The Financial Crisis Inquiry Commission

The Financial Crisis Inquiry Commission
Name	Financial Crisis Inquiry Commission
Formed	2009
Dissolved	2011
Jurisdiction	United States
Headquarters	Washington, D.C.
Commissioners	See text

Contents

The Financial Crisis Inquiry Commission

The Financial Crisis Inquiry Commission was a bipartisan investigative commission created to examine the causes of the 2007–2008 financial collapse and the subsequent Great Recession. Established by the Emergency Economic Stabilization Act of 2008, the commission conducted public hearings and produced a comprehensive report in 2011 that evaluated the roles of Lehman Brothers, AIG, Goldman Sachs, mortgage-backed securities, and the Federal Reserve in the crisis. Its work intersected with contemporaneous probes such as the Congressional Oversight Panel and the House Financial Services Committee, informing legislative debates over the Dodd–Frank Wall Street Reform and Consumer Protection Act and regulatory reform.

Background and Establishment

The commission was created in the aftermath of the collapse of Bear Stearns, the seizure of Fannie Mae and Freddie Mac, and the bankruptcy of Lehman Brothers amid global market turmoil that affected institutions including Citigroup, Bank of America, and Merrill Lynch. Congressional passage of the Emergency Economic Stabilization Act of 2008 and debates involving the United States Department of the Treasury and the G20 led to bipartisan agreement to establish an independent inquiry modeled after commissions such as the National Commission on Terrorist Attacks Upon the United States and the 9/11 Commission. The commission’s mandate responded to failures observed in regulatory bodies such as the Securities and Exchange Commission, the Office of the Comptroller of the Currency, and self-regulatory organizations including the New York Stock Exchange.

Mandated to examine the causes and aftermath of the crisis, the commission’s statutory powers mirrored prior investigatory bodies like the Senate Banking Committee and the House Committee on Oversight and Government Reform. Commissioners were appointed by congressional leaders and the President of the United States, drawing from nominees connected to institutions such as Harvard University, Columbia Law School, Moody's Investors Service, and Standard & Poor's. Prominent appointees included former officials linked to Federal Reserve policy, academics from Princeton University and Yale University, and practitioners with experience at firms like JPMorgan Chase and Deutsche Bank. The mix reflected tensions among proponents of interventionist responses exemplified by the Troubled Asset Relief Program and critics aligned with market-oriented voices such as those associated with Goldman Sachs alumni.

The commission employed fact-finding techniques used by entities like the United States Postal Service Office of Inspector General and the Government Accountability Office, combining subpoena authority, sworn testimony, depositions, and document review. Public hearings featured witnesses from Timothy Geithner, Ben Bernanke, Henry Paulson, executives from AIG, and representatives of credit rating agencies including Moody's Investors Service and Fitch Ratings. The investigative team analyzed offerings from issuers of CDOs, securitizers linked to Countrywide Financial, underwriting practices at Wachovia, and risk models similar to those used at Goldman Sachs. Analytical support drew on academic research from scholars associated with National Bureau of Economic Research, Brookings Institution, and American Enterprise Institute.

The commission’s majority report concluded that failures by key institutions such as Lehman Brothers and AIG, flawed practices at Countrywide Financial and Washington Mutual, negligent performance by Moody's Investors Service and Standard & Poor's, and inadequate supervision by the Federal Reserve and the Securities and Exchange Commission were central contributors to the crisis. It identified excessive leverage at Bear Stearns and Lehman Brothers, perverse incentives in the mortgage origination chain involving subprime mortgage originators and real estate investment trusts, and abuses in derivatives markets exemplified by credit default swap transactions between AIG and counterparties like Goldman Sachs. The report assigned culpability to corporate executives, financial firms, and regulatory failures, drawing comparisons to conclusions from the Financial Crisis of 2007–2008 literature and echoing findings from investigations such as the Puerta Real style inquiries in earlier crises.

The report provoked reactions across institutions including the United States Congress, the Treasury Department, and industry groups such as the American Bankers Association and consumer advocates like CFPB supporters. Some members of the finance industry criticized the commission’s characterization of firms like Goldman Sachs and JPMorgan Chase, while academics at Harvard and Yale debated its interpretations of leverage and regulatory causation. The report influenced legislative efforts culminating in the Dodd–Frank Wall Street Reform and Consumer Protection Act and informed enforcement actions at the Department of Justice and civil suits in United States district court venues.

Post-report, federal and state authorities pursued reforms and litigation that touched institutions named in the inquiry, including settlements with Bank of America, enforcement involving Countrywide Financial affiliates, and oversight changes at the Securities and Exchange Commission and the Federal Reserve Board. The commission’s findings shaped scholarship at centers like the Brookings Institution and regulatory reforms debated at International Monetary Fund meetings and Basel Committee on Banking Supervision convenings. Its legacy endures in continuing debates over systemic risk, derivatives regulation, credit rating practices, and the architecture of financial regulation reflected in later rulemaking and academic assessments.

Category:United States federal commissions