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 an independent, bipartisan panel created to examine the causes of the financial collapse that culminated in the 2007–2008 global financial crisis. The commission conducted public hearings, subpoenaed documents, interviewed witnesses, and produced a comprehensive report attributing the crisis to failures in regulation, financial institutions, and market practices. Its work intersected with investigations, litigation, and reforms involving major firms, regulatory agencies, and legislative responses.

Background and Establishment

The commission was established by the United States Congress through provisions in the Fraud Enforcement and Recovery Act of 2009 and the Emergency Economic Stabilization Act of 2008 as part of congressional efforts following the Lehman Brothers collapse and the Bear Stearns rescue. It was modeled in part on earlier inquiries such as the Warren Commission and the 9/11 Commission, and formed amid debates involving the Federal Reserve System, the Treasury Department, and congressional committees including the United States Senate Committee on Banking, Housing, and Urban Affairs and the United States House Committee on Financial Services. Key contemporaneous events included the passage of the American Recovery and Reinvestment Act of 2009 and regulatory proposals advanced by the Dodd–Frank Wall Street Reform and Consumer Protection Act discussions.

Mandate and Membership

The commission’s mandate required analysis of underlying causes of the financial crisis, assessment of regulatory and supervisory failures, and recommendations to prevent recurrence; it was tasked to examine institutions such as AIG, Fannie Mae, Freddie Mac, Goldman Sachs, and Merrill Lynch. Membership comprised commissioners appointed by congressional leaders and the President of the United States; notable commissioners included former California State Treasurer Phil Angelides (chair), former Speaker of the United States House of Representatives Newt Gingrich (member), former House Majority Leader Barney Frank (nominee but not a commissioner), and former United States Representative Bill Thomas (vice chair). Other commissioners came from backgrounds linked to Citigroup, Bank of America, JP Morgan Chase, academia such as Harvard University and Columbia University, and financial oversight bodies like the Securities and Exchange Commission and the Office of the Comptroller of the Currency.

Investigation and Findings

The commission conducted hearings that featured testimony from executives of Citigroup, Goldman Sachs, Lehman Brothers, Bank of America, Wachovia, Countrywide Financial, Washington Mutual, and insurers such as AIG. It subpoenaed records from investment banks, mortgage originators like Countrywide Financial and IndyMac, credit rating agencies Standard & Poor's, Moody's Investors Service, and Fitch Ratings. Investigations covered mortgage securitization chains involving Mortgage Electronic Registration Systems and Real Estate Mortgage Investment Conduits, derivatives trading tied to credit default swaps and collateralized debt obligations, and shadow banking activities linked to short-term funding markets and repo transactions. The commission examined policy decisions at the Federal Reserve Bank of New York, actions by Treasury Secretary Henry Paulson, and oversight lapses at the Office of Thrift Supervision and the Federal Deposit Insurance Corporation.

Report and Key Conclusions

In its final report, commissioners concluded that the crisis resulted from widespread failures including excessive risk-taking by banks such as Goldman Sachs and Morgan Stanley, faulty underwriting by mortgage lenders like Countrywide Financial, conflicts of interest at credit rating agencies including Standard & Poor's and Moody's Investors Service, and inadequate regulatory supervision by agencies such as the Securities and Exchange Commission and the Office of the Comptroller of the Currency. The report detailed contributions from securitization practices, leverage at institutions like Lehman Brothers, and opaque derivatives markets dominated by counterparties including AIG. It highlighted policy missteps during the administrations of George W. Bush and the early tenure of Barack Obama, and referenced legislative frameworks such as the Glass–Steagall Act and debates leading to Dodd–Frank Wall Street Reform and Consumer Protection Act reforms.

Reactions and Impact

The report provoked responses from congressional leaders including Senator Christopher Dodd and Representative Spencer Bachus, regulators such as SEC Chairman Mary Schapiro, and executives including Lloyd Blankfein of Goldman Sachs and Ken Lewis of Bank of America. Advocacy groups like Public Citizen, Consumer Federation of America, and Americans for Financial Reform cited the findings to support calls for stricter oversight, while business associations such as the Securities Industry and Financial Markets Association disputed some conclusions. International institutions including the International Monetary Fund and the Bank for International Settlements referenced the commission’s analysis in cross-border regulatory dialogues and in shaping reforms at forums like the G20 and the Financial Stability Board.

Legal and Political Aftermath

The commission’s findings fed into litigation against firms including Countrywide Financial, Washington Mutual, and Lehman Brothers estates, and informed congressional hearings before panels like the United States Senate Committee on Banking, Housing, and Urban Affairs and the United States House Committee on Oversight and Government Reform. Policymakers cited the report during enactment of Dodd–Frank Wall Street Reform and Consumer Protection Act provisions establishing the Consumer Financial Protection Bureau and enhanced authority for the Financial Stability Oversight Council. The report also influenced academic research at institutions such as Princeton University, Yale University, and Massachusetts Institute of Technology and inspired further investigations by watchdogs including Government Accountability Office and nonprofit monitors like ProPublica.

Category:Investigations into the 2007–2008 financial crisis