Robberdance Report

Oh my god. On the heels of the most broad and bambi of State of the Union addresses in history, the committee times their bipartisan criminal concoction of the 911 commission for the financial crisis.

http://topics.nytimes.com/top/reference/timestopics/organizations/f/financial_crisis_inquiry_commission/index.html?inline=nyt-org

http://www.nytimes.com/2011/01/26/business/economy/26inquiry.html?_r=1&hp=&adxnnl=1&adxnnlx=1296036524-aZy9BBCmGvMR6KofQKF76A

Go for the incompetence defense

"Though the report documents questionable practices by mortgage lenders and careless betting by banks, one striking finding is its portrayal of incompetence."

About the crony commission

Phil Angelides
Commission Chairman

Mr. Angelides, 56, is a graduate of Harvard University and a Coro Foundation Fellow. He served from 1975 to 1983 in California government, where he was a widely respected policy leader in affordable housing, urban planning, and public finance. He entered the private sector in 1984 and, in 1986, formed his own real estate investment business, which pioneered the planning and building of smart growth communities and helped spark a national dialogue around building more livable, environmentally responsible communities. Mr. Angelides is currently President of Riverview Capital Investments which focuses on sustainable urban development and clean energy projects.

Hon. Bill Thomas
Commission Vice Chairman

Mr. Thomas continues his examination of substantial economic issues in search of coalition-building solutions through his work as a visiting fellow at the American Enterprise Institute (AEI), a national think tank that brings together some of the country's most accomplished public policy experts.

Brooksley Born
Commissioner

Ms. Born is a 1961 graduate of Stanford University and a 1964 graduate of Stanford Law School where she was president of the Stanford Law Review

Brooksley Born practiced law for many years in Washington DC. She joined the firm of Arnold & Porter in 1965, became a partner in the firm in 1974 and retired from the firm in 2002. She was the head of the firm's derivatives practice and represented domestic and international clients in legislative, litigation, regulatory, and transactional matters involving derivatives and financial markets.

Peter J. Wallison
Commissioner

Peter Wallison holds the Arthur F. Burns Chair in Financial Policy Studies and is co-director of the American Enterprise Institute (AEI)'s program on Financial Policy Studies. Prior to joining AEI, he practiced banking, corporate and financial law at Gibson, Dunn & Crutcher in Washington, D.C. and New York.

Between 1972 and 1976, he served first as Special Assistant to New York's Gov. Nelson A. Rockefeller and, subsequently, as counsel to Mr. Rockefeller during his term as Vice President of the United States.

NOTE: One time General Council to the Department of Treasury

Byron S. Georgiou
Commissioner

He is currently President of Georgiou Enterprises, with wide ranging interests including partnerships in several private equity firms; a portfolio of carbon emission reduction projects in China that generate carbon credits under the Kyoto protocol. Mr. Georgiou received his undergraduate degree with Great Distinction from Stanford University, attending on a full Alfred P. Sloan academic scholarship, and his Juris Doctor degree magna cum laude from Harvard Law School.

Note: Byron Georgiou is one of two Nevadans on the panel and was a contributor to Harry Reeds campaign for Senate.

Keith Hennessey
Commissioner

Keith Hennessey most recently served as the senior White House economic advisor to President George W. Bush. Mr. Hennessey coordinated economic policy for the President, including financial market issues, tax policy, energy and climate change, health care, Social Security and Medicare reform, housing, technology and telecommunications, and agriculture.

In addition to advising the President on his Administration's response to the financial crisis of 2008, Mr. Hennessey helped design, enact, and implement the President's most important economic policies, including reforming the regulation of Fannie Mae and Freddie Mac, and international economic issues such as several free trade agreements.

Heather H. Murren, CFA
Commissioner

United States Senate Majority Leader Harry Reid appointed Heather Murren to the Financial Crisis Inquiry Commission.

Note: Retired Managing Director of Bank of America owned Merril Lynch member of the Financial Roundtable with Countrywide, Bank of America, Wachovia, GMAC Financial, JPMorgan, Washington Mutual and AIG.

Spread the blame

Financial Crisis Was Avoidable, Inquiry Finds

By SEWELL CHAN

WASHINGTON — The 2008 financial crisis was an “avoidable” disaster caused by widespread failures in government regulation, corporate mismanagement and heedless risk-taking by Wall Street, according to the conclusions of a federal inquiry.

The commission that investigated the crisis casts a wide net of blame, faulting two administrations, the Federal Reserve and other regulators for permitting a calamitous concoction: shoddy mortgage lending, the excessive packaging and sale of loans to investors and risky bets on securities backed by the loans.

“The greatest tragedy would be to accept the refrain that no one could have seen this coming and thus nothing could have been done,” the panel wrote in the report’s conclusions, which were read by The New York Times. “If we accept this notion, it will happen again.”

While the panel, the Financial Crisis Inquiry Commission, accuses several financial institutions of greed, ineptitude or both, some of its gravest conclusions concern government failings, with embarrassing implications for both parties. But the panel was itself divided along partisan lines, which could blunt the impact of its findings.

Many of the conclusions have been widely described, but the synthesis of interviews, documents and testimony, along with its government imprimatur, give the report — to be released on Thursday as a 576-page book — a conclusive sweep and authority.

