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The Angelides Commission?

July 15, 2009 - by Donny Shaw

Via Glenn Thrush, I See that the Democrats have made their picks for the “Pecora 2.0” commission:

House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.) have announced six of the ten members of the Financial Crisis Inquiry Commission — including its chairman, former California state treasurer (and failed gubernatorial candidate) Phil Angelides.

Other members of the panel, modeled on the 1930’s Pecora Commission, include:

* Bob Graham, former Democratic senator from Florida.

* Heather Murren, a retired Managing Director for Global Securities Research and Economics at Merrill Lynch.

* Byron Georgiou, a Las Vegas-based businessman and attorney.

* Brooksley Born, who was appointed by President Clinton as Chair of the Commodities Futures Trading Commission from 1996-1999.

* John W. Thompson, Chairman of the Board of Directors of Symantec Corporation, a software provider.

This commission could be a big deal, or it could be totally unimportant. It’s all up to these folks who will comprise it and how hard they push to get at the bottom of what caused the financial crisis.

The commission this one is based on from the Great Depression, the Pecora Commission, had a tremendous impact on moving public sentiment against Wall Street and in favor of tough reforms. It basically paved the way for enacting the New Deal. It’s success was due almost exclusively to its Chairman Ferdinand Pecora, who was notoriously relentless in his grilling of Wall Street executives. He was committed to getting to the bottom of things, uncovering fraud and corruption where it existed.

Will Phil Angelides provide the same kind of leadership?

Here, from the Fraud Enforcement and Recovery Act of 2009. is what Congress has specifically directed the commission to investigate:

(A) fraud and abuse in the financial sector, including fraud and abuse towards consumers in the mortgage sector;

(B) 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;

(D) monetary policy and the availability and terms of credit;

(E) accounting practices, including, mark-to-market and fair value rules, and treatment of off-balance sheet vehicles;

(F) tax treatment of financial products and investments;

(G) capital requirements and regulations on leverage and liquidity, including the capital structures of regulated and non-regulated financial entities;

(H) credit rating agencies in the financial system, including, reliance on credit ratings by financial institutions and Federal financial regulators, the use of credit ratings in financial regulation, and the use of credit ratings in the securitization markets;

(I) lending practices and securitization, including the originate-to-distribute model for extending credit and transferring risk;

(J) affiliations between insured depository institutions and securities, insurance, and other types of nonbanking companies;

(K) the concept that certain institutions are ‘too-big-to-fail’ and its impact on market expectations;

(L) corporate governance, including the impact of company conversions from partnerships to corporations;

(M) compensation structures;

(N) changes in compensation for employees of financial companies, as compared to compensation for others with similar skill sets in the labor market;

(O) the legal and regulatory structure of the United States housing market;

(P) derivatives and unregulated financial products and practices, including credit default swaps;

(Q) short-selling;

(R ) financial institution reliance on numerical models, including risk models and credit ratings;

(S) the legal and regulatory structure governing financial institutions, including the extent to which the structure creates the opportunity for financial institutions to engage in regulatory arbitrage;

(T) the legal and regulatory structure governing investor and mortgagor protection;

(U) financial institutions and government-sponsored enterprises; and

(V) the quality of due diligence undertaken by financial institutions;
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