Standard & Poors' defense sounds familiar

What a shame that the feds’ big lawsuit against Standard and Poors probably won’t go to trial.

The public is missing the chance to view up close many of the players whose fraud and fecklessness helped fuel the financial collapse, wriggling and squirming under scrutiny by sharp lawyers in dramatic confrontation, with prosecutors who want to prove they can take on Wall Street and its high-priced lawyers, while Standard and Poor’s fights to save its business.

The stakes are too high for the government or the credit rating agency to take their chances turning the case over to a “jury of their peers.”

Before the Justice Department filed its case, Standard and Poors had already rejected a settlement offer that required it to pay $1 billion and admit responsibility. The case will eventually settle without that grand showdown in court, so the authorities can hold their face-saving press conference and the company will survive, stripped of a painful share of its profits but with enough semblance of its professional standing to go forward.

That means most of the jousting will take place in the court of public opinion, where both sides have shown considerable prowess.

For its part, the Obama administration has convinced a sizable chunk of the electorate that its efforts actually have reformed the financial system that led to the 2008 meltdown. Standard and Poors, meanwhile, has managed to prevent meaningful reform of the questionable practices that helped create that meltdown, despite damning official reports from the Financial Crisis Inquiry Commission and the Permanent Senate Subcommittee on Investigations that laid a large chunk of the blame for the collapse squarely on the failures of the credit rating agencies.

As part of its defense, Standard and Poors has suggested that it wasn’t inflating its ratings of investments based on worthless mortgages just because that’s what the big banks were paying it do.

No, the credit rating agency insists it was taken in, along with all the other highly paid geniuses who were profiting or pumping up the housing bubble.

If the case went to trial, Standard and Poor’s could conceivably call all the top Obama administration officials who likewise have said, over the years, that the financial collapse was an unforeseeable event that came from nowhere.

They could call on Treasury Secretary Geithner and Larry Summers, Obama’s chief economic adviser until November 2010, both of whom embraced this feeble notion.

It wouldn’t be difficult for prosecutors to undermine this defense, since there are plenty of experts who were predicting the collapse of the bubble, though none of them were in the D.C.-Wall Street power axis. They were ignored before the collapse, as they are being ignored now.

If the Standard & Poor’s case did make it to trial, prosecutors would perform a real service by demolishing this phony propaganda in order to win their case.

 

 

 

 

 

With Watchdogs Like These...

It would be bad enough if our leaders were letting the high-finance big shots off the hook for their misdeeds because the authorities were just too incompetent to catch them.

But what’s worse is that those in power don’t want to hold the high rollers accountable and run the other way when any opportunity presents itself to shine a light on how we got here.

The most recent examples are the shenanigans of Rep. Darrell Issa, head of the House Committee on Oversight and Reform.

Issa’s committee could play a crucial role in highlighting the abuse and fraud that led to the crisis if he chose, similar to the one played by Ferdinand Pecora’s hard-hitting investigation into the financial corruption and speculation that led to the Great Depression.

But Issa, a Republican, has other agendas in mind – like embarrassing the Democrats and protecting Republican interests in winning more donations from Wall Street. His priorities have been in lock-step with the Republican attack on government regulation of corporations, rather than figuring out how government might do a better job of responding to corporate abuse.

This week he hastily canceled an inquiry into the Financial Crisis Inquiry Commission after emails surfaced that would have severely embarrassed Republicans on that bipartisan commission that investigated the causes of the financial collapse.

In response to Issa’s investigation, the Democrats on the commission issued another report, accusing the Republicans of rigging their conclusions to support their political goals – weakening the Dodd-Frank financial reform.

The commission itself had long ago collapsed along partisan lines, with Democrats issuing a report that reached bland conclusions – it was everybody’s fault, while three of the committee’s Republicans were reluctant to blame anybody except to the extent that they agreed with the bankers – it was the fault of an unforeseeable global housing collapse.

The fourth Republican, meanwhile, fixed the blame on the right’s favorite bogeymen – poor people, Fannie Mae and Freddie Mac.

