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Stacy-Marie Ishmael and Joe Nocera on the Financial Crisis Inquiry Commission

When Oscar nominations were announced this week, the film “Inside Job” made the list for Best Documentary. It’s an examination of the causes of the financial crisis and it doesn’t pull any punches about what the filmmakers think lies ahead.

The film takes the position that as long as there is no change in the cozy relationships between the financial industry and those charged with regulating it, it’s not going to be possible to fix the system.

But by the time “Inside Job” was being released this past fall, a bipartisan congressional panel, the Financial Crisis Inquiry Commission, had already been at work for more than a year examining the causes of the crisis.

The FCIC, as the commission is known, using subpoena power when necessary, collected millions of pages of documents, conducted more than 700 interviews and held 19 public hearings with high-profile witnesses like Alan Greenspan, Robert Rubin and the CEOs of several now-defunct Wall Street firms. It made for less than scintillating theater.

But in the end, the commission was fractured by partisan divisions, which may affect its credibility. The commission’s final report, which was released Thursday, was endorsed only by the Democratic commission members — Republican members included two separate dissenting statements of their own, leaving us with a whole batch of new questions. One of which is: Wasn’t some of this ground covered when Congress passed the Dodd-Frank Wall Street Reform Legislation?

Alison Stewart put some of these questions to Stacy-Marie Ishmael, an editor at FT Tilt, a Financial Times website, and Joe Nocera, a business columnist for The New York Times and co-author of the new book “All the Devils Are Here: The Hidden History of the Financial Crisis.”

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  • Thor Veblen

    I was reading the FCIC report when this segment came on. I was shocked at the mediocre level of the discussion, with Ms. Ishmael rushing to make her Tea Party points blaming the victims of the mortgage scams and some ill-specified groups outside of the US, and Joe Nocera misrepresenting the lesson of the report as bubbles are due to some inherent psychological predisposition to self-delusion, and hence ‘inevitable’. Whatever the flaws of the Report, they have nothing to do with your supposed ‘coverage’. Bill moyers would at least have had knowledgeable people on to discuss the report, rather than engage in superficial chatter about whether Obama was really ‘pro-Wall Street’. I don’t know how you people can look yourselves in the mirror.

  • Edward J. Dodson

    Analysts of the financial crisis have missed (or ignored) important and very fundamental dynamics of the problem. Deregulation of the financial services sector escalated the dysfunctional nature of property markets. And, what is not understood is that property markets go through very regular periods of boom-to-bust CAUSED by public policy failures that go back centuries. As a market analyst and business manager at Fannie Mae for 20 years (until retiring in 2005) I observed first-hand the workings of how land speculation drove up property prices and how the financial sector accommodated speculation by annually raising maximum loan limits, reducing the cash required as a down payment, creating ever more flexible creditworthiness standards — all in an effort to sustain transaction volumes and satisfy Wall Street analysts demand for double-digit revenue growth. For those of us who gathered and analyzed the market data, the growing risks were clear. Appraisal reports revealed that with each passing year beginning in the mid-1990s, we were financing more and more land value and less and less housing value. Residential markets are reasonably stable when land-to-total value ratios stay around 25 percent. By the early 2000′s this ratio in many metropolitan markets hit 50 percent or higher. When the GSEs resisted the demands of the largest mortgage loan originators (e.g., Countrywide) to securitize the subprime mortgage loans they were creating, these lenders simply bypassed the conventional secondary market and went directly to Wall Street. The result was the private placement MBS. Nominal yields were much higher than conventional MBS, which attracted all sorts of investors. Any person trained as a residential loan underwriter would have known by cursory loan level reviews that a high percentage of these borrowers were not creditworthy and that many of the transactions involved misrepresentation and fraud. Clearly, the bond rating agencies did not do the type of post-purchase reviews done by the GSEs. Whether this was because these firms were neither staffed nor technologically-equipped to perform this responsibility, or senior management ordered that such examinations not occur is an issue regulators and Justice Department attorneys need to investigate.

