9/11-style commission to probe banks, causes of economic crisis
US commission to probe financial crisis by Jitendra Joshi Wed May 6, 10:09 pm ET
WASHINGTON (AFP) – US lawmakers voted to create a 9/11-style commission of experts to probe the causes of last year's devastating financial meltdown and to draw lessons to prevent its recurrence.
The vote in the House of Representatives coincided with a new study that accused US and foreign banks of deliberate culpability in the collapse that engulfed the US and world economy.
The House voted 367-59 for a bill aimed at curbing financial fraud that included the proposal for an independent panel modeled on the bipartisan commission that investigated the September 11 attacks of 2001.
House Speaker Nancy Pelosi welcomed passage of the "critical bill," which requires the new commission to report back by mid-December 2010.
"Americans must be assured that we are taking every step possible to protect their interests and to prevent the misuse or abuse of their hard-earned dollars," she said.
The committee, which would also probe the US government's series of hefty financial bailouts, would hold public hearings and would have subpoena power to compel testimony from reluctant witnesses.
Republican Representative Darrell Issa, who has been pushing for the new commission since last fall, said: "You cannot solve a problem until you've accurately diagnosed it.
"A truly independent and nonpartisan commission can put forward an assessment that will help us avoid repeating the mistakes that got us into this crisis in the first place."
The Senate, which approved its own version of the bill in late April, must now vote on the House version in order to send it to President Barack Obama to sign into law.
The independent inquiry would comprise 10 members drawn from US citizens with "significant experience in such fields as banking, regulation of markets, taxation, finance, economics and housing."
Six of the members would be chosen by Democratic leaders in Congress and four by Republicans, a composition that drew protests from opposition members who noted that the 9/11 commission was split 50-50 between the two parties.
And while Democrats blame Republican laissez-faire policies, Republicans point to their rivals' strong past support for two busted government-backed mortgage lenders -- Freddie Mac and Fannie Mae -- as a major factor.
The commission would have a wide-ranging remit to examine the role of US regulators and the Federal Reserve, along with companies' accounting practices, executive pay schemes and use of exotic investment tools.
Possible fraud, the controversial role of credit risk agencies and short-selling on the markets are also listed in the legislation for investigation.
In its new report, the Center for Public Integrity, meanwhile, named 25 "subprime" mortgage companies whose risky lending was blamed for the US property market collapse that triggered a global tumult.
Many of the lenders were either controlled by US and European banks, or could not have indulged in their high-risk lending spree without the connivance of banks, the investigative journalism group said.
"The mega-banks that funded the subprime industry were not victims of an unforeseen financial collapse, as they have sometimes portrayed themselves," the center's executive director Bill Buzenberg said.
"These banks were deliberate enablers that bankrolled the type of lending that's now threatening the financial system," he said.
The center said that from 2005 to 2007, the "Subprime 25" accounted for nearly one trillion dollars or about 72 percent of loans extended to risky borrowers who would not normally have qualified for a mortgage.
Four of them have received US bailout funds, including collapsed insurer American International Group and banking behemoth Citigroup.
Top of the list with at least 97.2 billion dollars in subprime loans was Countrywide Financial, which was bought by Bank of America last year to avert bankruptcy for the nation's largest independent mortgage company.
The top foreign-owned lender at number nine was HSBC Finance, part of the British-based banking titan HSBC. EquiFirst (16th on the list) was shut down by its British owner Barclays Bank in February.