But the FCIC’s Democrats have now unearthed an email sent by that fourth Republican, Peter Wallison, fellow at the right-wing American Enterprise Institute think tank, to another FCIC Republican, Douglas Holz-Eakins, the day after Republicans took the majority in the House of Representatives last year. In the Nov. 3 email, Wallison wrote that it is "very important" that the separate GOP statements "not undermine the ability of the new House GOP to modify or repeal Dodd-Frank."

Issa has a chance to redeem himself by joining the senior Democrat on the oversight panel, Elijah Cummings in scrutinizing the shameful foreclosures of members of the nation’s military.

I wouldn’t hold my breath for that to happen.

While Issa has shown some willingness to tackle an investigation of the Obama administration’s failed foreclosure relief program, he’s shown no interest in the robo-signing scandal or aspects of the housing crisis that might embarrass the big banks.

Martin Berg

 

Fill In the Blanks

A New Yorker story published online this morning describes yet another example of a financial debacle abetted by government corruption. As I read the first paragraph, it struck me that the basic plot is always the same – all you need to do is fill in the blanks:

In the spring of _______, as the reelection campaign of ______ was gathering momentum, a group of prominent _____ businessmen met for breakfast at the ________ to see the candidate. Among them was _____, the chief executive officer of _____, a fast and freewheeling financial institution that had brought together some of the most colorful and politically well-connected _____ in the country….

Last week’s final report of the Financial Crisis Inquiry Commission explains in intricate detail why and how the U.S. economy imploded in 2008, but isolates no single, primary cause of the crisis. The Commission says that the crisis was “avoidable” and notes that “widespread failures in financial regulation and supervision proved devastating to the stability of the nation’s financial markets,” but this is just one Commission conclusion of many. As Joe Nocera points out, the report never gets to the bottom line.

Our report, “Sold Out: How Wall Street and Washington Betrayed America,” published in March 2009, got right to the bottom line in its title. We didn't need subpoena power or a large staff to figure out what happened, just the willingness to say what everybody in the Wall Street/Washington axis of power already knew. Between 1998 and 2008, Wall Street invested $5 billion in Washington, a combination of money for lobbying and campaign contributions that won deregulation and other policy decisions that enabled the financial industry to do as it pleased. The ensuing orgy of unbridled speculation, based on "derivatives" and other financial schemes that even the CEOs themselves didn't understand, came to a halt when the housing bubble burst and Wall Street couldn't even figure out the value of the investments it held. The financial industry panicked, threatened to shut down the system, and got the government to undertake the mother of all bailouts - trillions of dollars in loans, tax breaks and other goodies.

In short: the power of money poisoned our policies and our politics, with dire consequences for all of us who don't enjoy the special favors that only vast quantities of money can buy.

The Commission, created and appointed by Congress and composed of members of the political elite, could not possibly issue that indictment. Which is why the discussion of the bailout – the most obvious example of the special status of the privileged in our country – is a measly five pages out of 410.

The American public deserves better. In other man-made national disasters, like the explosion of the Challenger space shuttle 25 years ago, experts in the field – astrophysicists, geologists, academics – were asked to undertake an independent investigation. Their reports secured the confidence of the public, and led to remedial actions. NASA was not allowed to investigate itself, and lo and behold, it turned out that the culture at NASA was ultimately responsible for a design defect in the rocket.

Because it retreats from the fundamental truths, the Commission's report does nothing to help us come to grips with the root cause of the financial crisis: the corruption of our democracy by special interest money.  I know from more than thirty years of fighting for consumer rights – particularly in the insurance marketplace – that industry lobbyists and unlimited money to politicians almost inevitably kill  legislation that would help average people. Even the feeble, loophole-ridden campaign laws that limited how much big corporations could spend in elections are in jeopardy, thanks to the United States Supreme Court’s decision last year in the Citizens United case, which decreed that corporations have the same First Amendment rights as human beings. Here in California, the voters have the ability to go around a paralyzed legislature and put matters on the ballot for a direct vote of the people, but even this populist process is increasingly abused by special interests that want to block consumers from having their day in court, or by a single company like Mercury Insurance, who thought it could fool the voters into permitting auto insurance overcharging.

