Financial Crisis Inquiry Commission

Financial Crisis Inquiry Commission
Name	Financial Crisis Inquiry Commission
Formed	2009
Jurisdiction	United States
Headquarters	Washington, D.C.
Chief1 name	Phil Angelides
Chief1 position	Chairman
Chief2 name	Bill Thomas
Chief2 position	Vice Chairman

Financial Crisis Inquiry Commission. The Financial Crisis Inquiry Commission was a ten-member panel established by the United States Congress through the Fraud Enforcement and Recovery Act of 2009. Its mandate was to examine the complex causes of the 2008 financial crisis and the subsequent Great Recession. The commission was tasked with delivering a comprehensive report to the President and Congress, aiming to provide a definitive historical account and inform future regulatory policy.

Background and establishment

The commission was created in the wake of the catastrophic collapse of major financial institutions like Lehman Brothers and the government-sponsored interventions for AIG and Fannie Mae. Modeled after earlier investigative bodies such as the Pecora Commission and the 9/11 Commission, its formation was a direct legislative response to public and political demand for accountability. The Fraud Enforcement and Recovery Act of 2009, signed by President Barack Obama, formally authorized the panel, charging it with a broad examination of domestic and global causes of the meltdown. Its creation reflected a bipartisan, though often contentious, effort in Congress to understand the failures that led to the deepest economic downturn since the Great Depression.

Membership and structure

The commission comprised six Democratic and four Republican appointees, selected by congressional leadership from both parties. Phil Angelides, former Treasurer of California, was appointed chairman, while former Congressman Bill Thomas served as vice chairman. Other prominent members included Brooksley Born, former chair of the Commodity Futures Trading Commission, and John W. Thompson, chairman of Symantec. The panel was supported by a professional staff of economists, investigators, and lawyers, operating with a budget of several million dollars. This structure aimed to balance diverse political and professional perspectives, though partisan divisions became increasingly apparent throughout its work.

Investigation and hearings

Over the course of 2010, the commission conducted an extensive investigation, reviewing millions of pages of documents from entities like the Federal Reserve, the Securities and Exchange Commission, and major banks such as Goldman Sachs and Citigroup. It held nineteen days of public hearings across the country, interviewing over 700 witnesses including prominent figures like Alan Greenspan, Ben Bernanke, Lloyd Blankfein, and Angelo Mozilo. The hearings, broadcast on networks like C-SPAN, explored topics ranging from the collapse of the subprime mortgage market and the role of credit rating agencies like Moody's to the proliferation of complex derivatives like collateralized debt obligations.

Key findings and conclusions

The commission's final majority report, released in January 2011, concluded that the crisis was avoidable and resulted from widespread failures in financial regulation, dramatic breakdowns in corporate governance at institutions like Fannie Mae and Freddie Mac, excessive borrowing and risk-taking by households and Wall Street, and systemic breaches in accountability and ethics. It identified key catalysts including the bursting of the housing bubble, the securitization of toxic assets, and the opaque dealings in markets for credit default swaps. The report placed significant blame on regulators like the Securities and Exchange Commission and policymakers for failing to curb the excesses that led to the panic.

Dissenting and additional views

The commission's work was marked by significant partisan disagreement, reflected in three separate dissenting statements appended to the final report. The dissent by commissioners Peter J. Wallison, Douglas Holtz-Eakin, and Keith Hennessey argued the majority overstated the role of Wall Street and understated the central part played by U.S. housing policy, particularly government mandates to Fannie Mae and Freddie Mac. Another dissent, from commissioner Bill Thomas, criticized the report's scope and methodology. These dissenting views highlighted deep ideological divides over the root causes of the crisis, particularly concerning the Community Reinvestment Act and the government's role in promoting homeownership.

Legacy and impact

While the commission's report did not lead to a singular, sweeping legislative response like the Dodd–Frank Wall Street Reform and Consumer Protection Act (which was passed concurrently), it provided a crucial historical record and influenced the ongoing debate over financial reform. Its findings were cited in subsequent congressional hearings, academic studies, and media analyses of the crisis. The dissenting views, particularly from Peter J. Wallison, continued to fuel conservative policy arguments for years. The commission's work stands as a major public investigation into one of the most significant economic events in modern American history, though its ultimate political impact was tempered by the partisan divisions it exposed.

Category:2009 establishments in the United States Category:Financial crisis of 2007–2008 Category:United States federal commissions