PREVIEW-US crisis panel will scratch but not maul bankers

January 11, 2010

By Karey Wutkowski

WASHINGTON, Jan 11 (Reuters) – The U.S. commission examining the financial meltdown is expected to take Wall Street bankers to task this week for a return to extravagant bonuses, but the spectacle should fall short of the political theater that marked a similar investigation of the Great Depression.

The 10-member, bipartisan Financial Crisis Inquiry Commission will hear from the executives just as public outcry is again reaching a fever pitch over the multimillion-dollar bonuses the banks are poised to award after hurrying to repay billions of dollars of taxpayer bailouts.

The panel is modeled after the Pecora Commission, which investigated the Wall Street crash of 1929. That commission was beset with political turmoil and sideshow moments including a dwarf who jumped on the lap of banker J.P. Morgan Jr. during his testimony.

The new commission on Wednesday will hear from top executives of Goldman Sachs, JPMorgan Chase, Bank of America and Morgan Stanley. For a full list of witnesses, please click here.

Those executives are prime targets for public anger, not only for the lavish bonuses, but also because they remain tight-fisted with credit to consumers and small businesses.

The tone of the hearings may be less than bombastic, however, since no commission members are currently politicians seeking to show voters a good public drubbing of the bankers.

“It could end up being just more public flogging of banking executives, or it could provide some meaningful dialogue,” said Kevin Petrasic, a financial services attorney with Paul Hastings in Washington and a former bank regulator.

“With the way the commission is structured, it’s looking like it is trying to get answers.”

The panel members were politically appointed but have said they do not want to politicize their mission of finding out the how and why behind the most severe financial crisis since the 1930s.

The panel is chaired by Phil Angelides, a Democrat and former California state treasurer. Its vice chairman is Bill Thomas, a Republican and former head of the House Ways and Means Committee.

Other notable members include Brooksley Born, a Democrat and former head of the Commodities Futures Trading Commission, who issued early warnings about risks in the financial system.


The roster of bank executives is also telling.

Missing are some of the most vilified characters of the crisis, including Dick Fuld, former CEO of fallen firm Lehman Brothers; Vikram Pandit, the CEO of multiple bailout recipient Citigroup, and Ken Lewis, the recently retired CEO of Bank of America, whose reputation was tarnished after a bumpy merger with Merrill Lynch.

Similarly, the regulators scheduled to testify on Thursday are not ones accused of being asleep at the switch. Federal Deposit Insurance Corp Chairman Sheila Bair, Securities and Exchange Commission Chairman Mary Schapiro, and U.S. Attorney General Eric Holder are scheduled to testify.

David Min, associate director for financial markets policy at the Center for American Progress in Washington, said all hearings are political theater to some extent.

However, the fireworks will likely be limited, he said.

“I’m sure the bank executives will be well instructed by their lawyers and will be in the four corners of what’s safe,” Min said.

These executives are no stranger to Washington, having been called repeatedly to the White House for not doing enough to help the very Americans that bailed them out. Obama has even complained about “fat cat bankers” taking big bonuses.

Min said the more interesting work from the commission is going on behind the scenes, with anonymous staffers reading papers in dark rooms.

The commission has already been working for months to meet with market players, comb through documents and start piecing together a narrative that will form the substance of its Dec. 15, 2010, report to President Barack Obama and Congress.

The public hearings that will occur throughout this year will largely be just for show, and will serve as a backdrop to Congress’s attempt to rewrite financial regulatory rules.

It is unclear how much the commission’s work will affect the legislative process expected to wrap up this year, or lay the groundwork for a second attempt at regulatory reform.

“I think gridlock is going to return (to Congress) next year,” said Brian Gardner, policy analyst at investment firm Keefe Bruyette & Woods. “It’s going to be very difficult to have that second bite at the apple.” (Editing by Steve Orlofsky) (( +1 202 898 8374))

No comments so far

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see