Naming a thing for what it is aids understanding, which leads to action and ultimately recovery. Absent the cleansing force of honesty, we remain rooted in fear for our kids, for America’s future. Indeed, there is something deeply foreboding about the country’s degraded democracy and disabled economy. Some of the old clichés are becoming a sickening reality. We used to idly wonder, are we Rome, a corrupt empire in the process of collapse? A thoughtful, almost poetic book by that name, written by Cullen Murphy, suggests we are.

The term “third world” was once a sneer, connoting abject poverty, corruption, gross disparities between rich and poor, the absence of government services, a state controlled by a cabal of self-perpetuating leaders. Now consider the statistics on post-collapse America, which Arianna Huffington marshals in her latest book, "Third World America."

This would be a good point to fill in the blanks in the piece I excerpted above from the New Yorker story. The missing words are: 2009, President Hamid Karzai, Afghan, presidential palace, Khalil Ferozi, Kabul Bank, Afghans. Yesterday’s New York Times reported that fraud and mismanagement at the largest bank in Afghanistan has resulted in $900 million in losses, potentially triggering a financial debacle. Kabul Bank is “too big to fail,” according to Western diplomats quoted by the Times. It's the same story everywhere, and thus it would hardly come as a surprise if U.S. taxpayers ended up funding the bailout of Kabul Bank.

Around the Web: From Maestro to Cornered Rat

When he used to appear before Congress during boom times, Alan Greenspan was worshipped as a hero. The Washington Post’s Bob Woodward wrote an insider’s, book-length Valentine dubbing him the maestro. That was a stark contrast to the bruising the former Fed chair took this week from the panel appointed to investigate the financial meltdown. The reviews of his performance were even tougher.

No wonder. Greenspan lamely tried to evade responsibility for the policies he orchestrated that led to the worst economic crisis since the Depression. CBS Econwatch blogger Jill Schlesinger labeled Greenspan’s appearance “ a trip to the land of denial.”

Brooksley Born, one of the commissioners on the Financial Crisis Inquiry Commission, bluntly told Greenspan that the Fed “failed to prevent the housing bubble, failed to prevent the predatory lending scandal, failed to prevent the activities that would bring the financial system to the verge of collapse.”

A little historical context: Greenspan helped undermine Born’s efforts to regulate derivatives when she was head of the Commodities Futures Trading Commission in the Clinton Administration.

Frederic Sheehan, who’s written several books lambasting Greenspan and the Fed, credited the panel with doing a decent job in preparing for his testimony. Sheehan noted that Greenspan wasn’t used to having to answer follow-ups and seemed stumped. When he used to appear before the Senate as Fed chief, senators “were afraid, they didn’t want to look foolish in asking simple questions. A lot of the really simple questions are the ones that are still unaddressed or need to be addressed but never were when he was Fed chairman, particularly about money and credit. He walked away from those questions again today.”
One common theme in reviewing Greenspan’s performance was incredulity at his assertion that he was caught by surprise by the mortgage crisis. Diane E. Thompson, an attorney with the National Consumer Law Center, said in an interview with Washington Independent’s Anne Lowrey that she and other members of the Federal Reserve’s Advisory Council started warning Greenspan about mortgage problems in the early 2000s.

Meanwhile Angelides has problems of his own. Members of his panel complained to the New York Times that he seemed more interested in headline-grabbing hearings than deep investigation, that the panel had wasted too much time getting started and had issued no subpoenas even though it has the power to do so. As David Dayen writes on Firedoglake, “If anyone was watching this but me and the WSJ, they would have seen a cornered rat. Born nailed Greenspan – although, given the relative lack of interest in the FCIC, the benefit to that will be merely psychic in nature.” Stay tuned….

Around the Web: How a Big Bank Shows Its Gratitude

While the mainstream press has focused on the dubious notion that the Citibank bailout will turn out to be a good deal for taxpayers, the Center for Media and Democracy tallies up the real cost of the entire bailout so far: $4.6 trillion, with $2 trillion outstanding.