    Edward J. Dodson

  • BVA

    How can Republicans assert that the Community Reinvestment Act in 1977 was major cause, and at the same time assert that a surplus of global liquidity, spawning a global housing bubble, was also a major cause. The CRA was only effective in the U.S. and only constrained banks. The major subprime credit laxity problem occurred in mortgages originated by the large non-bank mortgage lenders. (There is a Federal Reserve Bank report showing this — available online.)

    So the next question is where did the surplus of global credit begin? Our Federal Reserve? Yes, there were housing bubbles in many other countries, but whose lead were they following? And once the panic started who was holding the toxic assets? Who sold them those toxic assets? Why did the U.S. have to bail so many foreign banks along with the Wall Street banks? Was it fear of international repercussions if we didn’t bail them out, because it was our banks that sold them the toxic assets! Who are the Republicans trying to protect?

  • BVA

    I propose the we require public corporations that sell stock to the general public on stock-exchanges to insure the accuracy of their financial statements with insurance companies that would specialize in this new type of insurance. The insurance would pay out first in the event of a successful stockholder suit (or any other successful suit based in part on a misrepresentation in the financial statements). The insurance company would also hire the accounting firm (or firms) and either directly or indirectly hire the rating agency(s). This might remove the current big conflict of interest that both accounting firms and rating agencies have. The conflict exists currently because they are hired by the very companies that want them to present a particular picture of the financial condition of that company.

    In contrast, the insurance company would deal with public corporation (who financial statements it is insuring) ‘at arm’s length’. The insurance company would have money at risk. If the financial statements and the ratings of the securities included in those statements are not accurate enough they could lose money. The insurance company would be motivated to hire accountants and securities raters that know what they are doing. The insurance company would demand that the accountants and securities raters give them accurate financial statements and accurate securities ratings. The accountants and securities raters would be very foolish to mislead the ones who hired them. That would end their current cozy relationship with companies they audit or rate securities assets of.

    Then if something goes wrong somebody in the public corporation told some very persuasive lies backed up by some very persuasive but false documentation. And they will go to jail. If the accountants or rating agencies were also negligent they will lose a lot of business from other insurance companies, and they will probably also be sued by the insurance company that hired them.

  • Robert4006

    This was the most pathetic report that I could possibly imagine. Why bother with these amateurs at all? Ismael ranting about instant gratification and Nocera quipping that the “legislation passed in the 1920′s served us well for years.” Legislation in the “Roaring Twenties?” Really? Maybe he was thinking of the Glass-Steagall Act of 1933. Both of these useless goofs conveniently forgot to mention that the Gramm-Leach-Bliley Act of 1999 (aka Financial Services Modernization Act) deregulated the bejeezus out of the banking industry. Then, just before “Christmas break” 2000, Clinton signed “Foreclosure Phil” Gramm’s abomination: The Commodity Futures Modernization Act. Credit Default Swaps and Derivatives gone absolutely wild! Tens of Trillions of dollars traded under the radar. “Damn the torpedoes (and the regulations!!), full speed ahead.” With the passage of these two bills, the flood gates where literally blasted off their hinges. In less than a decade, we have what we have now — and my friends — it’s not over yet…

    My heart aches for the likes of Bill Moyers Journal. This episode was little more than a classic bait and switch. You teased us with a snippet from the documentary “Inside Job” and then switched to the pap that you presented — as if what you had to present was, of course, far more relevant. Little of relevance was presented. Just fluff and “snarkiness.” It seems as though _someone_ is telling PBS to “tone it down.” With “contributors” like David H. Koch (of the ultra right wing Koch Brothers), Monsanto, Archer Daniels Midland, Cargil, and oil companies — I knew the days of the real PBS were numbered. Sadly, it appears that we have now entered a new era of Orwellian doublespeak and misdirection.

    If you were serious about outing the real causes of this crisis, you’d have simply interviewed Charles Ferguson (“Inside Job”). Or, how about this? Interview William K. Black — the guy who headed a team that put over 1,000 people in jail for their participation in the S&L scandal. Or maybe Robert Scheer (“The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street.”) The title may seem a bit funny, but covers an extremely serious topic in a very serious fashion.

