Financial Crisis Inquiry Commission
Encyclopedia
- For a division within the Risk Management Agency of the U.S. Department of Agriculture with the same initials, see Federal Crop Insurance CorporationFederal Crop Insurance CorporationThe Federal Crop Insurance Corporation is a wholly owned Government corporation managed by the Risk Management Agency of the U.S. Department of Agriculture. FCIC manages the Federal crop insurance program which provides U.S...
. - For the information department within the United States government's General Services Administration, go to Federal Citizen Information CenterFederal Citizen Information CenterThe Federal Citizen Information Center , originally the Federal Consumer Information Center, is a department in the United States government's General Services Administration...
.
The Financial Crisis Inquiry Commission (FCIC) is a ten-member commission
Government agency
A government or state agency is a permanent or semi-permanent organization in the machinery of government that is responsible for the oversight and administration of specific functions, such as an intelligence agency. There is a notable variety of agency types...
appointed by the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
government with the goal of investigating the causes of the financial crisis of 2007–2010. The Commission has been nicknamed the Angelides Commission after the chairman, Phil Angelides
Phil Angelides
Philip Nicholas "Phil" Angelides is an American politician who was California State Treasurer and the unsuccessful Democratic nominee for Governor of California in the 2006 elections...
. The Commission has been compared to the Pecora Commission
Pecora Commission
The Pecora Investigation was an inquiry begun on March 4, 1932 by the United States Senate Committee on Banking and Currency to investigate the causes of the Wall Street Crash of 1929...
, which investigated the causes of the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
in the 1930s, and has been nicknamed the New Pecora Commission. Analogies have also been made to the 9/11 Commission
9/11 Commission
The National Commission on Terrorist Attacks Upon the United States, also known as the 9/11 Commission, was set up on November 27, 2002, "to prepare a full and complete account of the circumstances surrounding the September 11, 2001 attacks", including preparedness for and the immediate response to...
, which examined the September 11 terrorist attacks. The Commission does have the ability to subpoena
Subpoena
A subpoena is a writ by a government agency, most often a court, that has authority to compel testimony by a witness or production of evidence under a penalty for failure. There are two common types of subpoena:...
documents and witnesses for testimony, a power that the Pecora Commission had but the 9/11 Commission did not. The first public hearing of the Commission was held on January 13, 2010, with the presentation of testimony from various banking officials. Hearings continued during 2010 with "hundreds" of other persons in business, academia, and government testifying.
The Commission reported its findings in January 2011. It concluded that "the crisis was avoidable and was caused by: Widespread failures in financial regulation, including the Federal Reserve’s failure to stem the
tide of toxic mortgages; Dramatic breakdowns in corporate governance including too many financial firms acting
recklessly and taking on too much risk; An explosive mix of excessive borrowing and risk by households and Wall Street that put the financial system on a collision course with crisis; Key policy makers ill prepared for the crisis, lacking a full understanding of the financial system they oversaw; and systemic breaches in accountability and ethics at all levels.“
Creation and statutory mandate
The Commission was created by section 5 of the Fraud Enforcement and Recovery Act of 2009Fraud Enforcement and Recovery Act of 2009
The Fraud Enforcement and Recovery Act of 2009, or FERA, , is a public law in the United States enacted in 2009. The law enhanced criminal enforcement of federal fraud laws, especially regarding financial institutions, mortgage fraud, and securities fraud or commodities fraud.-Legislative history:U.S...
(Public Law 111-21), signed into law by President
President of the United States
The President of the United States of America is the head of state and head of government of the United States. The president leads the executive branch of the federal government and is the commander-in-chief of the United States Armed Forces....
Barack Obama
Barack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...
on May 20, 2009. That section of the Act:
- Set the purpose of the Commission, i.e. "to examine the causes, domestic and global, of the current financial and economic crisis in the United StatesUnited StatesThe United States of America is a federal constitutional republic comprising fifty states and a federal district...
." - Set its composition of 10 members, appointed on a bipartisanBipartisanshipBipartisanship is a political situation, usually in the context of a two-party system such as the United States, in which opposing political parties find common ground through compromise. The adjective bipartisan can refer to any bill, act, resolution, or other political act in which both of the...
and bicameralBicameralismIn the government, bicameralism is the practice of having two legislative or parliamentary chambers. Thus, a bicameral parliament or bicameral legislature is a legislature which consists of two chambers or houses....
basis in consultation with relevant Committees. Six members are to be chosen by the congressionalUnited States CongressThe United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
majority, the DemocratsDemocratic Party (United States)The Democratic Party is one of two major contemporary political parties in the United States, along with the Republican Party. The party's socially liberal and progressive platform is largely considered center-left in the U.S. political spectrum. The party has the lengthiest record of continuous...
