Back in July, the White House announced the creation of a Financial Crisis Inquiry Commission. That’s a lot of fancy words for a commission with a not-so-simple task: to get to the bottom of what caused last year’s financial crisis. The commission is charged with creating a report, which they will submit to Congress in December 2010. They met for the first time last month and like most federal commissions, it’s a motley crew. I spent yesterday updating the profiles of all 10 members. Not surprisingly, many of the commission’s members have strong Wall Street ties, both as employees of or lawyers representing the interests of the very financial institutions they’re charged with investigating.
The commission is comprised of six Democrats, appointed by the House Speaker and Senate Majority Leader, and four Republicans, appointed by the House and Senate Minority Leaders. The chair is Phil Angelides, a former candidate for governor of California and green real estate guru. It should be noted that Senate Majority Leader Harry Reid used two of his three picks to nominate prominent businesspeople from his home state of Nevada: Byron Georgiou, a Las Vegas-based lawyer and Heather Murren, a former managing director at Merrill Lynch who also happens to be married to the CEO of MGM Mirage in Las Vegas. (Between the three of them, they’ve donated $20,000 to Reid since 2001.)
Two key members of the panel are Brooksley Born, former head of the Commodity Futures Trading Commission, and Peter Wallison, a former Reagan aide who played a heavy hand in deregulating banks in the 1980s — both of whom cautioned about the financial crisis years ago. Born famously had lunch in 1996 with then-Fed Chairman Alan Greenspan, who told her to back off her push to regulate the financial derivatives market. This commission, presumably, is her second chance to push for tougher regulations.
The Center for Responsive Politics reports the 10 members combined have given over $1 million to federal candidates since 1989. Both former Rep. Bill Thomas and former Sen. and Florida Gov. Bob Graham raised thousands of campaign dollars from the same financial institutions they’re now investigating. Graham in particular raised tens of thousands of dollars from employees and PACs of Citibank, Bank of America and Goldman Sachs.
The transcript of panel member — and former director of the NEC before Larry Summers — Keith Hennessey‘s speech from the commission’s first meeting is fairly revealing. Notice how quick he is to divert blame for the financial crisis from Wall Street to Congress:
There is a temptation in this kind of process to look for villains, and indeed some have already been found and locked up. I expect we will uncover more. In Washington the easiest solution is to form an unruly political mob and march on Wall Street, and we have seen some of that behavior over the past year. I believe that part of our job is to help Washington policymakers also look in the mirror and realize that there are systemic pressures that created or exacerbated these problems, whether they are the iron triangles of particular financial interests working to weaken their oversight and regulation, or various subsectors using legislation as a competitive battleground, or the overwhelming bipartisan desire to do ever more to encourage homeownership, without regard for the adverse consequences of their actions. I strongly believe that politically popular laws enacted by Congress greatly contributed to the crisis, and I think it is essential we understand those causes.
This panel is akin to the 1930s Senate banking probe that followed the 1929 stock market crash. But unlike the hearings conducted by charismatic lawyer Ferdinand Pecora, this commission will not likely be doing any passionate yelling. They’ll probably hold a series of dignified meetings, then release a report next December to a few newspaper articles, telling us what we already knew. The two parties will likely butt heads frequently along pro-consumer/pro-business lines and their Wall Street ties certainly call into question their impartiality. It doesn’t seem like a very challenging task for a group with such economic experience and influence.