Well, at least the commission seems to fit the calling. They lost many golden opportunities to deeply understand the problems of the financial crisis. Don’t despair, it took a few iterations last time around during the Great Depression to finally find Ferdinand Pecora, who then brought justice into view. Also, blame Pelosi and the Democratic Party for not getting serious about an investigation and choosing an inept leader like Angelides — the entire country came to its knees. Mary Bottari writes today,
After that self-serving drivel, no wonder the God’s zapped the electrical system. There was a lot Greenspan could have done to rein in the housing bubble, not the least of which was simply telling people there was a bubble as housing prices began following an unprecedented and unsustainable path.
But electrical snafus are just the beginning of the FCIC’s problems. The FCIC is a 10-person panel assembled to report on the meltdown to President Obama later this year. The New York Times reported last week what was becoming increasingly obvious, the commission was in shambles. The commission waited eight months before having its first hearing. A top investigator resigned due to delays in hiring staff, no subpoenas have been issued and partisan infighting means few new documents have been released that would aid reporters in piecing together the crime scene even if FCIC investigators are not up to the task. Worse, it seems like the majority of staff have been borrowed from the complicit Federal Reserve.
These problems were on full display in last week’s hearings. The three days of hearings were marked by some heat, but little light. On day one, the commission let Greenspan blather on about how these types of crises were unpredictable. While Chairman Angelides tried to ask some common sense questions, Greenspan is a slippery eel and he slithered out of the room unscathed. An Elliot Spitzer with vast financial services knowledge and prosecutorial experience would have done better with Greenspan.
On day two, Charlie Prinz, former CEO of Citigroup, took center stage apologizing for his transgressions, but telling the FCIC that like a good captain he went down with his ship (by not selling his Citi stock). How the FCIC managed to make a hero out of the man who ran Citi into the ground is beyond me.
On day three, Fannie Mae execs took the stand. They were appropriately grilled about their inappropriate lobbying, but as economist Dean Baker points out, were not asked the key question: As housing experts why did you not warn of the housing bubble and take actions to dampen it? Baker was one economist who was loudly warning of the housing bubble as early as 2004. But the Fannie Mae execs successfully peddled the narrative that the institution was engulfed in catastrophic and unforeseeable decline in home values.
But the saddest lost opportunity of the week was in the questioning of Robert Rubin. Former Goldman Sachs executive, Clinton Treasury Secretary, and Citi board member, Rubin bears tremendous responsibility for creating the disaster by pursuing an extreme deregulatory agenda in the 1990s and then standing by idly as the consequences of that agenda unfolded. Rubin should have been pressed by multiple commissioners on the following: Do you regret pushing for the repeal of Glass-Steagall that helped create too big to fail firms and allowed Wall Street gambling to spread to Main Street banks? Do you regret deregulating derivatives and setting these “weapons of mass economic destruction” lose upon the world? Do you regret pushing through deregulatory trade agreements that spread our financial services model and risky financial products around the globe?
Inexplicably, Rubin was not even asked about the prior day’s testimony by Richard Bowen, Citigroup’s former chief of underwriting, who directly accused Rubin and other bank executives of violating their own risk management policies and ignoring warnings as early as 2006 that about 60 percent of mortgages were worthless. A full accounting of Rubin’s role in these events is critical given the strong role he still plays as a behind-the-scenes White House advisor.
Read the whole thing at PRWatch.org
I’m trying to not spend too much time on hack politics, that is establishment electoral politics. Unfortunately, sometimes I can’t help myself and other times, I think no one understands how to interact with politics in any other way. So, despite knowing better…
We’re in the beginning of a long period of switching people out every election until some sort of viable alternative develops. At this point, the best thing either party has going for itself is the other party. Many people are comparing this year to ’94, but it’s much different, and will be shown to be if the Dems get a health care bill past, they’ll still probably lose the Congress. But there’s a much bigger difference between now and 1994. The Dems kept control of the Congress for another 14 years after the fall of the New Deal coalition via simple inertia. The party was losing seats almost every cycle since 1964 and was ready to drop well before ’94, just the Reps were never that well liked.
