On Wednesday May 6 the House of Representatives passed the Fraud Enforcement and Recovery Act of 2009 that would create a commission to study the reasons behinds our current economic crisis. This would be similar to the 9/11 commission, which was created “to prepare a full and complete account of the circumstances surrounding the Sept. 11, 2001 terrorist attacks.” And like the 9/11 commission you would not expect government leaders to wait until such a commission had completed its work to make changes to prevent another attack, in the case of the 9/11 commission, or to repair the underpinnings of our financial structure in the current crisis.
However, given the amount of money that has been committed to various bailouts, we should be expecting the results of such a commission at this point not its formation.
It also would have been nice if this was put in motion before additional bailouts monies, that are now in the multiple trillions, were passed out to the likes of AIG and Citigroup. Remember that the Federal Reserve started creating special auction facilities to address solvency issues of U.S. investment banks shortly after the crisis began in July of 2007. We had the bailout of Bear Stearns, the opening up of the Fed borrowing window to investment banks and brokerages and the massive and unprecedented Fed easing all before the flash point of the Lehman Brothers bankruptcy in September 2008.
If not before, the commission should have been formed once the Fed Reserve Board Chairman and Treasury Secretary came to Congress asking for a bailout. It was at this point that Congress should have been asking tough questions to the people who had been offering assurances that the worst of the crisis had passed and who now where telling Congress they needed to act at once or the whole system would collapse. In fact, given the nature of their assessments up to that point, the request for bailout monies should have been accompanied by their resignations.
Newsletter publisher John Lothian pointed out today that former Commodity Futures Trading Commission Chairman Walt Lukken had suggested such a commission back in November. That’s was six months ago. You may recall that Congress, up until the Lehman shoe dropped, was too consumed with blaming speculators for $4 gas prices and grilling Lukken in front of numerous Congressional committee hearings, to pay much attention to the ongoing bank solvency crisis.
