Angelides On Pecora II

Tim Fernholz talks with Phil Angelides, the new chairman of the Financial Crisis Inquiry Commission, a modern-day analogue to the Pecora Commission of the 1930s, charged with finding out the origins of the financial crisis, who we should hold responsible, and how we can ensure it never happens again. There are some interesting tidbits in the interview. First, we can be sure that Angelides has an understanding of the problem.

Why is this commission important?

The magnitude of what's happened in this country is astounding. Millions of people have lost their homes, millions of people have lost their life savings, millions of Americans have seen their pensions disappear. We have seen over a trillion dollars in taxpayer money go to prop up a dying financial system. This is a cataclysm. My view is that there is a real hunger in this country to have a pursuit of the truth, to find out what happened and why it happened, so hopefully, instead of sweeping it under the rug, it will not happen again in our lifetimes. This is an important commission with a critical role of serving the nation's best interests because we are called on to look into something that has been fundamentally important to this country: The very foundations of our financial system have been shaken [...]

Do you believe we already have a broad understanding of what led to this crisis, or do you feel there are a lot of questions still unanswered?

All of us come with our personal views. I'll start by saying that in the early part of this decade, as early as 2002, I was concerned about what was happening the marketplace. I was deeply concerned about executive compensation so I mobilize shareholders across the country to push back on executive compensation. I was concerned about lax enforcement at the SEC. ... I was part of a movement of activist shareholders in an effort to bring some common sense to the market place. In the wake of the Enron and Worldcom, we had some momentum, but the economy recovered and the regulators took their foot off the brakes. We all come in with our own viewpoints, but our job is to look at this fresh.

Next, he's willing to give his Republican colleagues on the committee some input, but he's setting ground rules and he thinks he can get the others on the commission to play ball:

The commission has the ability to subpoena information, but only if at least one of the Republican appointees supports the decision. Are you at all concerned about disagreement within the committee hurting its ability to gather information?

When the Speaker and the Majority Leader asked me to serve as chair, [I knew] this would be a hard and difficult road. I'm starting on the assumption that other commissioners, like myself, are interested in getting to the facts and the root causes. If we have to issue subpoenas, I hope we can do that. Hopefully people [with information] will cooperate, but if not, we were given the tools to get the facts. I would want to start on the basis that no commissioner would want to deprive us of information to make a good judgment on behalf of the American people. The commission is interesting because it really focuses on the inquiry, rather than the policy and political implications. I think that gives us a better chance of coming up with a nonpartisan, bipartisan findings of facts.

And finally, he seems to recognize something that a lot of people don't - the regulators probably had the capacity to stop at least the most egregious criminality happening in the markets, but they didn't use the authority they had. What the Financial Crisis Inquiry Commission can offer is, in Angelides' words, "a road map" and "a guidebook" to the next generation of regulators, so they know what to look for and where to go.

Now, Zachary Roth has a long piece about Bill Thomas and the other Republicans on the FCIC, or Pecora II, and how they are partisan enough to resist a real inquiry. The provision that one Republican must vote with Democrats in order to issue subpoenas could allow anyone Republicans don't want testifying to be able to do so; and all of the Republicans appear, to Roth, to be candidates to hang together:

None of the three rank-and-file Republican appointees seem like good candidates to break ranks. Peter Wallison is a fellow at the American Enterprise Institute, who has been a prominent advocate of the favored conservative notion that Fannie Mae and Freddie Mac are the true culprits in the crisis, and who argued this week in the Washington Post against creating a consumer protection commission for financial products -- an idea seen by many as a cornerstone of any effort to reform the financial regulatory system. Doug Holtz-Eakin, for his part, was John McCain's top economic adviser at the time when the GOP presidential nominee declared the fundamentals of the economy strong. And Keith Hennessey is a former economic adviser to President Bush and a former aide to Sen. Trent Lott.

But it's the identity of the Republican-appointed vice chair -- whose support is required by law for the commission to perform several other key functions, like hiring staff -- that's the really ominous sign. That's Bill Thomas, the Republican former congressman from California, who earlier this decade chaired the House Ways and Means committee.

During his years in Congress, Thomas, who now works for a major DC lobbying firm, acquired a reputation as a smart, highly-skilled and acutely partisan supporter of big business, who once tried to have Democrats forcibly ousted from a capitol meeting room, and was accused of being literally in bed with a corporate lobbyist.

I'd agree that Wallison and probably Hennessey and Thomas are useless, but Holtz-Eakin, a former head of the CBO, has at least displayed flashes of intellectual honesty when he wasn't in charge of a Presidential campaign's economic policies. He has acknowledged the need for higher taxes. He has called for the Bush tax cuts to expire. He's definitely conservative and he sometimes says some boneheaded things, but I don't see him as a hardcore partisan, actually. And if Angelides structures this as a just the facts inquiry, there's at least the promise of a legitimate investigation.