Commission Begins Documenting Financial Meltdown
DEBORAH AMOS, host:
And were going to an even longer term investigation into the causes of the financial crisis. A new congressional panel, the Financial Crisis Inquiry Commission, is trying to get to the bottom of it. Its mission is to determine all the root causes of the financial crisis and present those findings by the end of the year.
This week, the commission held its first public hearings on Capitol Hill. The Planet Money team, Alex Blumberg�and�Chana Joffe-Walt, have this report on how the hearings went.
ALEX BLUMBERG: First off, Chana, this commission has its work cut out for it. Everyone had their own pet theory about what caused the crisis.
CHANA JOFFE-WALT: And the commission's charter seems to pay lip service to all of them. It says, and Im reading here: The FCIC is charged with conducting a comprehensive examination of 22 areas of inquiry related to the financial crisis. Twenty-two.
BLUMBERG: Including, but not limited to, fraud and abuse in the financial sector, the global imbalance of saving and international capital flows, and the tax treatment of financial products and investments.
JOFFE-WALT: I really hope its not that last one. If after a year of hearings and subpoenas and depositions they came out with a report that said, eh, its the tax code, it would be a bit of a letdown.
(Soundbite of gavel)
Mr. PHIL ANGELIDES (Chairman, Financial Crisis Inquiry Commission): The meeting of the - oh good the mikes work. The meeting of the Financial Crisis Inquiry Committee Commission will come to order.
BLUMBERG: So thats Phil Angelides messing up the title of the commission he is chairman of. First up were the bankers. The heads of the four biggest banks on Wall Street - JP Morgan Chase, Bank of America, Morgan Stanley and Goldman Sachs.
JOFFE-WALT: And they had a plan. Number one, show you're apologetic. Number two, dont apologize for anything specific. Number three and most importantly, assure everyone things have changed, things are better now.
BLUMBERG: For example, Commissioner Heather Murren asked Lloyd Blankfein, head of Goldman Sachs, do you need more regulation? And he replied, well, we have a new regulator now, the New York Fed, and its much more on the case than the one we used to have, the SEC.
Mr. LLOYD BLANKFEIN (CEO, Goldman Sachs): I mean every day dozens of people from the New York Fed come in and they know every part of our business, look at papers, our processes, procedures in a very, very - our regulation is different now.
Ms. HEATHER MURREN (Commission Member): So is there yes in there, that there should be more regulation, more supervision?
Mr. BLANKFEIN: Well, there should have been more than there was in September under the old regime, and right now it feels much different, it feels like a lot of regulation, and appropriately a lot.
JOFFE-WALT: Well, that was the morning panel. The next panel to come before the commission in the afternoon - they saw things a little differently.
Mr. PETER SOLOMAN (Former Vice Chairman, Lehman Brothers): I dont think there's been great improvement.
BLUMBERG: This is Peter Soloman. He is not some activist or anti-Wall Street crusader. He was actually vice chairman at Lehman Brothers in the 1980s, and now he runs his own investment firm.
JOFFE-WALT: Peter Soloman says the major cause of the crisis: the four guys you just heard from this morning, the big banks. In fact, this is the theme of all of the panelists in the next session, all of whom were finance guys. They all said the big banks spent a lot of money trying to get Congress and regulators to do what they wanted. First you're going to hear Peter Solomon and then Michael Mayo, a financial services analyst with Calyon Securities.
Mr. SOLOMON: I mean, you cant have this much lobbying, this much money spent without - I assume these folks wouldnt do all that unless they thought they were getting value received.
Mr. MICHAEL MAYO (Financial Services Analyst, Calyon Securities): The revenues the four banks represent this morning equal GDP of Argentina. If its Argentina against Sheila Bair, who's going to win?
BLUMBERG: Sheila Bair, for those who dont know, she is the head regulator for commercial banks.
JOFFE-WALT: So its sort of weird. Here you have a commission created by Congress to figure out what went wrong at the big banks, and one answer that seems to emerge: Congress cant resist the money the big banks throw at them.
BLUMBERG: Keith Hennessey, one of the commissioners who used to be George W. Bushs senior economic advisor, actually spoke to this paradox. In his written testimony he alluded to the fact that except for the continued efforts of a few members of Congress, this commission would never have been created. He said -and I'm reading here: I surmise that most people in positions of power are not particularly excited that this commission exists. And he goes on: Other than the members of Congress who created this panel, and a couple of hundred million Americans who are justifiably furious with what happened last year in Washington and Wall Street, I am not sure who wants us to succeed.
Im Alex Blumberg.
JOFFE-WALT: And I am Chana Joffe-Walt, NPR News.