(three of these by the Speaker of the HouseSpeaker of the United States House of RepresentativesThe Speaker of the United States House of Representatives, or Speaker of the House, is the presiding officer of the United States House of Representatives...
and three by the Senate Majority LeaderParty leaders of the United States SenateThe Senate Majority and Minority Leaders are two United States Senators who are elected by the party conferences that hold the majority and the minority respectively. These leaders serve as the chief Senate spokespeople for their parties and manage and schedule the legislative and executive...
) and four by the congressional minority, the RepublicansRepublican Party (United States)The Republican Party is one of the two major contemporary political parties in the United States, along with the Democratic Party. Founded by anti-slavery expansion activists in 1854, it is often called the GOP . The party's platform generally reflects American conservatism in the U.S...
(two from the House Minority LeaderMinority leader of the United States House of RepresentativesThe House Minority Leader is one of the party leaders of the United States House of Representatives. This title is currently held by Democratic Representative Nancy Pelosi of California....
and two from the Senate Minority LeaderParty leaders of the United States SenateThe Senate Majority and Minority Leaders are two United States Senators who are elected by the party conferences that hold the majority and the minority respectively. These leaders serve as the chief Senate spokespeople for their parties and manage and schedule the legislative and executive...
). - Expressed the "sense of the Congress that individuals appointed to the Commission should be prominent United States citizens with national recognition and significant depth of experience in such fields as banking, regulation of markets, taxation, finance, economics, consumer protection, and housing" and also provided that "no member of Congress or officer or employee of the federal governmentFederal government of the United StatesThe federal government of the United States is the national government of the constitutional republic of fifty states that is the United States of America. The federal government comprises three distinct branches of government: a legislative, an executive and a judiciary. These branches and...
or any stateState governments of the United StatesState governments in the United States are those republics formed by citizens in the jurisdiction thereof as provided by the United States Constitution; with the original 13 States forming the first Articles of Confederation, and later the aforementioned Constitution. Within the U.S...
or local governmentLocal government in the United StatesLocal government in the United States is generally structured in accordance with the laws of the various individual states. Typically each state has at least two separate tiers: counties and municipalities. Some states have their counties divided into townships...
may serve as a member of the Commission." - Provided that Commission's chair be selected jointly by the congressional majority leadership and that the vice chair be selected jointly by the congressional minority leadership, and that the chair and vice chair may not be from the same political party.
- Set the "functions of the Commission" as:
- Authorized the Commission to "hold hearingsHearing (law)In law, a hearing is a proceeding before a court or other decision-making body or officer, such as a government agency.A hearing is generally distinguished from a trial in that it is usually shorter and often less formal...
, sit and act at times and places, take testimonyTestimonyIn law and in religion, testimony is a solemn attestation as to the truth of a matter. All testimonies should be well thought out and truthful. It was the custom in Ancient Rome for the men to place their right hand on a Bible when taking an oath...
, receive evidenceEvidenceEvidence in its broadest sense includes everything that is used to determine or demonstrate the truth of an assertion. Giving or procuring evidence is the process of using those things that are either presumed to be true, or were themselves proven via evidence, to demonstrate an assertion's truth...
, and administer oathOathAn oath is either a statement of fact or a promise calling upon something or someone that the oath maker considers sacred, usually God, as a witness to the binding nature of the promise or the truth of the statement of fact. To swear is to take an oath, to make a solemn vow...
s" and "require, by subpoenaSubpoenaA subpoena is a writ by a government agency, most often a court, that has authority to compel testimony by a witness or production of evidence under a penalty for failure. There are two common types of subpoena:...
or otherwise, the attendance and testimony of witnesses and the production of books, records, correspondence, memoranda, papers, and documents." This subpoena power was also held by the Pecora Commission, but not the 9/11 Commission. - Provided that "a report containing the findings and conclusions of the Commission" shall be submitted to the President and to the Congress on December 15, 2010, and that at the discretion of the chairperson of the Commission, the report may include reports or specific findings on any financial institution examined by the Commission.
- Provides that the chairperson of the Commission shall, not later than 120 days after the date of submission of the final report, appear before the Senate Banking Committee and the House Financial Services Committee to testify regarding the Commission's findings.
