Financial Crisis Inquiry Commission Hearings Continue
The FCIC is holding three more days of hearings April 7-9, 2010 devoted to Subprime Lending and Securitization and Government-Sponsored Enterprises (GSEs). The 10-member FCIC panel is investigating banking executives’ involvement in risky mortgage debt investments that helped trigger the 2008 financial collapse. The hearings were carried by CSPAN. There were these advance billings:
The Meltdown Men: Greenspan, Rubin, & Prince to Testify before Financial Crisis Commission (Monday, 04/5/2010 – 11:15 am) by Jeff Madrick
On Wednesday (April 7), there were three sessions.
Session 1 was the one you probably saw excerpts from on the evening news:
Session 1: The Federal Reserve
This session got major play in the print media and Internet:
Greenspan Testifies To Financial Crisis Commission, Blames Fannie, Freddie For Subprime Crisis (LIVEBLOG, VIDEO). Huffington Post. Shahien Nasiripour and Ryan McCarthy (First Posted: 04- 7-10 09:10 ).
(The HuffPo promised to run a live blog of the testimony at the Financial Crisis Inquiry Commission’s latest round of hearings in Washington, D.C. Check back to the link above for regular updates and video.)
Richard (RJ) Eskow: In the Dark: A Good Prosecutor Would’ve Pinned Greenspan Down (Huffington Post, April 8, 2010)
FCIC Hearings: Greenspan Grilled, Madrick Validated (Wednesday, 04/7/2010 – 2:30 pm) by Justin Lutz, Roosevelt Institute
Greenspan Grilled Over Role in Financial Crisis, by John C. Mckinnon and Randall Smith, Wall Street Journal (April 8, 2010)
Greenspan reflects on crisis, deflects blame, by Dana Milbank, Washington Post Staff Writer (Thursday, April 8, 2010)
As the WSJ noted, "Former Fed chief Alan Greenspan faced some of the toughest questioning yet about his role in the financial crisis at a hearing Wednesday marked by tense exchanges with a longtime foe." Who might that be? WaPo has the answer:
A particularly sharp exchange occurred between Mr. Greenspan and Brooksley E. Born, a panelist and former regulator who clashed with Mr. Greenspan and members of the Clinton administration over derivatives regulation — and lost that battle.
In tough questioning on Wednesday, Ms. Born called on Mr. Greenspan to defend his longtime deregulatory bent.
"The Fed utterly failed to prevent the financial crisis," she said. "The Fed and the banking regulators failed to prevent the housing bubble. They failed to prevent the predatory lending scandal. They failed to prevent our biggest banks and bank holding companies from engaging in activities that would bring them to the verge of collapse without massive taxpayer bailouts."
"Didn’t the Federal Reserve fail to meet its mandates, fail to meet it responsibilities?" she added.
Mr. Greenspan replied that there was a failure: an underestimation of the "state and extent" of financial risks and the ability of private counterparties to assess them.
"The notion that somehow my views on regulation were predominant and effective at influencing the Congress is something you may have perceived," he said. "But it didn’t look that way from my point of view."
Session 2: Subprime Origination and Securitization
Session 3: Citigroup Subprime-Related Structured Products and Risk Management
News coverage of Sessions 2 & 3 included:
Day 2 (April 8): The bipartisan Financial Crisis Inquiry Commission (FCIC) continued to hear testimony today from several former Citigroup executives including ex-CEO and Chairman Chuck Prince and Robert Rubin, the former Treasury Secretary who headed Citigroup’s executive committee.
In his statement this morning, former Citigroup President & CEO Chuck Prince apologized for the impact of the financial crisis on Americans. His comments came as he and former Citigroup Board Member Robert Rubin testified before the Financial Crisis Inquiry Commission. Later, Comptroller of the Currency John Dugan spoke on his office’s oversight over Citigroup during the financial crisis.
