Senate Votes to Create Panel to Probe Causes of Economic Crisis
By James Rowley
April 22, 2009
April 22 (Bloomberg) -- The U.S. Senate voted to create an independent bipartisan commission to investigate the causes of the financial crisis.
The measure was adopted 92-4 today as an amendment to legislation to expand U.S. power to prosecute mortgage and financial fraud. The commission would report its findings by the end of 2010.
The Financial Markets Commission would investigate whether fraud, abuse or lapses by financial regulators caused the financial crisis. It also would examine lending practices and credit-rating agencies' role in assuring investors about the safety of mortgage-backed securities that now account for billions of dollars in troubled assets on bank books.
"The people of the United States have seen the value of their homes decline," along with the drop in their investments, said Georgia Republican Johnny Isakson, a proponent of the commission. "The decline that started out as a hiccup became colossal," he said. "There should be some answers."
The panel would study capital requirements, regulations governing liquidity and how much banks and unregulated financial companies such as hedge funds can borrow. It could refer evidence of criminal wrongdoing to the Justice Department.
House Speaker Nancy Pelosi also plans to push for an investigation modeled after the Senate Banking Committee's 1933 probe into the causes of the 1929 stock market crash and the Great Depression, according to her spokesman, Nadeam Elshami. Recommendations of the Pecora Commission, named after its chief counsel, Ferdinand Pecora, led to creation of the Securities and Exchange Commission.
The Senate measure would create a 10-member commission appointed by House and Senate leaders of both parties as well as the Democratic chairmen and ranking Republicans on the Senate Banking Committee and the House Financial Services Committee.
The panel would look at the effects of converting investment banks such as the failed Bear Stearns Cos. and Lehman Brothers Holdings Inc. from private partnerships to publicly held corporations. The commission also may examine executive compensation.
The legislation would expand the fraud laws to cover mortgage brokers that aren't regulated or insured by federal agencies, the $700 billion Troubled Asset Relief Program to rescue financially troubled banks, and the economic-stimulus program passed earlier this year.
The measure would add 160 special FBI agents, 200 prosecutors and Justice Department lawyers and 200 agents to investigate fraud at the Secret Service, the Postal Inspection Service and the Department of Housing and Urban Development.
The Senate also is considering creating a select committee to conduct a separate investigation. North Dakota Democrat Byron Dorgan said such a probe is needed "to try to do the narrative of what happened."
Click here to return to FBIC homepage