- Provides for the termination of the Commission 60 days after the submission of the final report.
Composition
Speaker of the House Nancy PelosiNancy Pelosi
Nancy Patricia D'Alesandro Pelosi is the Minority Leader of the United States House of Representatives and served as the 60th Speaker of the United States House of Representatives from 2007 to 2011...
of California
California
California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...
and Senate Majority Leader Harry Reid
Harry Reid
Harry Mason Reid is the senior United States Senator from Nevada, serving since 1987. A member of the Democratic Party, he has been the Senate Majority Leader since January 2007, having previously served as Minority Leader and Minority and Majority Whip.Previously, Reid was a member of the U.S...
of Nevada
Nevada
Nevada is a state in the western, mountain west, and southwestern regions of the United States. With an area of and a population of about 2.7 million, it is the 7th-largest and 35th-most populous state. Over two-thirds of Nevada's people live in the Las Vegas metropolitan area, which contains its...
each made three appointments, while House Minority Leader John Boehner
John Boehner
John Andrew Boehner is the 61st and current Speaker of the United States House of Representatives. A member of the Republican Party, he is the U.S. Representative from , serving since 1991...
of Ohio
Ohio
Ohio is a Midwestern state in the United States. The 34th largest state by area in the U.S.,it is the 7th‑most populous with over 11.5 million residents, containing several major American cities and seven metropolitan areas with populations of 500,000 or more.The state's capital is Columbus...
and Senate Minority Leader Mitch McConnell
Mitch McConnell
Addison Mitchell "Mitch" McConnell, Jr. is the senior United States Senator from Kentucky and the Republican Minority Leader.- Early life, education, and military service :...
of Kentucky
Kentucky
The Commonwealth of Kentucky is a state located in the East Central United States of America. As classified by the United States Census Bureau, Kentucky is a Southern state, more specifically in the East South Central region. Kentucky is one of four U.S. states constituted as a commonwealth...
each made two appointments:
- Phil AngelidesPhil AngelidesPhilip Nicholas "Phil" Angelides is an American politician who was California State Treasurer and the unsuccessful Democratic nominee for Governor of California in the 2006 elections...
(chairman) - Pelosi (jointly chosen as chair by Pelosi and Reid) - Bill ThomasBill ThomasWilliam Marshall Thomas , commonly known as Bill Thomas, is an American politician, and a Republican member of the United States House of Representatives from 1979–2007, finishing his tenure representing California's 22nd congressional district and as the Chairman of the House Ways and Means...
(vice chairman) - Boehner (jointly chosen as vice chair by Boehner and McConnell) - Brooksley BornBrooksley BornBrooksley E. Born is an American attorney and former public official who, from August 26, 1996, to June 1, 1999, was chairperson of the Commodity Futures Trading Commission , the federal agency which oversees the futures and commodity options markets...
(Pelosi) - Byron GeorgiouByron GeorgiouByron Stephen Georgiou is a financial lawyer, and an investor. In 2009, Georgiou was appointed by United States Senate Majority Leader Harry Reid to the Financial Crisis Inquiry Commission .-Education:...
(Reid) - Bob GrahamBob GrahamDaniel Robert "Bob" Graham is an American politician. He was the 38th Governor of Florida from 1979 to 1987 and a United States Senator from that state from 1987 to 2005...
(Reid) - Keith HennesseyKeith HennesseyKeith Hennessey is the former Assistant to the U.S. President for Economic Policy and Director of the U.S. National Economic Council. He was appointed to the position in November 2007 by President George W. Bush, and served until the end of Bush's second term in office. Mr...
(McConnell) - Douglas Holtz-EakinDouglas Holtz-EakinDouglas J. "Doug" Holtz-Eakin is an American economist, former professor, former Director of the Congressional Budget Office and former chief economic policy adviser to U.S...
(McConnell) - Heather MurrenHeather MurrenHeather Murren was the cofounder, chairman and CEO for Nevada Cancer Institute from its founding until June 2009, and remains a member of its board of directors...
(Reid) - John W. ThompsonJohn W. ThompsonJohn W. Thompson is a former vice-president at IBM and the former Chief Executive Officer of Symantec Corporation. He is presently the Chairman of the Board of Directors of Symantec Corporation and CEO of Virtual Instruments...
(Pelosi) - Peter J. WallisonPeter J. WallisonPeter J. Wallison is a lawyer and the Arthur F. Burns Fellow in Financial Policy Studies at the American Enterprise Institute. He specializes in financial markets deregulation. He was White House Counsel during the Tower Commission's inquiry into the Iran Contra Affair...