Most of that money comes from the Federal Reserve, not the Troubled Asset Relief Program, which amounts to a measly $700 million. The Fed bank dole is handled in complete secrecy, which is why Bloomberg News is suing to get the Fed to open its books, which got the WheresOurMoney treatment here.

As for Citibank and the supposed bonanza for taxpayers, Dean Baker takes it apart in this Beat the Press column. In any case, Citibank is eternally gratefully to taxpayers. Here’s how they’re showing it.

Get out the popcorn. Phil Angelides’ Financial Crisis Inquiry Commission is gearing up for another round of hearings April 7 through 9, this one on subprime loans and scheduled to feature former Fed chair Alan Greenspan, who before the bubble burst, used to take pride in being able to obfuscate any economic issue. If Angelides thought Goldman’s CEO was like a salesman peddling faulty cars, I wonder what he makes of Greenspan, who worshipped the financial deregulation that made the wreck not only possible, but probable.

Angelides meanwhile, appears to be playing down expectations for the FCIC, kvetching to the Wall Street Journal’s editorial board about the small size of the panel’s budget ($8 million) and short time frame (final report due in December).

While everybody was bowing down to Greenspan, they should have been listening to Harry Markopolos, the man who was tried to blow the whistle on Bernie Madoff but was repeatedly ignored by the SEC. Now he’s written a book. He doesn’t think the SEC has improved much.  Russell Mokhiber has a good interview with Markopolos in his Corporate Crime Reporter.

What Would Pecora Do?

There have been lots of positive comparisons between Phil Angelides and Ferdinand Pecora, who led an earlier investigation of Wall Street excesses that led to the Great Depression.

Pecora was a no-holds barred former prosecutor who ran his hearings with meticulous preparation and theatrical flair, and his work galvanized public support for widespread reforms.

Some have been impressed by Angelides’ reputation as a reformer from his days as California treasurer, when he tried to use the power of the state’s investments for socially worthy causes and implemented some protections for shareholders. Angelides was widely praised after public hearings earlier this year for his understanding of high finance and his scolding of the head of Goldman-Sachs, Lloyd Blankfein, comparing him to a used –car dealer.

I’ve been less impressed by Angelides, who doesn’t seem to have a grasp on the opportunity he has to marshal support for real financial reform. And he’s too cozy with a Democratic leadership that’s been soft on Wall Street in the wake of the financial meltdown.

I’m also suspicious of Angelides, the politician and former real estate developer who unsuccessfully ran for governor against Arnold Schwarzenegger, because of his close ties to the Democratic Party elite. In addition, I’m wary of the impact of Angelides' main job running a coalition promoting green technologies. That’s certainly a laudable goal, but Angelides and his Apollo Alliance aren’t going to get very far without lobbying the Obama administration and the Democrats, who would not be happy with a hard-hitting report.
Whatever drama Angelides manages to muster at any given moment, I’m concerned that his multiple roles and background will cause him to soft-pedal his investigation. Those concerns were only heightened after Angelides surfaced as part of a curious SEC report last week that cautions firms about “pay to play” in the state investment business.
According to the SEC, when Angelides was running for treasurer in 2002 he hit up a top J.P. Morgan official to co-chair a fundraising event. It wasn’t just an honorary position. The price tag for the co-chairmanship? $10,000.

According to the report, the official didn’t co-chair the event but donated $1,000 to Angelides” campaign personally ­– and helped raise $8,000 more. In asking other J.P. Morgan brass to contribute to Angelides, the official noted that that the state of California was an important client for the firm.

Just how important became clear in the next couple of years, when J.P Morgan received about $37 million in fees from the state on more than 50 bond offerings totaling $15.8 billion – overseen by Angelides as state treasurer.

In the SEC’s curious take on the matter, neither Angelides nor J.P. Morgan is accused of doing anything improper.  Angelides isn’t even mentioned by name. The agency merely uses its report to caution finance officials about not running afoul of SEC regulations.

