Washington’s Financial Disaster

By FRANK PARTNOY
NYT

San Diego

THE long-awaited Financial Crisis Inquiry Commission report, finally published on Thursday, was supposed to be the economic equivalent of the 9/11 commission report. But instead of a lucid narrative explaining what happened when the economy imploded in 2008, why, and who was to blame, the report is a confusing and contradictory mess, part rehash, part mishmash, as impenetrable as the collateralized debt obligations at the core of the crisis.

The main reason so much time, money and ink were wasted — politics — is apparent just from eyeballing the report, or really the three reports. There is a 410-page volume signed by the commission’s six Democrats, a leaner 10-pronged dissent from three of the four Republicans, and a nearly 100-page dissent-from-the-dissent filed by Peter J. Wallison, a fellow at the American Enterprise Institute. The primary volume contains familiar vignettes on topics like deregulation, excess pay and poor risk management, and is infused with populist rhetoric and an anti-Wall Street tone. The dissent, which explores such root causes as the housing bubble and excess debt, is less lively. And then there is Mr. Wallison’s screed against the government’s subsidizing of mortgage loans.

These documents resemble not an investigative trilogy but a left-leaning essay collection, a right-leaning PowerPoint presentation and a colorful far-right magazine. And the confusion only continued during a press conference on Thursday in which the commissioners had little to show and nothing to tell. There was certainly no Richard Feynman dipping an O ring in ice water to show how the space shuttle Challenger went down.

That we ended up with a political split is not entirely surprising, given the structure and composition of the commission. Congress shackled it by requiring bipartisan approval for subpoenas, yet also appointed strongly partisan figures. It was only a matter of time before the group fractured. When Republicans proposed removing the term “Wall Street” from the report, saying it was too pejorative and imprecise, the peace ended. And the public is still without a full factual account.

(More here.)

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