Some of the biggest news coming out of last week's Financial Crisis Inquiry Commission were the apologies from the banksters. But, the FCIC is not a body for bankster catharsis. As the New York Times points out, the commission should be aggressively pursuing the truth.
The latest public hearings of the Financial Crisis Inquiry Commission, held last week, made headlines for eliciting more apologies from financiers who presided over the market collapse.
You may recall a similar flurry last year, when Lloyd Blankfein, the chairman and chief executive of Goldman Sachs, was widely credited for having apologized for his firm’s role in the financial crisis.
We did not buy it then; Mr. Blankfein never said what he was sorry for or to whom he was apologizing. And we are not buying it now.
Mr. Prince says he “could not” foresee the impending collapse, when he could have and should have seen it coming. Certainly, others did. Mr. Rubin has said that under his employment agreement, he was not responsible for the bank’s operations. But he was a towering figure at Citi, a source of its credibility and prestige. That implies responsibility, no matter what his contract said. Add all that to the “I wasn’t the only one” context of both men’s comments, and their regret translates as, “We feel bad about an accident we were powerless to prevent.”
Except that the financial crisis was not an accident and they were not powerless. The crisis was the result of irresponsibility and misjudgments by many people, including Mr. Prince and Mr. Rubin. Citi, under their leadership, epitomized the financial recklessness that ruined the economy.
More important, the “apologies” are distractions. The purpose of the inquiry is not catharsis. It is to determine the causes of the crisis and present the truth. A successful inquiry would compel the government to take appropriate corrective action.
The commission has managed to unearth some compelling testimony. (Last week’s hearings produced detailed evidence of how the mortgage-investment pipeline came to be stuffed with toxic loans.) But the inquiry can strangely lack vigor. It has not issued any subpoenas for documents — satisfied so far with voluntary submissions — and does not administer oaths to witnesses it interviews in private. Lying to a federal investigator is illegal under oath or not, but experience shows that taking an oath is a powerful incentive to tell the whole truth.
The commission is supposed to finish its work by Dec. 15. In the meantime, Congress’s efforts at financial reform appear to be weakened daily by politicians who are more concerned with campaign donations than regulating the financial system. This week, for instance, a Senate committee is expected to propose new regulations for derivatives that are more loophole than rule.
The Commission needs to hold more hearings, issue subpoenas, get to the bottom of what happened and hold people accountable. In particular, the failures of former regulators like Christopher Cox need to be exposed. Never again should the people writing and enforcing the rules be beholden to the big banks instead of the public.