OK, so the SEC doesn’t think Angelides did anything wrong soliciting funds from J.P. Morgan and then giving them the state's business. But the report serves as a bitter reminder that those who we’re counting on to get to the bottom of the financial meltdown are steeped in the toxic brew of cash and politics that has seeped into the core of our government.

I hope I’m proven wrong about Angelides; that his intimacy with this unseemly world has left him with a sense of sustained outrage and not empathy for it.  But it will take more than a few zingers to convince me. I mean, let’s be serious. Would Ferdinand Pecora have solicited money from J.P Morgan? Not much chance. After Pecora grilled the son of the legendary banker, J.P. Morgan, Jr. described the investigator as having “the manners of an assistant prosecuting attorney who is trying to convict a horse thief.”

Mr. Angelides, Which Side Are You On?

While I was watching the hearings into the financial crisis last week, a haunting old song got into my head and wouldn’t leave.

It was “Which Side Are You On?” from the 1930s out of the coalfields of Harlan County, Kentucky.

Coal miners faced brutally harsh living and working conditions, under strict control by the coal barons who had complete power over the miners and their communities. The miners and their families waged a tough struggle to win recognition for their union and concessions from the bosses.

The lyrics describe how at a certain point in the fight, the population of Harlan County had to take sides.

They simply couldn’t remain neutral any more. They either had to stand with the miners and their families or with the coal barons and the thugs who enforced their rule.

I wanted to ask Angelides: which side are you on?

Are you on the side of the people who are suffering in the worst economic calamity since the Depression? Or on the side of the bankers  and the politicians and regulators who did nothing to halt the crisis and whose response has only made it worse?

Lots of people admire Angelides. He’s a former real estate developer who built a reputation as a reformer while California Treasurer, then ran unsuccessfully for governor in 2006.

I found him an odd choice. Previous high-profile investigations have featured lawyers with not only great intellectual chops but who were skilled storytellers and fearless to boot.

Angelides is a bright guy who has some understanding of high finance, but without any of the characteristics that distinguished previous investigators. Far from being a courageous outsider, he’s a Democratic Party insider who has grubbed for political contributions.

He’s bright enough to get training and surround himself with people with those skills.

So why were the hearings so lacking in urgency to get to the bottom of the financial crisis, hold people accountable and offer material support for real reform?

Because Angelides doesn’t understand that at this point, there simply are no more neutrals. If you understand the public’s anger and the mishandling of the financial crisis, then you have an obligation to take a strong stance, and show you are on the side of really fixing the problems.

That’s what Sen. Christopher Dodd found out.

For years the Connecticut Democrat was a darling of the financial industry. Then came the crisis and the bailout. He tried to refashion himself as a reformer but he had no credibility with his constituents after having taken millions in campaign contributions from the financial sector over the years.

The voters in Connecticut weren’t buying the new image. They were threatening to throw him out, so Dodd retired. Since his announcement, he’s showed his true colors, doing his contributors’ bidding by dropping his push for a Consumer Financial Protection Agency.

Unlike Dodd, Angelides is not running for office, at least not now. But he’s wearing the mantle of public protector, and the public is in no mood for phonies.

People don’t want an arbitrator, they want a fighter.

They also don’t have a burning need for another investigation. Several very thorough investigations have already been conducted, including one by the Consumer Education Foundation that you can find here.

Mr. Angelides, we know what happened. What we want to know is, what are you going to do about it? You can still set this commission straight. But you have to bring a sense of passion for the fight that has been missing so far. And you’ve got to know which side you’re on.

"Apology Accepted, Captain Needa"

It’s not about “sorry” anymore.

Even before the Wall Street titans were sworn in last week, it appeared as if the goal of the Financial Crisis Inquiry Commission’s chair, Californian Phil Angelides, was to wring an apology from the men whose companies led the nation into an economic abyss. Whereas most Americans, let me venture, would like to wring their necks.

