Will America ever truly learn what happened on Wall Street that brought our markets, our economy, and our country to its knees?
We should not expect the incestuous Wall Street-Washington partners to implicate themselves and thoroughly expose their shortcomings. A full 16 months since the failure of Lehman Bros. and how much have we truly learned? What change has really occurred? Who has been fired in Washington? Who has been indicted on Wall Street? Will the Financial Crisis Inquiry Commission, charged with investigating the factors which facilitated our economic disaster, truly be effective?
The truth may hurt but if the hard questions are not asked, the failings are not exposed, and those responsible are not held to account, then the lessons will not be learned, and the experience will likely repeat itself.
Will the commission pretend to investigate, but ultimately wilt under the pressure of the incestuous pillars of power? Will the commission rise above the fray, hold people and institutions to account, and make our country proud? Will the commission use its power to subpoena, if need be?
Whom should the commission pursue? What agencies and institutions should the commission target? If I were on the commission, I would recommend pursuing the following targets:
1. FINRA: Wall Street’s self-regulator. Who from FINRA was charged to monitor the business activities at the respective Wall Street banks? What did they report and recommend? Question and if need be subpoena SEC Chair Mary Schapiro to release ALL information regarding FINRA’s internal investment portfolio, especially its hedge fund and fund of fund activities. Additionally, compel FINRA to release all details regarding its Auction-Rate Securities liquidation in mid-2007. Was FINRA merely incompetent in regulating Wall Street or was it actually complicit in this meltdown? It is high time that FINRA is truly introduced to America.
2. SEC: who from the SEC was charged with monitoring the activities at the respective Wall Street banks? What did they report and recommend? How did they interact with their FINRA colleagues? Question and if need be subpoena current SEC Chair Mary Schapiro and former SEC Chairs Chris Cox, William Donaldson and others.
America should not be duped into thinking that FINRA or the SEC will ever fully investigate and expose their own shortcomings.
3. Rating Agencies: fully expose the relationships between the rating agencies and the Wall Street banks. What were the fee structures? Were there any unscrupulous dealings which facilitated structured transactions? Were there kickbacks involved? Use subpoena powers if necessary!
4. Derivatives: fully expose the pressures applied by Robert Rubin, Alan Greenspan et al to leave this monstrous market largely unregulated. Why was Brooksley Born, then chair of the Commodities Futures Trading Commission (CFTC), pressured by Wall Street and Washington to leave this market unregulated?
5. Freddie Mac/Fannie Mae: revisit and thoroughly expose the failed business practices of these institutions. If necessary, subpoena Franklin Raines and Leland Brendsel. Provide the transparency which Congress never provided in its own questioning of Freddie and Fannie executives. America deserves a comprehensive review of the campaign contributions, lobbying dollars, and other forms of remuneration paid by Freddie and Fannie. Question Armando Falcon, Freddie and Fannie’s overseer at OFHEO (Office of Federal Housing Enterprise Oversight).
6. Originators: the highly structured deals on Wall Street could not have happened without a steady source of collateral provided by mortgage originators. Fully explore and expose the fee structures and relationships between Wall Street and the originators. Fully explore and expose the relationships between the originators and their overseers. Fully explore and expose the relationships between the originators and those in Washington receiving campaign contributions. Let’s start with a subpoena for Angelo Mozilo who ran Countrywide.
7. Goldman Sachs: the commission could be busy investigating this firm, but start with exploring what drove Goldman to short the housing market.
How much has America learned from these parties? Is America supposed to believe that everything and everybody was truly on the up and up? Who profited while America now underwrites and backstops trillions of dollars in exposure?
Will the Financial Crisis Inquiry Commission rise to the occasion? Will the commission be the voice of the American public? Let’s start with the seven points highlighted above and go from there. America deserves nothing less than total truth, transparency and integrity. Will we get it?
P.S. I hope people will want to forward this commentary to friends and colleagues so we can assess just how accountable the commission will be. Thanks for your support.
Disclosure: No positions