(Boehner)
Commission's investigation and public response
As part of its inquiry, the Commission will hold a series of public hearings throughout the year including, but not limited to, the following topics: avoiding future catastrophe, complex financial derivatives, credit rating agencies, excess risk and financial speculation, government-sponsored enterprises, the shadow banking systemShadow banking system
The shadow banking system is the infrastructure and practices which support financial transactions that occur beyond the reach of existing state sanctioned monitoring and regulation. It includes entities such as hedge funds, money market funds and Structured investment vehicles...
, subprime lending practices and securitization, and too big to fail.
The first meeting of the Commission took place in Washington
Washington, D.C.
Washington, D.C., formally the District of Columbia and commonly referred to as Washington, "the District", or simply D.C., is the capital of the United States. On July 16, 1790, the United States Congress approved the creation of a permanent national capital as permitted by the U.S. Constitution....
on September 17, 2009, and consisted of opening remarks by Commissioners.
On January 13, 2010, Lloyd Blankfein testified before the Commission, that he considered Goldman Sachs' role as primarily that of a market maker, not a creator of the product (i.e.; subprime mortgage-related securities). Goldman Sachs was sued on April 16, 2010 by the SEC for the fraudulent selling of collateralized debt obligation
Collateralized debt obligation
Collateralized debt obligations are a type of structured asset-backed security with multiple "tranches" that are issued by special purpose entities and collateralized by debt obligations including bonds and loans. Each tranche offers a varying degree of risk and return so as to meet investor demand...
s tied to subprime mortgages, a product which Goldman Sachs had created
February 26–27 the Commission heard from academic experts and economists on issues related to the crisis. The following experts have appeared before the Commission in public or in private: Martin Baily, Markus Brunnermeier, John Geanakoplos, Pierre-Olivier Gourinchas, Gary Gorton, Dwight Jaffee, Simon Johnson, Anil Kashyap, Randall Kroszner, Annamaria Lusardi, Chris Mayer, David Moss, Carmen M. Reinhart, Kenneth T. Rosen, Hal S. Scott, Joseph E. Stiglitz, John B. Taylor, Mark Zandi and Luigi Zingales.
April 7–9, 2010, Alan Greenspan, Chuck Prince and Robert Rubin testified before the Commission on subprime lending and securitization.
May 5–6, former Bear Stearns CEO Jimmy Cayne, former SEC Chairman Christopher Cox, Tim Geithner and Hank Paulson are scheduled to appear before the Commission.
Writer Joe Nocera of the New York Times praised the commission's approach and technical expertise in understanding complex financial issues during July 2010.
July 27, The composition of the commission has changed several times since its formation. The executive director J. Thomas Greene was replaced by Wendy M. Edelberg, an economist from the Federal Reserve. Five of the initial fourteen senior staff members resigned, including Matt Cooper, a journalist who was writing the report. Darrell Issa, a top Republican on the House Oversight and Government Reform Committee, questioned the Federal Reserve's involvement as a possible conflict of interest, and there has been disagreement among some commission members on what information to make public and where to place blame. Mr. Angelides called the criticisms "silly, stupid Washington stuff," adding: "I don’t know what Mr. Issa’s agenda is, but I can tell you what ours is." In a joint interview the commission’s chairman, Phil Angelides (D), and vice chairman, Bill Thomas (R), said that the turnover’s effects had been exaggerated and that they were optimistic about a consensus.
Report
The Commission's final report was initially due to CongressUnited States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
on December 15, 2010, but was not released until January 27, 2011. The Commission concluded that "the
crisis was avoidable and was caused by: Widespread failures in financial regulation, including the Federal Reserve’s failure to stem the
tide of toxic mortgages; Dramatic breakdowns in corporate governance including too many financial firms acting
recklessly and taking on too much risk; An explosive mix of excessive borrowing and risk by households and Wall Street that put the
financial system on a collision course with crisis; Key policy makers ill prepared for the crisis, lacking a full understanding of the financial system
they oversaw; and systemic breaches in accountability and ethics at all levels.“
External links
- Financial Crisis Inquiry Commission Website
- Official live streaming video of the proceedings of the Financial Crisis Inquiry Commission
- Profiles and photos of commissioners
- Testimony of Alan Greenspan - Financial Crisis Inquiry Commission - Wednesday, April 7, 2010