- The Financial Crisis Inquiry Commission Report and the GOP Dissent
- Report of the Democratic Staff of the Oversight and Government Reform Committee: An Investigation of Attacks Against the FCIC
- For comparison of the final policy evaluation based on the testimony below.
Timeline for sample hearings
Lloyd Blankfein, Chairman and CEO, Goldman Sachs
- 2010 April "Testimony of Lloyd Blankfein Before the Senate Homeland Security and Government Affairs Committee" (.gov version) Senate Banking Committee. "Investment Banks and the Financial Crisis, Goldman Sachs Chair and CEO." April 27, 2010.
- Written Testimony of Lloyd Blankfein See "Witnesses" : Panel 3
This video is of Lloyd Blankfein (CEO-Goldman Sachs) testifying before Congress after it was revealed that Goldman Sachs had been privately taking short positions on CDOs in which they were finding buyers for the sellers that created them. The one that comes up most is the "Abacus" trade. Before you get to Blankfein's testimony, notice that he is testifying before the Homeland Security and Government Affairs Committee, not the Senate Banking Committee. This is interesting in itself because the Senate Banking Committee typically has jurisdiction over banking. At the time, the Dodd-Frank Act was still being negotiated by the chairman of the Senate Banking Committee, Christopher Dodd (D-CT), which might be relevant. For Carl Levin (D-MI), in contrast, the hearing would have few repercussions. So it might be interesting to evaluate both Levin and Blankfein. (Levin is the chair of the Homeland Security and Government Affairs Committee.) Blankfein was under significant pressure.
7:38:00 Levin engages Blankfein. Cursing. Naming of specific CDOs.
7:43:39 Blankfein begins stuttering and repeating the questions asked. Frequently pauses mid-sentence, regardless of the question.
7:45:24-8:01:23 Heated Exchange. Cursing.
8:01:32 John McCain (Ranking Member) takes over. McCain asks much simpler questions. Blankein hesitates.
8:10:15 McCain asks "What is a synthetic CDO?" Blankfein struggles to respond. These types of financial instruments were controversial.
8:12:41 McCain questions Blankfein regarding the Abacus trade.
- 2010 January "Testimony of Lloyd Blankfein Before the Financial Crisis Inquiry Commission" (.edu version) Financial Crisis Inquiry Commission. "First Public Hearing of the FCIC, Panel 1: Financial Institution Representatives." January 13, 2010.
- Written Testimony of Lloyd Blankfein Panel 1
Jamie Dimon, Chairman and CEO, JP Morgan Chase
- 2012 "Testimony of Jamie Dimon Before the House Financial Services Committee" 1 of 2 (.gov version) House Financial Services Committee. "JP Morgan Chase Trading Loss, Jamie Dimon Testimony." June 19, 2012
- 2012 "Testimony of Jamie Dimon Before the House Financial Services Committee" (cont'd) 2 of 2 (.gov version) House Financial Services Committee. "JP Morgan Chase Trading Loss, Jamie Dimon Testimony." June 19, 2012
This video is of Jamie Dimon (CEO - JP Morgan Chase) testifying before the House Financial Services Committee after the "London Whale" trade in which Chase lost over $2 billion in a single trade. Recall that JP Morgan Chase was financially the strongest "big bank" in the midst of the financial crisis. Initially the questions are not difficult and Dimon seems relieved. However, when he encounters more hostile members later on in the hearing he becomes very indignant, cutting off congress members frequently. This is rare for a witness. Usually it is the other way around. One of the important philosophical disagreements that comes up is about what governments should do about banks that are too big to fail, and even whether a bank being "too big to fail" is a valid concept.
17:17 Dimon Testimony Begins (1 of 2)
00:00 Dimon Testimony Continues (2 of 2)
- 2012 "Testimony of Jamie Dimon Before the House Financial Services Committee" (C-Span.org Version) House Financial Services Committee. "JP Morgan Chase Trading Loss, Jamie Dimon Testimony." June 19, 2012 (This is a better quality C-span.org version of the above hearing that is easier to navigate.)
