More FCIC panelists & more questions
11 January
The Financial Crisis Inquiry Commission (henceforth, FCIC) staff has released the details and full witness list for our first substantive hearings.
When:
It’s a two day hearing.
- Wednesday, January 13, 2010: 9:00 a.m. EST
- Thursday, January 14, 2010: 9:00 a.m. EST
Where:
The Ways & Means Committee Room, 1100 Longworth House Office Building, Washington, DC.
How to watch / listen:
The staff tell us they expect the FCIC website to go live Tuesday of this week, and the hearings to be streamed through the website. That’s their statement, not mine, so please don’t hold me to it. I have nothing to do with the mechanics of the meetings or (potential) broadcast. I don’t know if C-SPAN or any of the business networks will cover it.
The substance
There are five panels over two days. If you read last Wednesday’s post you know about panel 1 on Wednesday. The composition of the other four panels is newly public.
Day 1: Wednesday, January 13
Panel 1: Financial Institution Representatives
- Mr. Lloyd C. Blankfein, Chairman of the Board and Chief Executive Officer, Goldman Sachs Group, Inc.
- Mr. James Dimon, Chairman of the Board and Chief Executive Officer, JPMorgan Chase & Company
- Mr. John J. Mack, Chairman of the Board, Morgan Stanley
- Mr. Brian T. Moynihan, Chief Executive Officer and President, Bank of America Corporation
Panel 2: Financial Market Participants
- Mr. Michael Mayo, Managing Director and Financial Services Analyst, Calyon Securities (USA) Inc.
- Mr. J. Kyle Bass, Managing Partner, Hayman Advisors, L.P.
- Mr. Peter J. Solomon, Founder and Chairman, Peter J. Solomon Company
Panel 3: Financial Crisis Impacts on the Economy
- Dr. Mark Zandi, Chief Economist and Co-founder, Moody’s Economy.com
- Dr. Kenneth T. Rosen, Chair, Fisher Center for Real Estate and Urban Economics, University of California, Berkeley
- Ms. Julia Gordon, Senior Policy Counsel, Center for Responsible Lending
- C.R. “Rusty” Cloutier, President and Chief Executive Officer, MidSouth Bank, N.A. and Past Chairman of the Independent Community Bankers Association
Day 2: Thursday, January 14
Panel 1: Current Investigations into the Financial Crisis – Federal Officials
- Honorable Eric H. Holder, Jr., Attorney General, U.S. Department of Justice
- Honorable Lanny A. Breuer, Assistant Attorney General, Criminal Division, U.S. Department of Justice
- Honorable Sheila C. Bair, Chairman, U.S. Federal Deposit Insurance Corporation
- Honorable Mary L. Schapiro, Chairman, U.S. Securities and Exchange Commission
Panel 2: Current Investigations into the Financial Crisis – State and Local Officials
- Honorable Lisa Madigan, Attorney General, State of Illinois
- Honorable John W. Suthers, Attorney General, State of Colorado
- Ms. Denise Voigt Crawford, Commissioner, Texas Securities Board and President, North American Securities Administrators Association, Inc.
- Mr. Glenn Theobald, Chief Counsel, Miami-Dade County Police Department, Chairman, Mayor Carlos Alvarez Mortgage Fraud Task Force
Written testimony
I expect each witness will submit written testimony, give oral testimony, and respond to questions. I will do my best to make their written testimony available on this site.
Questions?
While I am providing you with the above information, I did not put these hearings together, nor am I responsible for the mechanics of them. I just show up and participate as one of ten commissioners. So if you have questions or concerns about the structure, participants, or mechanics, please direct them to the Chairman and commission staff. For press inquiries, Tucker Warren is the media contact: twarren
Expanding my request for assistance
Last Thursday I asked for suggestions about questions to ask the bank executives. The feedback has been incredible, both in the comments and in email sent directly to me. Thanks to all who have contributed. The hard part is going to be picking the best 1-3 questions to ask.
I would therefore like to expand that request to cover the other four panels listed above. What do you recommend I ask any of the above-listed panelists about the causes of the financial crisis?
Please post your question in the comments or email it to me: kbh
Please do:
- Tell me at which witness the question is directed.
- Suggest questions that are appropriate for a particular witness.
- 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.
Last Thursday I steered questions for the first panel toward the issue of Too Big To Fail with respect to the large financial institutions. While this is one of my major interests, it is not a particular focus of these two-day hearings which are very broadly (too broadly?) framed. This means you should feel free to suggest questions about any element of the financial crisis, as long as you’re focused on the question “what caused X,” where X is some element or effect of the financial crisis.
