FINSAC, Manatt-Dudus mode of enquiry a very expensive joke

Wilberne Persaud, Columnist

Furthermore, the commission to enquire into FINSAC did not investigate, could not even be said to have made an effort to understand, the causes of the financial crisis the country faced, which led to the establishment of FINSAC.

For political partisans it was beautiful theatre, though. To them I recommend the hilarious YouTube video 'I can't recall' by Tony Rebel, which may be found at http://www.youtube.com/watch?v=zL6ybB9CbMg&feature=email.

So while the product of Tony Rebel's creativity makes us laugh, that's one quite expensive joke! On the other hand, if we consider the US Financial Crisis Inquiry Report we find an amazing amount of material to chew on. Pity is that an amazing amount of material often proves terrifying. We find, for instance, that Federal Deposit Insurance Corporation officials, referring to Citigroup, communicated to the chairperson, Sheila C. Bair, the view that "the liquidity and confidence situation [is] negative and deteriorating such that viability may be threatened without outside support".

Humour

In response to a proposal for support from Lehman Brothers, an official of JP Morgan Chase responds: "Let's give them an order for the same drugs they have apparently been taking to think that we would do something like that."

Often, in dire situations, humour is the only calming way out. Yet years after the fact, the details of recklessness and closeness to the greatest worldwide economic depression since 1929 are still frightening - the more so as we contemplate the downgrade of US government debt.

The US commission was created by Section 5 of the Fraud Enforce-ment and Recovery Act of 2009, signed into law by President Obama in May of 2009. The act required that members of the commission be "prominent United States citizens with national recognition and significant depth of experience in such fields as banking, regulation of markets, taxation, finance, economics, consumer protection, and housing".

Its functions were to "examine the causes of the current financial and economic crisis in the United States". It looked specifically at "fraud and abuse in the financial sector, including fraud and abuse towards consumers in the mortgage sector".

The inquiry should consider "federal and state financial regulators, including the extent to which they enforced, or failed to enforce, statutory, regulatory, or supervisory requirements; the global imbalance of savings, international capital flows and fiscal imbalances of various governments; monetary policy and the availability and terms of credit; accounting practices, including mark-to-market and fair value rules and treatment of off-balance sheet vehicles".

There were more than 22 potentially causative factors from which we chose the few listed above. This was an enquiry meant to get to the true causes of the crisis.

Conclusion

The commission's conclusion was that "the crisis was avoidable and was caused by: widespread failures in financial regulation, including the Federal Reserve's failure to stem the tide of toxic mortgages; dramatic breakdowns in corporate governance, including too many financial firms acting recklessly and taking on too much risk; an explosive mix of excessive borrowing and risk by households and Wall Street that put the financial system on a collision course with crisis; key policymakers ill prepared for the crisis, lacking a full understanding of the financial system they oversaw; and systemic breaches in accountability and ethics at all levels".

The US commissioners were on a fact-finding mission.

Minutes of meetings, emails, recorded conversations, expert and professional opinions, all these and more came into the public domain and were openly reported on by January 27, 2011 — merely two years and three months after the crisis.

Our FINSAC commission starts 14 years after the fact, not referring to minutes of meetings, emails and other factual and evidentiary details not subject to memory lapse, opinion, and emotion.

It relied instead mainly on peoples' recall, or inability to recall, their opinions, and emotions.

In the FINSAC enquiry, memory recall was not that bad, but hard evidence was skimpy; Manatt-Dudus, as Tony Rebel tells it, was full of "I can't recall".

Finally, K.D. Knight gave up most of the points he had accumulated from his skilful cross-examination of Prime Minister Golding when he suggested that the PM was "pathologically mendacious" and that he "should pack up and go".

With these two unnecessary remarks, he opened the proceedings to being legitimately described as purely politically partisan. He should have left that judgement to the commissioners and the people. Yet, I daresay, the people do know the true situation.

Wilberne Persaud at email: wilbe65@yahoo.com