A 10-member panel set up by Congress has painstakingly tried to decipher the cause of the global financial crisis (GFC) that cost the U.S. government $700 billion in bailouts. The Financial Crisis Inquiry Commission (FCIC) held two days of hearings starting Wednesday, gathering bankers and regulators to figure out how the 2008 financial meltdown occurred.
“The crisis has shown that most financial institution compensation systems were not properly linked to risk management,” said Sheila Bair, chairman of Federal Deposit Insurance Corporation, which insures depositors against bank failures.
“Formula-driven compensation allows high short-term profits to be translated into generous bonus payments, without regard to any longer-term risks,” she told the commission.
The commission will undergo further discussions this year with individuals in business, academia, and government officials and will conclude its findings in December 2010.
Appointed by Congress, the chairman of the committee Phil Angelides said that, “people are angry … they have the right to be … There’s no question that these institutions were at the center of this storm, not to make any prejudgments about their role in it.”
Lloyd Blankfein, CEO of Goldman Sachs Group, Inc.; James Dimon, CEO of JPMorgan Chase & Company; John Mack, chairman of the Board of Morgan Stanley; and Brian Moynihan, CEO and president of Bank of America were present at the inquiry and were expected to respond to grilling questions and comments. Angelides referred to the panel as “key leaders who have been involved in the financial crisis.”
For example, Lloyd C. Blankfein, chief executive of the storied Wall Street firm Goldman Sachs, likened the financial crisis to four hurricanes hitting the East Coast in a single year. Angelides was quick to rebut that, “(He) sat on the board of the California Earthquake Authority, acts of God (are] exempt. These were acts of men and women.”
Furthermore, Angelides said to Blankfein, “I’m just going to be blunt with you ... it sounds to me a little bit like selling a car with faulty brakes, then buying an insurance policy on the buyer of those cars. It doesn’t seem to me that’s a practice that inspires confidence in the market.”
Despite the metaphors being used to analyze the gravity of the financial catastrophe, the results have prompted President Barack Obama to announce stringent new levies on the institutional banks in the United States to recoup some bailout funds and reduce the federal deficit.
This 10-member commission is unlike the Pecora Commission, which was set up in 1932 by the United States Senate Committee on Banking and Currency after the Wall Street Crash of 1929. The Pecora team had the power to subpoena Wall Street power players and exposed deals and practices that were illegitimate or inappropriate.
For instance, influential banker J.P Morgan Jr. shocked the world by admitting that he and various business partners avoided income taxes between 1931 and 1932. The FCIC has been referred to as the Angelides Commission after its chairman, but does not have subpoena powers to access documents and witnesses for testimony.
“The crisis has shown that most financial institution compensation systems were not properly linked to risk management,” said Sheila Bair, chairman of Federal Deposit Insurance Corporation, which insures depositors against bank failures.
“Formula-driven compensation allows high short-term profits to be translated into generous bonus payments, without regard to any longer-term risks,” she told the commission.
The commission will undergo further discussions this year with individuals in business, academia, and government officials and will conclude its findings in December 2010.
Appointed by Congress, the chairman of the committee Phil Angelides said that, “people are angry … they have the right to be … There’s no question that these institutions were at the center of this storm, not to make any prejudgments about their role in it.”
Lloyd Blankfein, CEO of Goldman Sachs Group, Inc.; James Dimon, CEO of JPMorgan Chase & Company; John Mack, chairman of the Board of Morgan Stanley; and Brian Moynihan, CEO and president of Bank of America were present at the inquiry and were expected to respond to grilling questions and comments. Angelides referred to the panel as “key leaders who have been involved in the financial crisis.”
For example, Lloyd C. Blankfein, chief executive of the storied Wall Street firm Goldman Sachs, likened the financial crisis to four hurricanes hitting the East Coast in a single year. Angelides was quick to rebut that, “(He) sat on the board of the California Earthquake Authority, acts of God (are] exempt. These were acts of men and women.”
Furthermore, Angelides said to Blankfein, “I’m just going to be blunt with you ... it sounds to me a little bit like selling a car with faulty brakes, then buying an insurance policy on the buyer of those cars. It doesn’t seem to me that’s a practice that inspires confidence in the market.”
Despite the metaphors being used to analyze the gravity of the financial catastrophe, the results have prompted President Barack Obama to announce stringent new levies on the institutional banks in the United States to recoup some bailout funds and reduce the federal deficit.
This 10-member commission is unlike the Pecora Commission, which was set up in 1932 by the United States Senate Committee on Banking and Currency after the Wall Street Crash of 1929. The Pecora team had the power to subpoena Wall Street power players and exposed deals and practices that were illegitimate or inappropriate.
For instance, influential banker J.P Morgan Jr. shocked the world by admitting that he and various business partners avoided income taxes between 1931 and 1932. The FCIC has been referred to as the Angelides Commission after its chairman, but does not have subpoena powers to access documents and witnesses for testimony.
