Opinion

Felix Salmon

The FCIC falls apart

By Felix Salmon
December 15, 2010

Shahien Nasiripour reports this morning that the Financial Crisis Inquiry Commission has, to all intents and purposes, fallen apart. The four Republicans seem set to issue their own minority report, sticking to discredited Republican talking points which blame the government and Frannie for the crisis, with especial focus on the long-standing and harmless Community Reinvestment Act. As a result, the official report will be received as some kind of equal-and-opposite Democrat view, rather than a definitive take along the lines of the 9/11 Commission report.

Given that putting this report together seems to be impossible, here’s my suggestion: it should go open-source. The FCIC’s great advantage over other narratives of the crisis is its subpoena power: it has access to enormous amounts of information no one else has seen. If it can’t collate that information into a definitive report, it should make all the information public—including everything in that notorious Goldman Sachs data dump—and let all of us have at it. Collectively, we should be able to do at least as well as the partisans in DC.

Update: You really can’t make this stuff up:

During a private commission meeting last week, all four Republicans voted in favor of banning the phrases “Wall Street” and “shadow banking” and the words “interconnection” and “deregulation” from the panel’s final report, according to a person familiar with the matter and confirmed by Brooksley E. Born, one of the six commissioners who voted against the proposal.

Comments
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This will only “confirm” what my wealthy, life-long Republican father, mother and their equally well-off friends have long argued to me: that the financial collapse was due to the Community Reinvestment Act. Period. My interpretation of their position: the banks lent money to lazy blacks and hispanics who wanted nice houses but didn’t want to have to pay for them, which is exactly what Barney Frank intended.

It’s so disheartening to know that this easily debunked myth has now penetrated the highest Republican circles, so much so that they are ready to go it alone from this commission. My despair runs especially deep today.

Posted by Susaninchicago | Report as abusive
 

You are absolutely right to call for full disclosure of the FCIC’s investigative materials. In fact, I argued for the same thing here:

http://finance.fortune.cnn.com/2010/11/0 2/how-the-fcic-can-salvage-its-relevancy  /

There is no Ferdinand Pecora this time around to pull together a definitive account, so we should rely instead on an army of wiki-investigators to do the job.

Posted by Pecora1933 | Report as abusive
 

Its pretty cool to know that Fannie Mae and deadbeat borrowers in Florida caused the European countries to overspend their revenues threatening their banks solvency.

The entire global banking system has a broken model. It appears that Republicans are as incapable of understanding this as they were incapable of understanding that tax cuts + increased defence spending = monstrous deficits in 2001-2008.

But its ok. We will get a second chance at a commission. Extend and pretend will probably end in a very ugly way over the next 2-3 years which will show that the Emperor’s fig leaf the banking sector is currently wearing is also just transparent Saran Wrap.

The large bonus pools continue to extract cash capital from the banking sector as fast as Treasury and the Fed can give them money. as a result, they are likely to enter the next crisis with inadequate cash and quality asset reserves again.

Posted by ErnieD | Report as abusive
 

Banning the use of the terms “Wall Street” and “shadow banking” is not enough of a challenge. I call on the FCIC to make it interesting. By banning the use of the letter “e” in their report. Sorry, account.

Posted by johnhhaskell | Report as abusive
 

…and these yoyos will be driving financial (deregulation & privatization) legislation through the House in just a month.

Besides shaking your head and crying, is there anything anyone can do??

Posted by Lilguy | Report as abusive
 

What in the flip? Why can’t Democrat leadership get some balls and play the Republican game? For god’s sake, Democrats are far smarter than Republicans, so I refuse to buy the excuse that Democrats simply can’t do it.

All Republicans did was pick a meme and stick to it.

Posted by Unsympathetic | Report as abusive
 

ErnieD, it is a fact that most of the cash and liabilities went to Frannie. It is a fact that most of the expected losses – and current losses – accrue to Frannie.

As for what is going on in Europe, the exact opposite of what you claim is the cause in Ireland. It bailed out it’s banks and has nearly bankrupted itself in the process. The UK has been tettering near bankruptcy every decade or so since 2 years after it brought in the welfare state.

Posted by Danny_Black | Report as abusive
 

Pecora1933, alot of this stuff is public domain. We have had records on the Maiden Lane Vehicles for a while – those notorious 100 cents on the dollar CDOs are doing relatively well whilst the government stands to lose about 3bn on the BSC “investments”. The Fed released details of their loan information and we see the subsidy to Morgan Stanley was less than a billion – and probably around 100million. We also have the details on the money lost and continuing to be lost on Frannie despite pathetic attempts by some bloggers not a million miles from here to minimise those costs, whilst coming up with figures for funding IBs so misleading to border on lying. We know alot of the structures used and how most of them were driven by regulation – short-term dependence on funding, rating arb etc. We also saw how priviliging credit risk over others put in a load of feedback loops that brought the system to its knees.

We also now have a lot of fake memes in place – AIG went bankrupt because it wrote CDSes on junk, when actually that “junk” has performed relatively well. Somehow the fact it was repeated collateral calls as AIG went into a cash call-credit downgrade-cash call spiral that damaged AIG and it was the virtually unreported act of genius to take cash from stock lending and “invest” it in highly illiquid ABSes that pushed AIG over the edge. Everyone who took out a loan and can’t pay it back is now a “victim”. Forclosuregate means that all the banks will go bankrupt because they don’t own the mortgages – that story has gone wierdly quiet since the banks all started foreclosing again. etc etc etc.

Posted by Danny_Black | Report as abusive
 

Yes, banning terms such as ‘Wall Street’ and ‘shadow banking’ is more than disingenuous. But Mr. Salmon does not help the effort to make the historical record clear as he once again refers to the ‘harmless Community Reinvestment Act.’ In making this claim, I am not asserting that the CRA was Enemy #1 (or that I know the possibly high value of ‘n’ for the hypothesis that it was Enemy #n). As he continuously repeats this mantra, a reasonable reader would likely conclude that, at best, he willfully ignores careful analysis such as that found in: http://www.federalreserve.gov/pubs/feds/ 2008/200861/200861abs.html

Posted by uprof | Report as abusive
 

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