    This financial crisis is one of the biggest stories in decades and will likely shape this new century in ways that the common man will come to lament. No one has been charged with anything. Wall Street is still sucking billions from the real economy. Jobs are still being offshored. Real Americans are still looking for jobs. College students are graduating with tens (if not tens upon tens) of thousands of dollars of debt, and many of them see no jobs in sight. Obama has barely even given us lip service. Glass-Steagall was not even mentioned and it is the only thing that will put a stop Wall run amok. Not to mention that there are Seven Hundred TRILLION dollars of unregulated derivatives still “out there.”

    We are actually nowhere near being out of the proverbial woods — and you give us this. Have you no shame?

  • Kathleen Utz

    Turmoil in Egypt maybe a somewhat legitimate excuse for the almost total lack of attention being given to the long awaited Financial Crisis Commission Report. I sense,however that there is a lack of interest in being caught stirring up this pot on the part of some in the media. In spite of the obvious risks,PBS has been on it.
    The appointment of this commission got my attention after learning that then Speaker Pelosi had selected Brooksley Born, Chief Executive of the Commodities Future Exchange between 1996 to 99,to serve as one of the 6 Democrats to the 10 person commission.
    Under the title “The Warning” her attempt to influence her male peers concerning the extreme risks associated with current financial policies was well documented by Frontline last year.
    Thank you for your coverage on Need to Know and I hope you will keep it up. As the Chair of the FCIC said”the greatest tragedy would be to accept the refrain that no one could have seen this coming and thus nothing could have been done.”

  • Guest 5

    Wow, I hear so much common sense in these comments above.
    Me I like to summarise it as :
    1) Excessive ability to Leverage borrow i.e to low deposits on House and land purchases or pay a huge property price or rent for a particularly shall we say great retail or prestige office location. ERR why is it prestigious? Does it serve it ‘s pupose should be more important.?
    2) Being able to for example buy and sell currencies and commodities without an underlying commercial purpose = dealing not trading
    3) Derivatives are nonsense. The name implies there is nothing real and one traders deal is anothers loss.
    What the all do is lead to speculation, bubbles in prices etc hey just today the Egypt insatability was the reason for a spike in Oil prices… No No it was commodity speculators who never actually owned and sold a real barrel of oil in thier lives.
    Who benefits from low interest rates other than banks or Big business. The millions ( BNS) of aging population globally are now consumers at .50% purchasing power due to low interest returns on investments.
    Guest 5.

  • Sue from New York

    People should read books like the “Great American Stickup”, “13 Bankers” and it “Takes a Pillage” because Need to Know does not do it like Bill Moyers Journal and Now did. Ms Ismael
    should realize it was not the immediate gradification of home buyers. It was the immediate gradification of the investment banks that broke down the fire wall between them and the commercial banks by destroying Glass-Steagal so that they could create derivative products to make money from home mortgages more specifically subprime mortgages. These mortgages were sold to buyers who were not informed about how the high interest rates they would have to pay or they were just pressured into it so the investment banks would have more derivatives to fatten the bubble.

    Is Need to Know going to cover the billionaires conference this week end in Palm Springs California
    next. Hosted by the very same Koch brothers who finance PBS programming. They and the other billionaires together justices Scalia and Thomas will be making plans and how to deregulate what is left of our regulatory laws turning our demoracy into a corportracy

  • Unlettered

    History has thought us that the powerful mentality; whenwhere rules and special language are madeused with trip wires to protect its noumenon prevails. The question becomes, would the persons mentioned tell us how to prevent such fact of occurrence?

  • fourTurns

    This is another example of the superficial coverage of issues that Need to Know copies from all other networks. Why even bother? Isn’t PBS supposed to provide something different? You should have had a long form interview with Charles Ferguson and get the rights to show his documentary.

  • TellTheTruth

    We usually enjoy Need To Know programs because of their in depth reporting and coverage of the subject. This specific presentation on the Financial Crises was so disingenuous it would be laughable if it were not for such a serious issue regarding the financial stability of our nation. The program was both a disgrace and a fraud.