In May of 2009, the Fraud Enforcement and Recovery Act (FERA) was signed into law. The bill created the Financial Crisis Inquiry Commission, a panel of 5 Democrats, 1 Independent, and 4 Republicans whose task was to “examine the causes, domestic and global, of the current financial and economic crisis in the United States” and to issue a bipartisan report by December 15, 2010. The official 545 page report was delayed and just recently released on January 28, 2011.
The FCIC’s investigations were marred with partisan bickering, finger-pointing and infighting, highlighted by the votes cast by the commission’s 4 Republican members during December 2010 to ban the words “deregulation,” “shadow banking,” “interconnection” and disturbingly, “Wall Street,” from the final report. After being voted down 6 to 4 on banning “Wall Street” from the final report, the Republican commissioners defected from the FCIC and issued their own nine page dissenting report on December 15, 2010 (which does not include the terms “deregulation,” “Wall Street,” and “shadow banking”). The Republicans have since complained about the commission’s leadership and management, claiming they were often kept in the dark about witness interviews and other important information.
The December 15th Republican report details the large housing bubble and government sponsored enterprises (GSE) such as Fannie Mae and Freddie Mac’s “contributions to declining lending standards,” and the Community Reinvestment Act’s role in the meltdown by “mandate[ing] the extension of credit to high-risk borrowers,” all in stark, partisan contrast to the official report’s conclusions released on January 28, 2011. One possible aim of the defecting Republican commissioner’s dissent was to attempt to undermine the official report by discrediting it as hyper-partisan. Following the release of the official FCIC report, three of the Republican commissioner’s dissented anew, while the fourth attempted to place blame for the entirety of the financial market meltdown on governmental social engineering. This Republican attention grab “makes it easy to chalk this up as just another chapter in the divisive politics in Washington,” commented one law professor. Another financial market scholar added, “The most likely outcome seems to be that this report gets put on a shelf to collect dust.”
Strangely, the official FCIC report may end up doing little more than collect dust. Because the Dodd-Frank Act was passed before the FCIC report was completed, new legislation was passed before official word was delivered as to the causes and underlying failures of the crisis. Now that the badly flawed Dodd-Frank Act is law, there seems to be little political will to carefully consider the FCIC official report in order to consider new regulation or necessary legislation. As to whether the Dodd-Frank Act will do anything to prevent a future meltdown, several commentators at various symposia believe that it most definitively will not.