Two blocks from the Treasury, where the government not long ago scrambled to save a collapsing financial system, a team of investigators armed with subpoena powers is preparing the official narrative of the crisis and what went wrong.
As Washington focuses on Congress’ regulatory response to the 2008 Wall Street meltdown, the Financial Crisis Inquiry Commission that Congress created last spring has been an afterthought.
On Wednesday and Thursday, the commission will hold its first public hearings featuring a gallery of the nation’s top bank executives — Lloyd Blankfein of Goldman Sachs, Jamie Dimon of JPMorgan Chase, John Mack of Morgan Stanley and Brian Moynihan of Bank of America.
“The irony here is it’s as if there was an earthquake and the only buildings standing today are the buildings that were at the epicenter of the earthquake,” the commission’s chairman, Phil Angelides, said in an interview Thursday. “You have millions of people unemployed, millions have lost their homes, and Wall Street is having a record year with record profits and record bonuses. People want to understand why.”
Angelides is the Democratic former California treasurer. His vice chairman is Republican Bill Thomas, a former congressman who chaired the House Ways and Means Committee. Together they lead a 10-member bipartisan commission with an ambitious mandate and limited time.
They were interviewed jointly Thursday in a small, spare conference room in an eighth-floor office suite on Pennsylvania Avenue within sight of the White House and the Treasury building.
Despite their different party labels, both men say that because they aim to explain the crises — not issue recommendations on how to avoid the next one — their work should be fairly nonpartisan.
Still, Angelides and Thomas said the commission could also offer proposed remedies or alternatives if there is strong consensus about the causes of the crisis.
The two men shrugged off decisions by President Barack Obama and congressional Democrats to proceed with a regulatory overhaul before the commission’s work is done. They said the commission’s final findings could still inform future legislation and could be a resource for regulators and for the industry itself.
Thomas in particular displayed impatience with bankers who worry that some additional government scrutiny and transparency will impair the industry.
“We came close to the worst thing in the world,” Thomas said. “So whenever you hear from these people, ‘Well, this will make us not to do this and not to do that,’ I immediately flip it from negative to positive and say, ‘Yeah, and so?’”
Both agreed that the crisis was the result of failures by individuals specifically and by the banking system in general. But in featuring the bankers at its first public hearings, the commission is sending a clear message that the first part of the narrative starts with the chief executives.
The commission is modeled on the 9/11 panel that examined the causes of the Sept. 11, 2001, terrorist attacks. But its prototype could be the so-called Pecora Commission, the Senate committee that investigated Wall Street abuses in 1933-34. It was named after Ferdinand Pecora, the committee’s chief lawyer.
On this point, Thomas and Angelides part ways.
“Nobody remembers the Pecora Commission,” Thomas protested. “The press created the knowledge of the Pecora Commission. C’mon, it’s mostly not applicable.”
“Here’s where I think it is,” Angelides countered. “It is different than the 1930s, but I do think there is a raw hunger for people to know.”
Congress instructed the new commission to explore 22 issues, ranging from the effect of monetary policy on terms of credit and government fiscal imbalances to bank compensation structures.
Thomas said the commission’s inquiry should include a look at the consequences of the 1999 repeal of the Depression-era Glass-Steagall Act that forced the separation of commercial and investment banks. Without the act, banks were unrestrained, Thomas said.
“It was wide open country, which I think is part of the problem in terms of not having a mental, financial, almost moral, obligation anymore because there is no backstop,” he said.
And while Angelides said the commission’s job was not to redebate the merits of the $700 billion bank bailout, he also said the commission’s inquiry does not end at the height of the crisis in fall 2008.
“We start with the belief that the financial crisis is not a past-tense phenomenon,” he said.