Hint: The panels that most interest me are the first panels on each day, so I will be examining most closely new questions aimed at the Federal officials who are scheduled to testify Thursday morning.
(photo credit: Global Financial Crisis by sputnik-)
Related Posts
(best matches are listed first)- What question should I ask four bank CEOs?
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- My questions for four bank CEOs tomorrow
- 20 questions for the Financial Crisis Inquiry Commission
- My opening statement at today’s Financial Crisis Inquiry Commission meeting
- The Financial Crisis Inquiry Commission
- 20 questions for the President’s press conference
- Is $700 billion enough? Part 2: the Obama warning
"We're supposed to understand and explain the causes of the current financial and economic crisis."
I don't see how it's possible to do a thorough analysis of the above without exploring the ramifications of monetary policy. Specifically, what is the impact of a quasi-government agency — the Fed — pushing interest rates below their natural equilibrium? The most obvious symptom of the crisis was a wave of mortgage defaults — could this have been the result of excessive money creation?
None of the panels include representatives from the Fed, so I guess this line of enquiry would best be directed at market participants such as Kyle Bass.
The failure of esoteric mathematical models, such as those used by AIG's Financial Products Group, has been identified as one potential element of the financial crisis. Should there be increased financial statement disclosure concerning the extent of the use of such models, the key assumptions used, the limitations of such models, and the financial statement impact of, say, 1% and10% deviations, from the key assumptions? Should external consultants, such as economists, who develop the models be subject to the same regulatory requirements and standardsas other external third parties, such as independent auditors and independent geologists who opine on oil and gas reserves?
I would address these questions to the Honorable Mary L. Schapiro.
To the Honorable Sheila C. Bair, FDIC:
As Chairwoman of the Federal Deposit Insurance Corporation, you were witness to the greatest financial crisis of our time and responsible for insuring the savings of millions of Americans in depository institutions across the nation. In 2008, Washington Mutual was seized and became the largest bank failure in our history. The FDIC monitored WaMu for several months; near the end the FDIC received daily updates on its health, with the Office of Thrift Supervision. On September 25, after the second significant withdrawal rush by depositors and ratings downgrade, the FDIC was appointed as Receiver and sold Washington Mutual Bank and subsidiaries to JPMorgan Chase for $1.9B.
According to the OTS, WaMu was seized for "insufficient liquidity to meet obligations, " even though its capitalization levels were well above regulator-defined minimums. Jamie Dimon, JPMC, stated that his organization was the only bidder for the bank, and that JPMC could have bought WaMu for a dollar. Shareholders and institutions owning senior unsecured debt were wiped out; according to the New York branch of the Federal Reserve, the latter catalyzed a period of liquidity preference among institutions and consequently manifested into a national "credit crunch", worsening an already precarious financial environment. Indeed, Treasury Secretary Timothy Geithner adamantly expressed (regarding WaMu debt holders) "the policy of the U.S. government is that there will be no more WaMu’s." Lastly, WaMu's parent company has filed a multi-billion dollar lawsuit claiming the FDIC's seizure was essentially a fire sale and should never have happened.
Ms. Bair, in the interest of protecting the FDIC's insurance fund and millions of American depositors in a least-cost, could Washington Mutual have been handled differently in a scenario that preserved consumer security and kept larger institutions lending? Was the auction process conducted fairly for all parties besides the FDIC and JPMorgan, or could have WaMu been bought out, similar to the Wachovia-Wells Fargo deal? In sum, should WaMu have been seized weeks before the Troubled Asset Relief Program passed during an immensely volatile period for our financial system, where precipitous decisions, however noble, could have been disastrous for America?
Required to establish a causation model for a financial crisis is to ask the bankers the following:
Please submit a breakdown of your major losses on a timeline since 2004. Working backwards from the peak of the crisis, explain the nature of each loss and the type of asset involved if applicable. If you took the loss to raise capital, explain why you had a capital shortfall. Do not assign or take blame; just explain what happened. When did the spiralling loss problem start? Show me on the timeline. Did any significant political, regulatory, financial, or economic events happen around this time?
For any of the financial institution representatives whose company collects mortgage payments, "How difficult would it be for banks to collect and report information on mortgage payments in a form usable for developing more accurate inflation statistics? I.e. as a replacement for Owners' Equivalent Rent in the CPI."
