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What question should I ask four bank CEOs?

The Financial Crisis Inquiry Commission has its first substantive hearing next week. The hearing will begin Wednesday morning (details to follow when they’re public). The commission staff has told the press we will have a panel of four financial CEOs/Chairs:

  • Lloyd Blankfein of Goldman Sachs;
  • Jamie Dimon of JPMorgan Chase;
  • John Mack of Morgan Stanley; and
  • Brian Moynihan of Bank of America.

I expect each will provide a written statement and some oral testimony. Commissioners will then ask questions. There will be other panels as well, which I will discuss after the Commission staff makes the details of them public.

I am one of 10 commissioners, and there are four people on this panel, and several panels, so I anticipate I will get to ask at most three or four questions, and more likely one or two. I assume I can submit written questions as well.

I am posting to ask for suggestions: what do you recommend I ask these men about the causes of the financial crisis?

I am serious about this request. I was a policy staffer for 14 years and have written hundreds (thousands?) of hearing questions and answers for my former bosses, so I have a few good questions in mind. At the same time, I long ago learned the value of getting input from a wide range of sources, so here’s your chance.

In return, I ask that you take this seriously. Here is how you can best help me.

Please post your question in the comments or email it to me: kbh <dot> fcic <at> gmail <dot> com. Warning: I will impose a stricter comments policy on this post, and I intend to delete comments which stray from the parameters described below.Please take your rants elsewhere, and post or send me only serious questions that meet these criteria.

Please do:

  • Suggest questions that are appropriate to ask a firm CEO or Chairman. These are general managers who think about their firm as a whole. Questions should be about the forest or at least big trees, not about leaves and twigs.
  • Suggest questions that can elicit information that is not otherwise available but should be.
  • Suggest hard questions.

Please don’t:

  • Suggest questions designed only to attack or embarrass the witnesses. I won’t ask them. My goal is to elicit information and analysis and, if possible, to encourage debate and discussion of what happened and why. I have no problem asking questions that embarrass witnesses or that they want to avoid, but only if it’s the most effective path to serious policy debate. I will leave the demagoguery to others.
  • Send me speeches. I am interested in asking questions that solicit useful answers, not in hearing myself talk. If your question begins Don’t you think … then you’re on the wrong track.

The Commission’s mission is to “submit on December 15, 2010 to the President and to the Congress a report containing the findings and conclusions of the Commission on the causes of the current financial and economic crisis in the United States.”

To repeat: We’re supposed to understand and explain the causes of the current financial and economic crisis. That should guide your questions.

While I will consider questions on any topic related to our mission, when thinking about large financial institutions, I am most interested in questions surrounding the too big to fail concept. I am also quite comfortable asking prospective questions about how well-prepared we are to prevent the next crisis, whatever that may be.

If all goes smoothly, within the next day or so I will post again with similar requests for other panels and witnesses. My goal would be to post again before next Wednesday with the best questions I have received.

To help get your thinking started, here is the key text from the invitation letter sent to the CEOs by Commission Chairman Phil Angelides and Co-Chairman Bill Thomas. This is already circulating widely among DC insiders and lobbyists, but the public doesn’t have access to it. That’s unfair. Having it will also help explain the written and oral testimony you see from the CEOs next week, since you will know the questions to which they are responding.

These are good questions, but they do not necessarily reflect my thinking, so please do not feel you need to limit the questions you suggest to the scope described below.

The FCIC is interested in learning what caused financial problems experienced by your company, including losses incurred, and what changes have been implemented as a result. Therefore, your testimony should address the following topics:

  • What were the primary errors and business practices that caused the financial problems at your company and what actions have been taken to address them;
  • What were your company’s business models and major sources of income (or loss), what changes have been made, what were the reasons for the changes, and what are your company’s current business models and sources of profit;
  • What types of lending activities did your company pursue that caused the financial problems, including the amount, Iypes and terms of loans being made, what changes have been made, what were the reasons for the changes, and what are your company’s current lending practices;
  • What were the risk management policies and practices at your company, including the types of investments being made, underwriting and approval of investments including reliance on third parties for due diligence, monitoring of investments by management, the board of directors, committees of the board of directors, and any other persons or entities, and the accounting and public reporting of the company’s investments. What changes have been made to your company’s risk management policies and practices, what were the reasons for the changes, and what are your company’s current risk management policies and practices. In addition, what were your company’s risk exposure, what changes have been made to your company’s risk exposure, what were the reasons for the changes and what are your company’s current risk exposure;
  • What were the executive compensation plans and practices at your company and how did they contribute to the problems. What changes have been made to your company’s executive compensation plans and practices, what are the current executive compensation plans and practices, and what were the reasons for the changes.

I look forward to your suggestions, and want to thank everyone who has emailed me input for my work on the commission. Please keep it coming, using the same email address provided above. I am sorry I can’t respond to everyone who is sending me stuff … the volume is just too great.

(photo credit: Empty hearing room by talkradionews)

By | 2017-05-23T19:06:30+00:00 Thursday, 7 January 2010|