The Financial Crisis Inquiry Commission is better than its reviews but still very disappointing. Its 545-page report represents a powerful, fact-filled indictment of the financial system and the leading players and institutions that produced the national catastrophe. But there is one glaring omission—the massive fraud that occurred on Wall Street.
Some leading economists and former regulators (not to mention citizens at large) think fraud is a central explanation for what went wrong. The commission’s conclusions skip lightly over the matter—both civil fraud and go-to-jail criminal fraud.
In this regard, the FCIC report resembles a giant haystack sprinkled with sharp needles. Somewhere in the FCIC’s daunting details are explosive revelations. But can citizens find or understand them? Not very likely; the six Democratic commissioners who produced the final report don’t mention any needles or provide any clues about how to find them. Instead, the commission blandly states that it has referred “potential violations” to “appropriate authorities.” But it won’t say how many cases were passed along to prosecutors or whether they involve big-name bankers or low-level clerks forging mortgage documents.
“Our job is to bring out the facts. It is the prosecutor’s job to prosecute the facts,” commission chair Phil Angelides insisted when I badgered him on this point. With some outside prompting from bloggers and other informed observers, I was able to locate a couple of needles amid the voluminous text. They implicate some of the best names on Wall Street. But for whatever reasons, the commission Democrats framed their findings in broadly critical accusations about the financial industry, government regulators, the Federal Reserve and others whose failures caused the eventual collapse. “We conclude this financial crisis was avoidable,” the commissioners declare. The FCIC’s facts confirm that judgment. Read the report or graze the 1,200 documents posted on the FCIC website (fcic.gov). You will doubtless come away dizzy but enlightened and angry.
For instance, I choked on this language: “As a nation, we must also accept responsibility for what we permitted to occur. Collectively, but certainly not unanimously, we acquiesced to or embraced a system that…gave rise to our present predicament.” That sounds like the same self-serving baloney the establishment can be counted on to deploy to avoid blame.
If everyone is to blame, then no one can be blamed. This reminds me of when the Iraq War went bad, and the Bush administration couldn’t find the WMDs. People who had led cheers for war started saying, “Well, we were all fooled, weren’t we?” No, we were not. Congress and the Obama administration took a similar tack on the financial crisis. It would be wrong and vengeful, they said, to point fingers at major miscreants. In this complacent milieu, referring cases to the Justice Department is not exactly comforting. Angry citizens want to know why more people didn’t go to jail.