About twenty-five years ago, I wrote about “inseki jishoku,” the Japanese tradition of accepting responsibility for one’s actions and resigning one’s position as penitence. “These social balancing mechanisms are powerfully ingrained within the Japanese culture. In business activity, they create by necessity a ‘state of intimacy’ among management and employees,” William Ouchi, a management expert, told me at the time. I suggested that there would be less corporate crime in this country if American CEOs embraced a similar approach. 

That never happened.

So what would be the point of a symbolic apology from the titans of the Money Industry – assuming they would be willing to offer one (they tried hard not to, in the event)?

No amount of apology is going to salve the grievous wound in the American psyche as the banks’ profits and bonuses break records.

Like most Americans, I am having a hard time getting my head around how these companies can claim to be earning a “profit” and their executives billions of dollars in extra compensation after American taxpayers were forced to pitch in trillions of dollars to keep the companies afloat.

The truth is that they were able to get away with it because no one in Washington ever imposed any kind of quid pro quo for the bailout.

No cap on the exorbitant interest rates we now pay to borrow our own money from the credit card companies, for example.

No relief for people trying to keep up with their mortgages and pay the rest of the bills.

If symbolism is what this is all about, I say we’ve moved beyond the “apology” stage. How about sending some of these people to jail for twenty years? Or is it "legal" to destroy an economy and cost Americans their life savings and jobs? I had hoped the Angelides investigation would be the beginning of an intensive investigation that, like the Watergate hearings, would lead to holding people criminally accountable for their actions. Not so far, at least.

As I watched the politicians and the leaders of Goldman Sachs, Chase and Bank of America sashay around an apology at the witness table, it reminded me of a scene from the Empire Strikes Back. Han Solo and the Millenium Falcon have just managed to elude Darth Vader’s entire fleet of starships. Informed that Vader wants an update on the search, Captain Needa replies, “I shall assume full responsibility for losing them, and apologize to Lord Vader.”  Vader, using the Force, strangles him. “Apology accepted, Captain Needa.”

Angelides Panel Day 2: Bair, But No Flair

The first two days of the long-awaited Financial Crisis Inquiry Commission hearings have been largely rambling and listless, with commissioners leading witnesses around the same debates and issues that even casual observers of the meltdown and bailout have heard many times.

Those with patience were rewarded Thursday with some nuggets of straight talk from FDIC’s Sheila Bair and state regulators skeptical of the benefits of financial innovation.

Phil Angelides is getting some raves for his clash with the head of Goldman-Sachs Wednesday and his knowledge of how the financial system works. Angelides compared Goldman to a used car salesman selling vehicles with bad brakes, and chided the firm’s chairman for describing the financial meltdown as a natural disaster like a hurricane.

I’m not buying it.

One dustup in the middle of two days of hearings did nothing to illuminate the meltdown. Goldman’s thick-skinned and well-paid Blankfein has already stared down the president of the United States and Congress. I doubt he’s going to change course after Angelides’ comments.

Angelides, his vice-chair Bill Thomas and the other commissioners seem to have no sense of urgency or flair for how to hold a public hearing. Angelides and company are either unprepared or appear not to have the stomach to bring out the story in a compelling way or hold bankers and regulators publicly accountable.

We have a long, proud history in this country of public hearings that focused on key issues, electrified the country, and galvanized political change, starting with the hearings on which the current panel is based, the 1930s Senate probe into the financial shenanigans preceeding the stock market crash, headed by Ferdinand Pecora.

Michael A. Perino, a professor specializing in securities regulation at St. John's University School of Law who's writing a book about Pecora, told "Bill Moyers Journal" that Pecora took complex financial transactions and turned them into simple morality plays. “Pecora was, if nothing else, a brilliant lawyer. He knew how to ask questions. He was a pit bull. He would not let people get away with hemming and hawing and hedging their answers. And he would go after them, politely, of course. But he would go after them until he got the answer he wanted.”

In the early 1950s Sen. Estes Kefauver went after organized crime. Later in the decade, Sen. Robert Kennedy targeted corrupt union bosses.  In the 1970s, the country was riveted by the Senate hearings into the Watergate scandal, led by a superb lawyer named Sam Dash.