- 2008 April "Testimony of Jamie Dimon Before the Senate Committee on Banking, Housing, and Urban Affairs" (C-Span.org version) Senate Committee on Banking, Housing, and Urban Affairs. "U.S. Financial Markets and the Sale of Bear Sterns." April 3, 2008. (NOTE: C-Span.org has the only version of this hearing video available. The committee website returns an error for this hearing, and this committee's hearings are not archived at thomas.loc.gov)
3:43:58 Dimon Testimony begins
- 2009 February "Testimony of Jamie Dimon Before the House Committee on Financial Services" (C-Span.org version) House Committee on Financial Services. "TARP Accountability: Use of Federal Assistance by the First TARP Recipients." February 11, 2009 (NOTE: C-span.org has the only streaming link to this video available. An alternative version in Quicktime (.wvx) format can be downloaded from the Financial Services Committee website here: http://archives.financialservices.house.gov/Hearings/hearingDetails.aspx?NewsID=1299. However, one may encounter technical problems downloading and using this version.)
33:03 Dimon Testimony Begins
- 2010 January "Testimony of Jamie Dimon Before the Financial Crisis Inquiry Commission" (.edu version) Financial Crisis Inquiry Commission. "First Public Hearing of the FCIC, Panel 1: Financial Institution Representatives." January 13, 2010.
- Written Testimony of Jamie Dimon
James Lockhart, Former Director, Office of Federal Housing Enterprise Oversight (OFHEO)
- "Testimony of James Lockhart Before the Financial Crisis Inquiry Commission" (.edu version) Financial Crisis Inquiry Commission. "Subprime Lending and Securitization and Government-Sponsored Enterprises, Session 2: Office of Federal Housing Enterprise Oversight." April 9, 2010
- Written Testimony of James Lockhart
This video is of Jim Lockhart's testimony before the Financial Crisis Inquiry Commission. The exchange with Bill Thomas is the most interesting. Lockhart and his critics hold different assumptions about whether it was necessary to require Fannie Mae and Freddie Mac to raise more capital in the midst of the financial crisis, and Lockhart is asked to explain why he did what he did. It seems as though Lockhart does not initially recognize that he is being asked to defend his actions. To the regulator, the reasoning seemed obvious.
- "Testimony of James Lockhart Before the House Committee on Financial Services House Committee on Financial Services. Legislative Proposals on GSE Reform." March 15, 2007 (NOTE: This link downloads a Quicktime (.wvx) version of the hearing file from the Financial Services Committee Website. This is the only version of this hearing available.
- Written Testimony of James Lockhart
3D Rendering of Hearings
Franklin Raines, Former Chairman and CEO, Fannie Mae, and Timothy Howard, Former CFO, Fannie Mae
- "Testimony of Franklin Raines Before the House Financial Services Committee" (C-span.org version) House Financial Services Committee. "The OFHEO Report: Allegations of Accounting and Management Failure at Fannie Mae." October 6, 2004 (NOTE: C-span.org has the only version of this hearing video available)
- Written Testimony of Franklin Raines
- Written Testimony of Timothy Howard
This video is on the Fannie Mae and Freddie Mac accounting violations that were discovered in 2004. The hearing is 7 hours, and includes the former CEO and CFO of Fannie Mae. At issue was their strategy of deferring expenses to future years to smooth out earnings and hit earnings targets that triggered bonuses. This was a high profile and partisan hearing. Kenneth Starr was involved as an outside investigator (Starr was the independent counsel for the investigation of Bill Clinton's relationship with Monica Lewinsky). Barney Frank, who would later become chairman of the Financial Services Committee and author Dodd-Frank, was involved. And Richard Baker was involved. Books have been written about the drama surrounding these events and events that occurred subsequently.
One thing you will notice is that Raines seizes upon minor errors in the members' interpretations of events. Raines also questions the legality of displaying their company's bonus information in the hearing, which causes a stir among the representatives. Baker tries to defend himself.
(NOTE that the activities covered here technically were not associated with the Financial Crisis of 2008. Raines and Howard were fired in 2004, but the companies purchased the risky loans that would cause them to fail in 2006 and 2007.)
4:00:00 Raines's Testimony begins
4:17:00 Raines splits hairs with Baker over the executives' bonus program vs. the company-wide incentives program
4:22:00 Baker comes under fire over the legality of displaying the company's confidential information.
- "Testimony of Franklin Raines Before the House Committee on Financial Services" (C-span.org version) House Committee on Financial Services. "Regulation of Fannie Mae and Freddie Mac." September 25, 2003. (NOTE: C-span.org has the only version of this hearing video available.)
- Written Testimony of Franklin Raines
Ken Lewis, CEO, Bank of America
- 2009 June "Testimony of Ken Lewis Before the House Committee on Oversight and Government Reform" (.gov version) House Committee on Oversight and Government Reform. "Bank of America and Merrilly Lynch: How Did A Private Deal Turn Into A Federal Bailout?" June 11, 2009.
