. Phil Angelides has secured the ability to grant whistleblower status to witnesses, a move that may get some surprise testimony.

What will the commission bring?

Wednesday

There are five panels over the two days, three on Wednesday and two on Thursday.   The first panel, “Financial Institution Representatives”, has the CEO/Chairman of each of the major four banks:  Lloyd Blankfein of Goldman Sach, James Dimon of JPMorgan Chase, John Mack of Morgan Stanley, and Brian Moynihan of Bank of America.

If there are going to be headline grabbing revelations at this commission, it will be from this panel.   There are any number of questions to ask these four CEOs, and it is just a matter of having enough time to get through the most important ones.

The next panel, “Financial Market Participants”, will have members of the investment community:  Michael Mayo, a director of Calyon Securities, Kyle Bass of Hayman Advisors, and Peter Solomon of Petere J. Solomon Company.   The presumption is that they’ll give an investor perspective on what was going on in the financial markets over the past decade, and their interactions with both the collateralized markets and the largest banks.

The last panel of Wednesday will be “Financial Crisis on the Economy”, which will give a much needed perspective on the crisis from the point of the real economy and regular people.   There will be C.R. Cloutier, a past chairman of the Independent Community Bankers Assocation, who will likely talk about pressures community banks felt from larger banks their unregulated subprime lending arms.   There will be Dr. Rosen of Berkeley and Dr. Zandi of Moody’s Economy.com to talk about the impact on the real economy and the real estate market.   And in a heartening sign, Julia Gordon of the Center for Responsible Lending, who will certainly give perspectives from the point of view of individuals who have been run over by the past decade.

Thursday

The two panels on Thursday will interview government officials, at the federal level for the fourth panel and at the state level for the last one.    The questioning of Attorney General Eric Holder will be interesting to see how much the committee wants to push him. State Attorney Generals, including Lisa Madigan of Illinois and John Suthers of Colorado will be testifying.

Who I think will be most interesting to hear from on Thursday is Sheila Bair, Chairman of the FDIC and a hero of financial reform. After a long year of surviving Treasury Secretary Geithner’s efforts to remove her from her office, and preventing the grossest subsidies from taxpayers to banks hidden in the Geithner “PPIP” Plan from going through, she’ll probably have a lot of interesting things to say.

Mike Konczal is a fellow at the Roosevelt Institute. He also blogs at Rortybomb.