In some sense, the Financial Crisis Inquiry Commission is a lame duck. Headed by Phil Angelides and created in May 2009, the FCIC is not due to file its final report until December. Financial reform legislation will likely come up for a vote next month. The panel’s ultimate recommendations will come months too late to make it into the bill — the final details of which are currently being hammered out by Sen. Chris Dodd (D-Conn.) and others. Where the FCIC is most important is in its testimonies, dragging Wall Street titans and former Fed and Treasury officials to the podium and grilling them.
Yesterday, it heard from former Fed Chair Alan Greenspan. Today, the FCIC hears from former top Citi executives Chuck Prince and Robert Rubin, as well as the current and former comptrollers of the currency (responsible for regulating national banks); tomorrow, it hears from former Fannie Mae officials and Office of Federal Housing Enterprise Oversight executives.
What did Greenspan say of importance? Not much. (Here is a copy of his prepared remarks and a copy of his review of the boom and bust, titled “The Crisis,” prepared for the Brookings Institution and released last month.) Much of his testimony retread well-worn ground. But the “Maestro” did assert that he was correct 70 percent of the time during his Fed tenure. Angelides cannily asked him: “Would you put [the financial crisis] in the 30 percent category?” Greenspan replied, “I don’t know.”
He also said that banks had been undercapitalized for the past 40 to 50 years (a problem under the Fed’s purview) and argued that financial services might be too complicated for regulators to regulate. “It’s not a simple issue of, ‘Let’s regulate better. It’s a different world,” he said. “The complexity is awesome.” He hedged that statement by noting that banks’ counterparties — the firms on the other sides of their trades and loans — helped alert regulators.