The Financial Crisis Inquiry Commission, a 10-person panel tasked with investigating the causes of the financial crisis, is gearing up for Wednesday, when it begins a second round of public hearings with financial executives, regulators and experts.
As has been reported but bears repeating, the panel has a big job and a small budget. The commission's chairman, Phil Angelides, has pointed out that the Lehman Brothers examiner's report -- an investigation into what happened with a single company -- cost $38 million and took 15 months. By comparison, the commission, whose job is to investigate the entire financial crisis for the public record, has an $8 million budget and Dec. 15 deadline for reporting its findings to Congress. Recent reports say the crisis panel has been beset with internal disagreements and staffing delays.
As part of its formidable to-do list, the panel has promised to look into the bankers, into the extent of deceptive accounting ($) at financial firms, into the mortgage bubble and into subprime lending at Citigroup. Among the people to be questioned this week are former Fed chairman Alan Greenspan, former Citigroup CEO Chuck Prince and former Citi chairman Robert Rubin -- who as Treasury secretary during the Clinton administration played a "key role in financial deregulation." Current and former heads of the Office of the Comptroller of the Currency will also face questioning, as will former executives from mortgage giant Fannie Mae and two former Fannie regulators.
As for what to expect: Greenspan has laid out his position on the financial crisis in a paper for the Brookings Institution (read the summary). In recent interviews he has stressed that the problem is not the markets, but that no one understood the risks that were being taken enough to step in. "We have to work our way back to understanding what went on," he told ABC News -- troubling, coming as it does from someone who spent more than two decades as the nation's chief financial regulator. He also stressed "more required capital" for financial firms, an idea that seems to be popular in principle, but only so long as regulators have discretion and specific numbers aren't written into legislation.
Former Citi execs Prince and Rubin will likely be in the headlines as well, as the panel questions them on the risky lending practices that led to $45 billion in government bailouts for Citigroup (see our bailout page on Citi). In 2007, shaking off concerns about the mortgage lending boom, Prince famously told the Financial Times, "When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing."