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Opinion: An update from the Financial Crisis Inquiry Commission

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The leaders of the Financial Crisis Inquiry Commission stopped by The Times on Wednesday to offer some thoughts about their ongoing probe into the latest Wall Street meltdown. Attached below are excerpts from a recording of their remarks. Chairman Phil Angelides (a former California state treasurer) and Vice Chairman Bill Thomas (a former congressman from Bakersfield who once led the powerful House Ways and Means Committee) were careful not to utter anything newsworthy. Nevertheless, they offered a taste of the findings that the commission will make to Congress in December.

Said Angelides:

I have been struck along this journey about the extent to which people in leadership positions, both public and private, when they’re queried about what happened, the extent to which all fingers point away from themselves. And there seems not to be a clear understanding that there’s a relationship between the activities in which people engaged and the consequences which resulted. I only note that because looking to the future, I worry about the level of self-examination that Wall Street and Washington have gone through in the wake of this crisis.... Certainly people at large financial institutions were spared the kind of consequence they might otherwise have seen.

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Asked to compare what the commission was doing with the congressional investigation in the 1930s into the causes of the Great Depression, Thomas said:

It’s just an entirely different world. It’s all about PR, it’s all about CYA, and it’s all about, as [Angelides] said in the beginning, it’s somebody else’s problem. And that’s what’s so frustrating to the American people. They just want to know, what did the truck look like that ran over them?

Thomas also observed:

You want something in common with that period or any other period when there was a bubble? It’s simple. Arrogance. Avarice. A failure to even think for a second about the long-term consequences, so focused on an individual in terms of the aggrandizement of that individual. Those are historical things that are present in any bubble, including what happened in the ‘30s, what happened today and what happened in dot-com. The difference is the complete integration of the international financial system so that cities in Norway go bankrupt because they held some Triple-A stuff that was backed by mortgages. That is completely different from what it had been in the past.

Congress is likely to finish work on a new set of financial-industry rules long before the commission’s report reaches the printer. Nevertheless, Angelides and Thomas said they expected their research to influence how Congress deals with such unresolved issues as the fate of Fannie Mae and Freddie Mac, as well as how federal agencies write future regulations. Said Angelides:

One sweep of the pen does not change the system. Every piece of that legislation is going to have to be implemented and enforced by regulators. What’s still an open question is, will the regulators have the knowledge, the capacity, the resources, the will to make the changes that need to be made? Will the market participants begin to behave in a different way? I believe our report, our examination of what happened, will be an important piece of work for not only the American people, Congress, but also the people who are charged with enforcing or implementing hopefully a new system of regulation that works better. The second point, though, there are a lot of pieces that are yet undone, and a lot of pieces where the debate hasn’t even fully ripened.... I suspect in many respects the debate will continue.

Click on the links below to hear the pair speak at length on these issues.

Opening statements

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Examining the Fed’s role (edited)

The pending bills

What regulators missed

Goldman Sachs subpoenas

Producing the final report

How far back do you go?

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-- Jon Healey

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