[bumped - BarbinMD]
This morning at 9 a.m. EST, the Financial Crisis Inquiry Commission will begin its first hearings with a line-up of executives from Goldman Sachs, Bank of America, JPMorgan Chase and Morgan Stanley. Too bad some of these looters and pillagers aren't being invited to show for another kind of line-up. "No. 3, step forward." Too bad there's no tough legislation to curb future activity like the past activity by banksters that created the giant mess we are still in. We have a loophole-ridden House bill that guarantees future bailouts for the too-big-to-fail crowd instead of legislation that makes clear that too-big-to-fail is too-big-to-exist.
But at least we get to have some theater where a few of the major players can tell us how they couldn't possibly have known that what they were doing would trash trillions in investments and put tens of millions out of work and out of their homes.
If you have the stomach for it, you can watch on C-Span. Some puff bios of the 10 commissioners, complete with photos, can be found here. The commission is scheduled to present a report on what it learns from the hearings and the rest of its inquiry on December 15. The FCIC web site is here.
Anybody expecting sparks to fly today will, I think, be sorely disappointed. So to get your adrenaline flowing before you tune in, you might like to check out this essay by Bill Moyers, "The Financial Lobby Owns Washington." If you can't play videos, there is a transcript here.
If you haven't seen Moyers's Journal program with Kevin Drum and David Corn, you should. It's here.
Aaron Ross Sorkin at The New York Times made some suggestions for questions the commissioners should ask.
Over at New Deal 2.0, Eliot Spitzer, William Black, and Frank Partnoy have put together their own list of questions, which appears below.
The three say:
The FCIC has not used subpoena authority or voluntary requests for information to obtain the background information essential in order to hold a real investigative hearing. In particular, it has not obtained AIG (and Fannie and Freddie’s) emails and other critical internal documents such as their financial models, internal accounting records, and loss reserve data that are readily available and vital to understand what caused the crisis. Any aircraft crash investigator knows how critical it is to find the “black box” that records the information that is typically essential to finding the cause. In the financial context, these AIG, Fannie & Freddie emails and internal accounting and risk records are the “black box” that any competent investigator would demand to review.
FCIC should use this first public hearing for two quiet purposes. The primary goal should be to develop information. The subsidiary goal is to put the CEOs on record as to what went catastrophically wrong, which will allow the FCIC to judge their candor as the facts are developed.
Below are three of the 10 questions they think should be asked at the hearings:
7. Warnings: What were the three most significant specific steps your banks took in response to the FBI’s September 2004 warning that the developing “epidemic” of mortgage fraud would produce a crisis if it were not stemmed? Why do you think the spread on nonprime mortgages fell after this warning, and other warnings? Why did bank loss reserves also fall during this time? What were your bank’s analyses of these risks and the adequacy of loss reserves (industry-wide and at your bank) and how did they change as the markets exhibited these perverse patterns? What did your bank’s officers recommend that the bank do in response to these perverse market conditions and what actions did the bank actually take? Were the industry reactions, and your bank’s reactions, to the warnings adequate?
8. Lobbying: How much has your bank spent on lobbying over the last five years? This year? How many additional personnel has your bank hired full-time or as consultants to lobby the federal government?
9. Crimes: How many criminal referrals has your bank made for mortgage-related frauds in each year beginning in 2002? How many named your own officers or employees? Does the FBI have adequate resources to investigate such frauds? Explain how an epidemic of mortgage fraud must lead to widespread accounting and securities fraud if the mortgage paper is to be resold.
While you watch the testimony, I recommend keeping plenty of barf bags close at hand.