New This video is of Ken Lewis, former CEO of Bank of America, testifying about Bank of America's acquisition of Merrill Lynch. This was a controversial acquisition because Bank of America shareholders alleged that Lewis withheld material information from them on Merrill Lynch's financial condition prior to the merger. After the initial application for federal approval to acquire Merrill Lynch, Lewis argued that Merrill Lynch's financial condition had changed, and the federal government should provide assistance. The Federal Reserve argued that Lewis used the threat of withdrawing from the acquisition (and allowing another bank failure to occur) as a mere "bargaining chip" to demand federal funds.
00:49:00 Lewis is attacked by Rep. Dennis Kucinich
00:52:15 Lewis addresses allegations that he requested a letter from the federal reserve to protect him against shareholders within the context of Bank of America's Merrill Lynch Acquisition.
01:22:40 Rep. Stephen Lynch raises allegations that Lewis threatened to use a "material adverse change" clause to walk away from the Merrill Lynch Acquisition if the company did not receive federal funds.
Angelo Mozilo, CEO, Countrywide
- 2008 March "Testimony of Angelo Mozilo Before the House Committee on Oversight and Government Reform" (C-span.org version) House Committee on Oversight and Government Reform. "Hearing on CEO Pay and the Mortgage Crisis." March 15, 2008. (NOTE: This video is only available on C-span.org)
New This video includes the testimony of Angelo Mozilo, former CEO of Countrywide, as well as the board members of several financial institutions' compensation committees. In the aftermath of the Financial Crisis, Countrywide was shown to have extensive involvement in many of the products associated with the financial crisis (McLean and Nocera, 2010). Countrywide was substantially involved in both originating loans that were purchased and securitized by other financial institutions, and eventually developing its own securitization business. Several financial institutions trace a substantial portion of their mortgage losses to loans originated by Countrywide. This hearing occurred as the mortgage crisis was in its early stages.
2:17:18-2:24:29 Angelo Mozilo makes opening statement
4:03:00 Rep. Elijah Cummings attacks Mozilo
4:08:13 Mozilo defends his reputation and offers to provide auxiliary staff to committee members
FCIC Policy Progression
- 1. Financial Crisis Inquiry Commission (FCIC) witness statements http://fcic.law.stanford.edu
- Documents for the Record. Submitting in advance of each hearing by witnesses.
- 2. Financial Crisis Inquiry Commission (FCIC) hearing transcripts http://fcic.law.stanford.edu/hearings
- The Commission held 19 days of public hearings in New York, Washington, D.C., and communities across the country that were hard hit by the crisis. The Commission conducted case study investigations of specific financial firms—and in many cases specific facets of these institutions—that played pivotal roles. Those institutions included American International Group (AIG), Bear Stearns, Citigroup, Countrywide Financial, Fannie Mae, Goldman Sachs, Lehman Brothers, Merrill Lynch, Moody’s, and Wachovia.The Commission also examined the roles of policy makers and regulators, including at the Federal Deposit Insurance Corporation, the Federal Reserve, the Federal Reserve Bank of New York, the Department of Housing and Urban Development, the Office of the Comptroller of the Currency, the Office of Federal Housing Enterprise Oversight (and its successor, the Federal Housing Finance Agency), the Office of Thrift Supervision, the Securities and Exchange Commission, and the Treasury Department.
- 3. 2010. Dodd–Frank Wall Street Reform and Consumer Protection Act July 21, 2010 ** Pub.L. 111–203, H.R. 4173
- 124 Stat. 1376–2223
- 12 USC 5301
- H. Rept. 111-517, S. Rept. 111-176
- An act to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end 'too big to fail', to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes.
- 4. 2011. FCIC report January 27 2011 http://www.gpo.gov/fdsys/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf
- How did it come to pass that in 2008 our nation was forced to choose between two stark and painful alternatives — either risk the collapse of our financial system and economy, or commit trillions of taxpayer dollars to rescue major corporations and our financial markets, as millions of Americans still lost their jobs, their savings, and their homes? The Commission concluded that this crisis was avoidable. It found widespread failures in financial regulation; dramatic breakdowns in corporate governance; excessive borrowing and risk-taking by households and Wall Street; policy makers who were ill prepared for the crisis; and systemic breaches in accountability and ethics at all levels. Here we present what we found so readers can reach their own conclusions, even as the comprehensive historical record of this crisis continues to be written.