Session 1: Citigroup Senior Management
Prince and Rubin testified side by side, and questions were directed to them alternately, so there is one video for both of them. Rubin blamed "excesses and abuses," but defended CRA, and strongly recommended consumer protections. He was questioned about Fannie and Freddie Mac. Rubin, as many others, complained that "nobody knew" what would happen, and said "we didn’t understand the downside." As if the Great Depression wasn’t enough to show him the downside.
When challenged about this, Rubin said, yeah, there were a few people who understood the larger picture, but "nobody" at the larger institutions did. See The Big Short: Inside the Doomsday Machine, by Michael Lewis.
Brooksley Born’s questions begin about 2 hours and 13 minutes into the video. She got Rubin to agree that over the counter derivatives should be regulated. In the final questions of the session, Rubin claimed that he was NOT opposed to regulation, contrary to previous reports. Rubin had a pad of paper and was taking notes. Angelides was struck by how little Prince and Rubin knew about what was going on in their own organization, even though they were on site and frequently engaged. It is as if they were insulated (my word) from what was really going on. (Angelides: You were either pulling the levers, or asleep at the switch.) They delegated almost everything, but did little oversight.
Session 2: Office of the Comptroller of the Currency
- Ex-Citi exec says he warned Rubin on mortgage risk, DANIEL WAGNER, AP
(Published: April 7, 2010)
Ex-Citigroup Chiefs Pressed On Roles In Risk-Taking, NPR/AP (April 8, 2010) Robert Rubin, a senior adviser to Citigroup Inc. at the time of its deep losses from subprime mortgages, and former CEO Charles Prince said Thursday they learned belatedly that Citi had $43 billion in high-risk securities on its bookson CNN’s Anderson Cooper 360 (AC360.com)
o Citigroup official on the hot se…
(4th video in the podcast): Robert Rubin faces grilling over Citigroup’s financial problems. CNN’s Jessica Yellin reports.
o Cooper interviewed Andrew Ross Sorkin about this session, but I can’t find a link for it on CNN.
Day 3 (April 9) had sessions devoted to Fannie Mae, and the Office of Federal Housing Enterprise Oversight.
Session 1: Fannie Mae
Mr. Robert J. Levin, Former Executive Vice President and Chief Business Officer, Fannie Mae
Mr. Daniel H. Mudd, Former President and Chief Executive Officer, Fannie Mae
Session 2: Office of Federal Housing Enterprise Oversight
Mr. Armando Falcon Jr., Former Director
Office of Federal Housing Enterprise Oversight
Mr. James Lockhart, Former Director
Office of Federal Housing Enterprise Oversight
Advance billing for this session included:
In these hearings, there were many questions about "Mark to Market" accounting.
Lutz, in the piece on the Roosevelt Institute’s page, concluded with this assessment:
Even at his toughest Phil Angelides, former California State Treasurer and Chair of the FCIC, at his toughest failed to elicit any admission of fault from Greenspan.
"a few commissioners said they were concerned that Mr. Angelides was more interested in holding prominent hearings than in selecting a few targets for deep examination. For example, the chief executives of four Wall Street banks testified in January, and Alan Greenspan, the former Federal Reserve chairman, will testify on Wednesday. The commission has issued no subpoenas even though it has the power to do so."
This is unacceptable. We hope that as the testimony progresses, the Commission is able to turn up the heat in order to get down to the real, tangible causes of the worst financial crisis in most people’s memory.
The New York Times article has much more on this subject.
There is now quite a lot of news coverage on the hearings so far, many more than included here, but conveniently gathered on the FCICI website at http://www.fcic.gov/news/
Finally, the previous set of hearings (February 26-27, 2010) has been reviewed by Shahien Nasiripour at HuffPo: Lively Debate, Hard Truths Emerge During Debate On Financial Crisis.
This set of hearings interviewed academics and other experts, but no stars and hence little coverage. Nevertheless, there’s much substance there that merits attention (see transcripts and videos for these sessions on the FCIC website
Bob in AZ
P.S. I’ve been working on this diary for more than a day. I need an easier way to compile and publish diaries with many links, bullet points, etc.