From Tom Petruno: Financial-meltdown commission sets first hearings
The panel set up by Congress to tell us why the financial-system meltdown happened — i.e., who and what to blame — will hold its first hearings Jan. 13 and 14 in Washington.
Congress is expecting a final report from the 10-member, bipartisan commission by Dec. 15, 2010.
Maybe they will take suggestions and questions.
My first suggestion is they start by interviewing – in private – the field examiners at the Fed, FDIC, OCC and OTS. There is no need to publicly embarrass any examiner. The various Inspector General reports on bank failures would provide a starting point (see Eric Dash’s article in the NY Times: Post-Mortems Reveal Obvious Risk at Banks).
Ask the examiners what they saw and when – according to the Inspector General’s reports, the field examiners were warning about lending problems in 2002 and 2003.
Follow the trail. Did this information generate warnings inside the organizations? If so, why wasn’t action taken? Was the action blocked by political appointees? And how would the proposed regulatory reform lead to a better outcome?
And a quote from Eric Dash’s article:
“Hindsight is a wonderful thing,” said Timothy W. Long, the chief bank examiner for the Office of the Comptroller of the Currency. “At the height of the economic boom, to take an aggressive supervisory approach and tell people to stop lending is hard to do.”
If the lending was risky, telling them to stop was the regulators job. How does reform fix this?
The good news is Brooksley Born is on the commission, and I think she will do an excellent job.
Here is their website (under construction)