Each of those hearings, from Pecora to Watergate, was characterized by relentless preparation, tenacious questioning and savvy stage managing.

Dash unfolded the Watergate story like an episode of the old courtroom drama Perry Mason. It’s worth quoting Dash’s method at length for the stark contrast with Angelides.

“Having been a trial lawyer, I know that you begin a trial by starting at the very beginning,” Dash told NPR’s “On the Media” in 2003.  “It's like a detective story. In this particular case, there was the Watergate burglary; there were the cops that arrested the burglars. And then I would bring in a number of accusers like John Dean who had been counsel to the president who was pointing the finger at the president and [H.R.] Haldeman and [John] Erlichman, and so I was setting up this tension of the police work, the work of the people who were involved as co-conspirators, who were accusing, and then ultimately bring the accused – Haldeman, [John] Mitchell, and Ehrlichman – and in order to make sure that our story would be told in a consecutive and interesting fashion, every witness that I called had been prior called, before an executive committee.

“In other words I knew exactly what my questions were going to be and I knew exactly what the answers were going to be so that I could put it in a form that this would come out like a story, and I think it, it succeeded in the sense that the American people were glued to their television sets waiting for the next episode.”

In Thursday’s session we got the attorney general, Eric Holder, touting his successful prosecution of Ponzi schemer Bernard Madoff and other cases that had nothing to do with the financial crisis. His office continues to investigate 2,800 mortgage fraud cases, Holder said.

No commissioner asked Holder any follow-ups about the recent failed prosecution of Bear Stearns hedge fund managers who were acquitted of lying to their clients about the funds’ mortgage investments, or lessons that the Justice Department might have learned from that embarrassing defeat.

Nor did the commissioners ask SEC chief Mary Schapiro, seated close by Holder, about the SEC’s colossal failure in ignoring repeated warnings about Madoff’s crooked deals.

What’s particularly frustrating is that Angelides appears to have the seeds of a theme: how banks and regulators ignored warnings of trouble prior to the meltdown. He has asked a couple of times about a 2004 FBI report that warned of a looming explosion of mortgage fraud. Surprisingly, though Angelides had raised it Wednesday with the bankers, when Angelides asked Holder about it Thursday, Holder replied that he wasn’t familiar with the warning but said, “We’ll look into that.”

That’s some indication of just how seriously the country’s top law enforcement officer is taking the hearings.

The commission’s second day of hearings focused on regulatory efforts of the SEC and FDIC as well as state efforts at financial regulation.

Amid strong lobbying by the big banks, state regulators have been largely pre-empted from financial regulation. Whether or not to give states back that authority is a key point of contention in on-going debate over financial reform; financial institutions continue to bitterly oppose it.

Sheila Bair, FDIC chair, whose strong voice for reform has sometimes been drowned out by those of other members of the Obama economic team, got a chance Thursday to reiterate her view of the failures that contributed to the crisis.

“Not only did market discipline fail to prevent the excesses of the last few years, but the regulatory system also failed in its responsibilities,” Bair said. Record profits across the banking sector, Bair added, also served to limit “second-guessing” among the regulatory community.

The Texas securities commissioner, Denise Crawford, also offered a sharp perspective not usually heard either on Wall Street or in Washington. “The great minds of Wall Street are probably right now coming up with new securitization products,” she told the commissioners. “It's not just mortgages. It's the entire structure of Wall Street and the super-wealthy that create the demand for new speculative products.”

Angelides Commission: All Puff, No Punch

Here are some early reactions to the the first hearing, now underway, of the Financial Crisis Inquiry Commission in Washington, D..C and televised on CSPAN 2.

Three hours into the FCICs much-hyped first public hearing, what’s being said is less important than what is not being said.

The bankers, beleaguered as they may like to appear, have little to fear if the questioning continues as it began.

So far, this is no Pecora Commission, the Depression-era investigation into the cause of the financial crash that led to landmark reforms including the Glass-Steagall Act and creation of the Securities and Exchange Commission.