Financial Crisis: Time for More Study, or Action?

Posted by: Dan Beucke on September 17

By Brian Burnsed

Do we really need another commission to study what led to the financial crisis? More important, do taxpayers really need to pay millions of dollars for it?

The Financial Crisis Inquiry Commission, formed in a bi-partisan effort by Congress and tasked with uncovering the causes of last year’s financial meltdown, had its first meeting today and will begin its investigation within a month. Armed with a $5 million budget, the 10-member committee has a December 2010 deadline to produce what commission member Peter Wallison, a senior fellow at the American Enterprise Institute, hopes becomes known as “the definitive statement of what caused the financial crisis of 2008.”

But rather potentially waste $5 million on what may be a less-than-useful report, here’s a suggestion: why not have the commissioners pick up copies of the half dozen best books that have emerged so far on the causes of the crisis. Pick a few of the top titles: “Lords of Finance,” “Fool’s Gold,” “In Fed We Trust,” “Street Fighters,” and “House of Cards.” At about $90 dollars for each of the 10 members, that would be a bargain — not to mention a whole lot faster. Heck, Uncle Sam could even purchase all five books for every member of Congress for a grand total of $48,150, still well under $5 million. That, as opposed to a tardy and likely ineffectual commission, might be taxpayer money well spent.

Consider that the commission is likely to deliver its findings well after any new financial regulations already are in place. Democratic leadership in Congress is pushing for sweeping financial legislation, which would impose more fervent regulation. There’s a sense of urgency, as some argue that a delay in pushing through new oversight of systemic risk and exotic financial products could set the stage for another, even more costly disaster. As the economic climate grows rosier and old wounds heal, financial lobbying dollars are starting to work their magic and the fire for strict regulation is dimming in even the strongest proponents. “A commission could come out with the boldest report possible two years from now and if the economy is doing well it’s not really going to make much of a difference,” says Princeton University political historian Julian Zelizer. “It’s at the moment of crisis where there’s political support to do something.”

Conservatives opposed to stringent financial regulation might use the Commission as rallying cry to delay any proposed legislation. They may be joined by some Democrats. Rep. Carolyn Maloney (D-NY) twice over the summer questioned whether it would be prudent to overhaul financial regulations without first seeing the results of a comprehensive government investigation. Wallison, who was appointed to the committee by House Minority Leader John Boehner (R-Ohio), agrees. “If Congress wants to do this right, they ought to have our views before they adopt any legislation, because they could do something that is inconsistent with what we say is the cause or they could do something entirely irrelevant.” He claims the committee will do its best to keep Congress informed as the investigation rolls along, but a majority of the key findings won’t be released until December of next year, when legislation may have passed. That, he says, would render the commission’s findings almost entirely moot.

The commission will have subpoena power, which could allow it to dig deeper than journalists and academics who have investigated the issue over the past year. But some experts wonder how much more there is to be discovered about what went wrong. “This is not the S&L crisis that happened before the advent of cable news and the Internet,” says Brian Gardner, senior vice president at investment bank KBW. “This is a more real-time crisis. The coverage…we’ve never seen anything like it.”