If you were hoping for fireworks at the first hearing of the Financial Crisis Inquiry Commission yesterday–as most of us were–chances are you were disappointed.
The bipartisan panel charged with what Chairman Phil Angelides described in his opening statement as conducting "a full and fair inquiry into what brought America’s financial system to its knees" led off with the heavies, hauling in Lloyd Blankfein, Jamie Dimon, John Mack, and Brian Moynihan, the bosses at Goldman Sachs, JP Morgan Chase, Morgan Stanley and Bank of America, respectively.
Set ’em up and knock ’em down, right?
For the most part, it seemed like America’s Most Wanted were allowed to do a song and dance about the need for larger capital requirements (but not too large), admit the proverbial "mistakes were made," praise their federal regulators for the thorough job they are doing of late, tout their own skills for having survived the meltdown and present their banks as benevolent institutions that have repaid the government with interest and are doing their best to solve the foreclosure crisis and extend credit.
But before you give up on this commission, and the notion that there can be any accountability for the titans in our rigged political system, I submit that there were some encouraging signs to take from yesterday. If indeed it is the job of this commission to "dig deep"–as The Nation‘s William Greider rightly described it–then perhaps yesterday simply marked the beginning of the excavation.
For one thing, the chairman at the helm gets it. In his opening statement Angelides described the financial crisis not as a "historical event" but as something "still here, and still very real." He alluded to the 26 million Americans unemployed and more than 2 million families whose homes were foreclosed over the past three years. Retirement accounts have been "swept away–vanished–like some day-trade gone bad." He sees the commission as a "proxy for the American people" and "our last best chance to take stock of what really happened" so we can make the necessary changes and avoid a repeat. He said that the bankers who appeared yesterday will likely be asked to testify again, and the investigation would call on any indivdual or institution relevant to the inquiry. He closed by telling of his father who grew up in the Depression "keenly aware of the financial recklessness that made his life so much harder than it needed to be."
I think the chairman was also successful in giving the public a show of the kind of hubris that led to this crisis and that is still alive and well and promising to repeat this devastation if the banksters aren’t forced to change their behavior.
Angelides questioned Blankfein on the propriety of Goldman selling subprime mortgage-related securities–to the tune of $40 billion in 2006-07–to investors even as Goldman itself was betting against those securities.
"Mr. Blankfein, you were actually creating these securities," said Angelides. "As someone that has been in business for half my career, the notion that I would make a transaction with you, and then the person I made that transaction with would then bet that that transaction would blow up, is inimical to me. How do you go to the rating agencies and persuade them to give [these products] the highest rating–AAA–at the same time you have credit information that leads you to believe those securities may fail?"