As background for why this question is relevant, the issue is that the CPI is meant to measure household costs. Owners' Equivalent Rent (OER) is not a cost but a potential income. It was originally used as a replacement for the Case Shiller index, which puts the full cost of the house sale in the index immediately. OER is more stable and had (until the last decade) tracked the long term trend. However, most people do not pay for their house up front but instead borrow to do so. A better inflation measure would collect the actual mortgage payments (the costs).
Note that the Fed uses the inflation statistic to measure how well it is doing its job. If the statistic had been higher, then the Fed would have raised interest rates sooner in the boom. Similarly, if inflation had shown lower in 2007 and 2008, they could have cut rates sooner in the bust. In the boom, this could have led to a smaller bubble and during the bust, it could have caused a softer landing without the deflationary months at the end of 2008.
For any of the representatives of financial institutions that issue mortgages (Day 1, Panel 1; probably James Dimon and Brian T. Moynihan and possibly C.R. “Rusty” Cloutier), "During the housing boom, banks approved mortgages for houses that were valued at much higher amounts than they could support. What are you doing to ensure that future valuations take into account more than just the current market price? –Or to put this another way, what are you doing to make it so that in the future, you reject mortgages on over priced houses?"
For Sheila C. Bair, the same question but with slightly different wording: "During the housing boom, banks approved mortgages for houses that were valued at much higher amounts than they could support. What are you doing to ensure that future valuations take into account more than just the current market price? –Or to put this another way, what are you doing to make it so that in the future, banks reject mortgages on over priced houses?"
The question might also be put to Julia Gordon and Kenneth T. Rosen, although again with different wording.
The question might even be put to representatives of companies that bought and sold mortgage securities, as they were buying mortgages with risk evaluations based on faulty house valuations.
I would like to see the question of demand deposit theft posed to Jamie Dimon. Dimon has stolen our demand deposits (over $400,000.00) in an elaborate scheme dating back to his days at Bank One. We are aware now that there are 1300 demand deposit accounts with significant deposits that were usurped. To affect the theft there was a campaign to interfere with individuals mortgage payments (triggering foreclosures), business activities (orders being cancelled), and utilities. We had our electricity shut off while the bill was paid in full. Then the local dcfs receives a call from someone stating concern that we have no electricity and someone should check in on our six children. The call was traced to jp morgan chase new york. We live in illinois. There is now an active FBI investigation. Please contact us for more details.
Letter to Senator Ensign of the PSI
I am open to any feedback anyone may have. This is the letter I sent Sen. Ensign just now. http://ensign.senate.gov/public/
Good Day Senator Ensign.
I have read that you are a member of the Permanent Subcommittee on Investigation and that the PSI is going to speak with the FDIC over the seizure of Washington Mutual. An Illegal seizure in my opinion. I have followed the WAMU/JPM/FDIC case now for over year. I have read the court documents and files. It makes me sick to see how corrupt our banking system is.
I am requesting that you ask the FDIC a few questions on my behalf. How I wish I could be at that hearing. I would also like to know on what day the hearing will be & if it will be broadcast on CSPAN?
Here is a list of the questions I would like to see asked. I truely hope the Senate ask's them real hardball questions and not alot of fluff.
1. Why did they Seize Wamu shortly after TPG invested 7 billions dollars in Wamu?
2. Why did they Seize on a Thursday, instead of the normal Friday?
3. Was Wamu Solvent at the time of the seizure. If it was not, how come Wamu & JPM both claim that Wamu was solvent? How did the FDIC determine that Wamu was NOT solvent? Based on what?
4.I beleive in Sept. 2008 there was a do not short list. Why was Wamu excluded from the list?
5. Why didnt the FDIC wait a few more weeks and give Wamu a chance with Bank Bailout / Tarp Funds?
6.Where does the FDIC get off on claiming Wamu's 4.4 billion in deposits?
7. Does the FDIC feel that 1.88 billion was fair market value. If they Do, please have them explain this, since JPM(Chase) offered about 8 dollars a share for Wamu a few months earlier.
8. There was a rumor that Citibank
made a Bid for Wamu to the FDIC, What was there bid amount?(Please check with Citibanks CEO to confirm).
The fall of Wamu was a great injustice to America and Wamu's shareholder. Any assistance that you render would be greatly appreciated.
Sincerly
A Wamu shareholder and longtime supporter of your's
http://www.youtube.com/watch?v=IeXtCiU2IeA