Today marks the first public hearings of the Financial Crisis Inquiry Commission (FCIC), a bi-partisan, ten-member commission created by Congress to investigate the financial collapse, in part by hearing testimony on the causes and current state of the crisis from private- and public-sector leaders. It’s like the Pecora Commission, the panel created to explore the causes of the Depression as part of the New Deal, or, if you’re unfamiliar with that, the 9/11 Commission for the financial crisis. Here’s what’s supposed to go down today.
Who’s Asking the Questions: A motley crew picked by a bi-partisan House Committee, comprised of former California state treasurer Phil Angelides; former House Ways and Means Committee chairman Bill Thomas; former CFTC chair and newly appreciated genius Brooksley Born; entrepreneur Byron Georgiou; former senator Bob Graham; Keith Hennessy, the director of the National Economic Council under George Bush; McCain economic adviser Douglas Holtz-Eakin; Nevada Cancer Institute CEO Heather Murren; Symantec chairman John W Thompson; and former Reagan counsel Peter Wallison. Yeah. It’s weird.
Who’s in the Spotlight: Technically it would be more illuminating, not to mention chronologically appropriate, if day one were to kick off with, say, the heads of Fannie Mae and Freddie Mac, or the ratings agencies responsible for giving high grades to bundles of CDOs that were so shady they were practically smoking crack in the back of class. But this is in large part about theater, about the catharsis of a public whipping, and so the commission has the advantage of the outrage in the air over bonus season, and has stocked the slate with an offering of marquee players: Goldman Sachs CEO Lloyd Blankfein, JPMorgan CEO Jamie Dimon, Morgan Stanley CEO John Mack, and Bank of America CEO Brian Moynihan, all of whose institutions survived, we’re sure we’ll be reminded multiple times, only because they were saved by the government and the American taxpayer.
Later in the day, there will be two more panels. The second, “Financial Market Participants,” will give some perspective on what happened from members of the investment community, including Kyle Bass, whose hedge fund raked in $500 million shorting subprime in 2007; investment banking veteran Peter Solomon; and former Deutsche Bank analyst Mike Mayo, whose loudmouth challenges of the solvency of financial institutions in 2007 were sadly overshadowed by fellow analyst Meredith Whitney’s legs. After that, the serious scholars and people with nothing else to do with their afternoon can settle in for “Financial Crisis on the Economy,” a talk about the impact of the crisis on Real People featuring Julia Gordon of the Center for Responsible Lending, a professor of real estate and urban economics at Berkeley, and, in a bit of miscasting, Mark Zandi, chief economist and co-founder of Moody’s.
What Will Happen: The CEOs have been defending themselves ad infinitum for a year and a half, and, well, they’ve made it this far. We can expect them all to be on guard and well rehearsed, and we doubt the script they’ve been studying from involves a bunch of straight, honest answers to the questions everyone has been asking all year. That said, it’s likely that all of them will at least try to present some new piece of information or at least express regret in a new way, if only as a means of deflecting attention from their problem areas. It’s possible that Lloyd Blankfein or Jamie Dimon (who yesterday said that he was “a little tired of the constant vilification”) will attempt to make some kind of grand statement about the demonization of bankers, though they may just go with a lie-back-and-think-of-England approach: After all, there are bonuses at stake! The wilder card is John Mack, the Morgan Stanley veteran who stepped down from his CEO position a few months ago. Though he still retains the chairman seat, Mack isn’t taking a bonus for the second year in a row this year, and he’s never been shy about displaying a healthy amount of pissed when it’s warranted. It’s interesting that he’s appearing instead of Morgan Stanley’s new CEO, James Gorman. And it will be interesting to see what happens with Brian Moynihan: He just recently stepped into his position, is expected to receive a bonus for the year 2008, and is not especially well liked by members of the House Financial Services Committee, one of whom found his testimony on the merger with Merrill Lynch “not believable.”