Washington: A US financial crisis fact-finding panel will hold its first meeting on Thursday, in what may be the Obama administration’s best hope of reinvigorating a push for tougher financial regulation.
The 10-member Financial Crisis Inquiry Commission—headed by an ex-California gubernatorial candidate—is charged with getting at the roots of the debacle that late last year brought world banks and capital markets to the brink of collapse.
Some critics say the causes of the crisis are already understood, ranging from deceptive mortgage lending and reckless debt securitisation, to irresponsible banker bonuses and unpoliced over-the-counter derivatives markets.
Dredging through all that again will only be a waste of time and a distraction from more urgent tasks, critics say.
But it’s also true that the crisis has not yet been examined from top to bottom in a public forum by a single panel armed with the power to subpoena witnesses and documents.
Key Senate and House of Representatives committees, often overwhelmed by political point-scoring and rigid ideological rhetoric, have not comprehensively tackled the task, despite the insistence of some lawmakers that it needs to be done.
The bipartisan commission, say its proponents, at least has the potential to profoundly influence policy. They point at the impact in the 1930s of the so-called Pecora Commission, on which the present panel is loosely modeled.
After the Wall Street Crash of 1929 that plunged the nation into the Great Depression, the Senate Banking Committee investigated, eventually hiring Ferdinand Pecora, a relentless New York assistant district attorney, to lead the probe,
The hearings that followed, with Pecora himself sometimes presiding, riveted the public and exposed rampant misconduct among some of the richest and most powerful men in America.
Legislation followed Pecora
The Pecora Commission was followed by the Glass-Steagall Act of 1933, which separated commercial banking from investment banking, as well as other 1933 and 1934 laws that today form the legal basis of the Securities and Exchange Commission.
Phil Angelides, former treasurer of California and failed candidate for governor in 2006 of that state, told Reuters last month in an interview that he’s no Ferdinand Pecora.
But the modern-day commission he chairs will convene at a time when the Obama administration needs a spark to reignite its drive for tighter oversight of banks and capital markets.
Now bogged down in Congress, financial regulation reform just six months ago appeared ready to sweep all obstacles before it, but its momentum has waned. Stiff resistance from powerful banking lobbyists has been a factor, as has the slow-walking of policy proposals by Republican opponents.
The House looks set to move on several of President Barack Obama’s draft bills before the end of the year, but there is no clear path forward in the Senate, especially with the intense debate over healthcare reform holding center-stage.
That could change, of course, and the commission is well-stocked with politicians and officials who know a thing or two about getting things done on Capitol Hill.
Angelides’ vice chairman is former House Ways and Means Committee chairman Bill Thomas. Former senator Bob Graham is a commission member. So is Brooksley Born, who formerly chaired the Commodity Futures Trading Commission. She is well-known today for years ago calling publicly, but unsuccessfully, for regulation of OTC derivatives.
Other commission members come from the business world, Wall Street and Washington think tanks. The commission is required to report its findings to Congress and Obama by 15 December 2010.