Financial crisis probe ends with partisan vote on FCIC report
Friday, January 7, 2011; 7:17 PM
A vote to approve the final report of the Financial Crisis Inquiry Commission broke down along party lines this week, all but ensuring that what began as a bipartisan investigation into the causes of the crisis will end in partisan division.
The six Democratic appointees to the panel each voted in favor of the 550-page report, which will be published in book form later this month, while the commission's four Republican appointees opposed the final version, according to sources with knowledge of the vote.
The end result isn't exactly surprising, given the partisan tensions that have emerged within the group in recent months. But it does mark a potentially disappointing conclusion to an effort that lawmakers and the panel's members had hoped would have an impact similar to the bipartisan 9/11 Commission or the Depression-era Pecora Commission, which exposed abuses on Wall Street and failures of Washington to adequately regulate the financial system.
Months of tussling between Republicans and Democrats on the panel boiled over Dec. 15, when GOP commissioners revolted, issuing their own paper that cited what they viewed as causing the financial crisis.
Republican commissioners have complained that the Democratic appointees were ignoring their views and input, limiting how much they could write in the published version, which will be distributed in book stores. They also criticized Democratic members for missing a statutory deadline of Dec. 15 to produce a report.
Last month, the Democratic appointees voted 6 to 4 to postpone the final version until later this month.
Republican Vice Chairman Bill Thomas, a former congressman, said then that the Democratic commissioners were committed to sticking with party-line votes. "It became fairly clear they are on a mission and it's going to be 6 to 4 votes," Thomas said Dec. 15 on Bloomberg Television.
He complained that even basic amendments he proposed had been shot down by the Democratic appointees, who were in the majority.
"When I offer a motion to remove the terms 'magic' and 'alchemy' from the book and get voted down 6 to 4," he said rhetorically, "to what extent is that going to be a really serious study or a sensational piece?"
At the time, Brooksley Born, a Democratic appointee to the panel and former chairman of the Commodity Futures Trading Commission, said she was disappointed by the release of the paper by Republicans.
"With the release of separate personal views of four of the commissioners, that's an indication to me that they will be dissenting on the report," she said. "I think that that certainly undercuts our ability of a commission as a whole."
In their December paper, the GOP members largely blamed federal housing policy for the financial crisis, pointing the finger at politicians in Washington for promoting lax mortgage-lending standards that allowed lower- and moderate-income people to buy homes beyond their means.
Specifically, they wrote, the Clinton and Bush administrations turned mortgage finance companies Fannie Mae and Freddie Mac, chartered by Congress to expand homeownership, into "two enormous monoline hedgefunds" whose "only option available was to invest in mortgages of increasingly lower quality and higher risk to the taxpayer."
That line of thinking diverges from the explanation of the financial crisis offered by many Democrats, which focuses more on risky practices on Wall Street and a deregulatory approach to overseeing the financial sector.
Virtually no one disputes the notion that the government promoted homeownership too aggressively and failed to rein in Fannie Mae and Freddie Mac, the biggest mortgage-finance companies. The main fault line has been the degree to which federal housing policy contributed to the financial crisis.
In their separate paper, the Republican FCIC members identified federal housing policies as the preeminent cause, leading Fannie and Freddie, carrying the imprimatur of taxpayer support, to buy more and more risky mortgages.
Despite the internal disagreements over the causes of the crisis, the commission will leave behind more than just a final report. When it publishes its book, it also will release a trove of source materials, including hundreds of interviews and subpoenaed documents.