In ’94 amongst the Dem political pooh-bahs, the thought the Dems could never lose the House was simply gospel, despite the fact the numbers showed they were easily ready to go down. This year is different because the Dems just regained control in 2006, there is no inertia, and no established political doctrine like the New Deal. The Dems regained power for one reason, they were not the Reps, and the Reps will regain power for the same reason, they are not the Dems. Now, if you think this state of affairs depressing, you’d be right. Nate Silver has a nice little piece about the numbers right now, and they are truly atrocious for Dems, except as he points out, if you are Rep. However, the Reps need only rely on a little more time, we Americans have short memories, and a little gain in credibility, and their numbers will begin going up by end of summer. After all, as Kang said, or was it Kronos, “Vote for a third party, go ahead waste your vote!”
The polling numbers of the past year have really been neither Dem or Rep favorable, they have been completely and virulently anti-established politics. If they stay that way, more than a few Rep incumbents will also meet defeat this November. In fact, unlike most years in our politburo type incumbency return numbers, getting rid of your party’s incumbent before the general will in many cases serve you well. There’s two numbers of great importance for November, unemployment and the Dow. If Dow is above 10,000 and unemployment below 9, the Dems can hold on. Unemployment above 10 and the Dow below 10, the Dems will likely lose both houses to a group of people who have no better idea what to do than those they’re replacing. Our politics is broken.
The last week sent an important signal to all who think things are going back to where they were. The Great Financial Panic of 2008 and 2009 has altered our political economy in ways it will take years to understand. Combined with the structural changes we’ve been ignoring for years, we have the recipe for great volatility, for a long period of time. Events are indeed in the saddle.
There’s nothing like a few elected officials, or even one, losing office to set them on their own panic, and Democratic hysteria is growing. Each day, the White House mouths stronger opposition to the banks, and there is and has been absolutely no political downside for them on this. The Republicans remain incapable of even feigning opposition to Wall Street. However after a year, no one can say anything about this White House except watch what they do, not what they say. Just as importantly, it is the Congress that must legislate and our Congress remains firmly in the control of our corporatocracy. But, if you can lose in Massachusetts, you can lose anywhere. More Democrats are coming out against Bernanke, bringing down his confirmation would be a good thing. Chris Dodd is even issuing a financial apocalypse warning against opposing the confirmation.
To show Democrats are verging on full blown hysteria, Wall Street’s own lap-dog, Chuck Schumer is attacking the Supreme Court decision unleashing the corporate whip on our electoral system. I think the word for Mr. Schumer is chutzpah. There is no one elected official, and that includes Mr. Clinton, who more represents the capitulation of the Democratic party to Wall Street than Mr. Schumer. Senator Schumer has sixteen-million in the his campaign committee, over two million of that from the financial sector. When he headed the DSCC, Mr. Schumer made it reliant on Wall Street money, that way a Senator elected from South Dakota or New Mexico could be captured by Wall Street. All that hard work, wiped out by one Supreme Court decision, phew, now it’s not even safe in NY when you’re sitting on a pile of money.
I was reading John Hussman’s weekly analysis of the financial situation and he ended with one of Doctor King’s speeches from Birmingham in 1957. In the speech Dr. King references the historian Arnold Toynbee stating:
And Toynbee tells that out of the twenty-two civilizations that have risen up, all but about seven have found themselves in the junk heap of destruction. It is because civilizations fail to have sense enough to dim the lights. And if somebody doesn’t have
sense enough to turn on the dim and beautiful and powerful lights of love in this world, the whole of our civilization will be plunged into the abyss of destruction. And we will all end up destroyed because nobody had any sense on the highway of history.
I never read Toynbee, but it made me look him up. He has an interesting and extraordinarily relevant theory about the history of civilizations. It basically states every generation in a thriving civilization is met with challenges. When they step up to meet it, the civilization continues to thrive. Yet at certain point in each civilization’s history, one generation shirks from the challenge and instead begins consolidating existing wealth, living off their inheritance, instead of providing for the future. That’s where we are today. We are in the process of institutionalizing a Looting Class for the first time in American history. America’s a very wealthy place and it can provide wealth, on an ever decreasing level, for decades, centuries. However, events are now defining, and many events are in motion because we failed to rise to the challenges of the last couple decades. The great thing about events defining the times is they do so with very clear demarcations. Do each of us rise to face the challenge or do we look simply to protect and consolidate what we have. Which side are you on?