The commission held 19 days of hearings and interviews with more than 700 witnesses; it has pledged to release a trove of transcripts and other raw material online.

Of the 10 commission members, the six appointed by Democrats endorsed the final report. Three Republican members have prepared a dissent focusing on a narrower set of causes; a fourth Republican, Peter J. Wallison, has his own dissent, calling policies to promote homeownership the major culprit. The panel was hobbled repeatedly by internal divisions and staff turnover.

The majority report finds fault with two Fed chairmen: Alan Greenspan, who led the central bank as the housing bubble expanded, and his successor, Ben S. Bernanke, who did not foresee the crisis but played a crucial role in the response. It criticizes Mr. Greenspan for advocating deregulation and cites a “pivotal failure to stem the flow of toxic mortgages” under his leadership as a “prime example” of negligence.

It also criticizes the Bush administration’s “inconsistent response” to the crisis — allowing Lehman Brothers to collapse in September 2008 after earlier bailing out another bank, Bear Stearns, with Fed help — as having “added to the uncertainty and panic in the financial markets.”

Like Mr. Bernanke, Mr. Bush’s Treasury secretary, Henry M. Paulson Jr., predicted in 2007 — wrongly, it turned out — that the subprime collapse would be contained, the report notes.

Democrats also come under fire. The decision in 2000 to shield the exotic financial instruments known as over-the-counter derivatives from regulation, made during the last year of President Bill Clinton’s term, is called “a key turning point in the march toward the financial crisis.”

Timothy F. Geithner, who was president of the Federal Reserve Bank of New York during the crisis and is now the Treasury secretary, was not unscathed; the report finds that the New York Fed missed signs of trouble at Citigroup and Lehman, though it did not have the main responsibility for overseeing them.

Former and current officials named in the report, as well as financial institutions, declined Tuesday to comment before the report was released.

The report could reignite debate over the influence of Wall Street; it says regulators “lacked the political will” to scrutinize and hold accountable the institutions they were supposed to oversee. The financial industry spent $2.7 billion on lobbying from 1999 to 2008, while individuals and committees affiliated with it made more than $1 billion in campaign contributions.

The report does knock down — at least partly — several early theories for the financial crisis. It says the low interest rates brought about by the Fed after the 2001 recession; Fannie Mae and Freddie Mac, the mortgage finance giants; and the “aggressive homeownership goals” set by the government as part of a “philosophy of opportunity” were not major culprits.

On the other hand, the report is harsh on regulators. It finds that the Securities and Exchange Commission failed to require big banks to hold more capital to cushion potential losses and halt risky practices, and that the Fed “neglected its mission.”

It says the Office of the Comptroller of the Currency, which regulates some banks, and the Office of Thrift Supervision, which oversees savings and loans, blocked states from curbing abuses because they were “caught up in turf wars.”

“The crisis was the result of human action and inaction, not of Mother Nature or computer models gone haywire,” the report states. “The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand and manage evolving risks within a system essential to the well-being of the American public. Theirs was a big miss, not a stumble.”

The report’s implications may be felt more in the political realm than in public policy. The Dodd-Frank law overhauling the regulation of Wall Street, signed in July, took as its premise the same regulatory deficiencies cited by the commission. But the report is sure to be a factor in the debate over the future of Fannie and Freddie, which have been run by the government since 2008.

Though the report documents questionable practices by mortgage lenders and careless betting by banks, one striking finding is its portrayal of incompetence.

It quotes Citigroup executives conceding that they paid little attention to mortgage-related risks. Executives at the American International Group were found to have been blind to its $79 billion exposure to credit-default swaps, a kind of insurance that was sold to investors seeking protection against a drop in the value of securities backed by home loans. At Merrill Lynch, managers were surprised when seemingly secure mortgage investments suddenly suffered huge losses.

By one measure, for about every $40 in assets, the nation’s five largest investment banks had only $1 in capital to cover losses, meaning that a 3 percent drop in asset values could have wiped out the firm. The banks hid their excessive leverage using derivatives, off-balance-sheet entities and other devices, the report found. The speculative binge was abetted by a giant “shadow banking system” in which the banks relied heavily on short-term debt.

“When the housing and mortgage markets cratered, the lack of transparency, the extraordinary debt loads, the short-term loans and the risky assets all came home to roost,” the report found. “What resulted was panic. We had reaped what we had sown.”

The report, which was heavily shaped by the commission’s chairman, Phil Angelides, is dotted with literary flourishes. It calls credit-rating agencies “cogs in the wheel of financial destruction.” Paraphrasing Shakespeare’s “Julius Caesar,” it states, “The fault lies not in the stars, but in us.”

Of the banks that bought, created, packaged and sold trillions of dollars in mortgage-related securities, it says: “Like Icarus, they never feared flying ever closer to the sun.”

_____________________________

Panel Investigating Financial Crisis Is Said to Refer Cases to Justice Dept.

http://www.nytimes.com/2011/01/25/business/25panel.html?adxnnl=1&ref=financialcrisisinquirycommission&adxnnlx=1296086503-2ycQSMP0rFycn7Q6u6CtmA

Let's watch the PEP office in DC follow up on these investigations and prosecutions. I can't wait to see their INCOMPETENCE!