Jonathan Weil has a bizarrely headlined column titled “Wall Street’s Collapse to Be Mystery Forever.”
That is a euphemism; what I really want to write would get this post blocked from Goldman Sachs, thanks to their new email nanny. Suffice it to say my linguistical first choice is a sensible investment thesis, given the recent rise in Ag products and farmland.
You need only read the FCIC report’s executive summary (here, pages 15-28) to see that they got the broad strokes right, and blamed the right people, institutions and policies.
What Weil gets right is that there were serious flaws in the design of the FCIC as a bi-partisan commission:
“To examine the causes of the financial crisis, Congress created a bipartisan panel of 10 political appointees led by Democrat Phil Angelides, a former California state treasurer. What was needed was a nonpartisan investigation directed by seasoned prosecutors (like Pecora was) who know how to cross-examine witnesses and get answers.
Whereas Pecora had no fixed deadline, Congress gave the crisis commission until December 2010 to complete its inquiry. Witnesses who didn’t want to cooperate fully could simply milk the clock. The panel got a budget of less than $10 million to investigate all the causes of the financial crisis. Lehman’s bankruptcy examiner got $42 million to produce a 2,200-page report on the failure of a single company.”
Blame Obama for not being more forceful in the creation of a Pecora-like commission. But Weil is dead on with that assessment. He adds:
“The report’s conclusions were obvious: The financial crisis was man-made and avoidable. Regulators and credit-rating companies blew it. Banks and homeowners borrowed too much. Companies such as AIG and Lehman Brothers had horrible governance. Ethics and accountability broke down. The government panicked when the crisis hit in 2008. And so forth.”
Well, that much was obvious to me, and perhaps to him and others. But many people did not understand that prior to the FCIC.
Was the report a “predictable failure” ? I don’t think so. It put the official imprimatur of what happened into black and white. Further, knowledgeable observers with a familiarity of what caused the crisis can now look at the partisans who tried to submarine the commission from the outset for the hard core ideological extremists they are, clinging to a disproven world view regardless of consequences.
Shame on them.
10 Questions for GOP Members of Financial Crisis Inquiry (December 16th, 2010)
Wall Street’s Collapse to Be Mystery Forever
Bloomberg, January 28 2011