We all know what the meltdown in financial and mortgage markets did to our retirement accounts and home values. But what exactly caused it?
Figuring that out will be the task of a new presidential commission created by legislation from U.S. Sen. Johnny Isakson of Georgia.
Armed with subpoena power and a $5 million budget, and styled after the 9-11 commission that investigated the Sept. 11, 2001, terrorist attacks, the Financial Crisis Inquiry Commission is expected to bring big names and high drama to Washington in coming months. Its charge: investigate the people and processes that resulted in the worst economic downturn since the Great Depression.
"I know about the financial difficulties we're all going through," said Isakson. "If some things were done that can be corrected to prevent something like this from ever happening again, then we owe it to ourselves, to our children and to our grandchildren."
Isakson, a Republican, and Sen. Kent Conrad, a Democrat of North Dakota, introduced legislation creating the commission in January. President Barack Obama signed it into law last week as part of the Fraud Enforcement and Recovery Act of 2009, which also authorizes another $245 million per year for the next two years to hire hundreds of FBI agents, attorneys, accountants and others to better investigate financial fraud and prosecute lawbreakers.
Backers of the financial fraud legislation say it's badly needed and will more than pay for itself through increased fines and penalties that will likely come with better government oversight — not to mention potential savings for the government and citizens alike if bad financial practices are stopped.
"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," House Speaker Nancy Pelosi said in a statement.
But others say the commission is unnecessary given that there's a whole host of regulators from other government agencies — from the Treasury Department and the Securities and Exchange Commission to the Justice Department and the Federal Deposit Insurance Corp. — already investigating the meltdown.
"There may be too many cooks already in the soup," said Sal Inserra, a partner at Atlanta-based accounting firm Porter Keadle Moore LLP. The firm and Georgia Southern University are co-sponsoring a conference on accounting fraud in Atlanta this week that features SEC and Justice Department officials, as well as the former chief financial officer of HealthSouth, who was charged with bank fraud in 2003.
"How many resources are you going to throw at this?" Inserra said.
Inserra said his clients, mainly banking companies, have already been overwhelmed by regulators and investigators in recent months, often asking the same sorts of questions and inquiring about the same sorts of information.
"As it stands now, most of my bank clients don't get an hour's worth of sleep without somebody knocking on their door and asking for their records," he said.
Isakson said an independent commission is necessary because not only private industry, but also government agencies and even Congress itself could ultimately be found partly to blame for the financial markets' meltdown. The 10-member panel of outside financial experts will be appointed by congressional leaders from both parties, but it can't include members of Congress or employees of government agencies.
"There's culpability and there's issues throughout the government and throughout the private sector," Isakson said, adding that any findings of criminal wrongdoing will be forwarded to the Justice Department.
"It's entirely possible that there was some activity that took place that was certainly improper and maybe illegal," he said.
He said the commission also will be able to subpoena and investigate hedge funds, investment rating firms and government regulators that can't be easily reached by other arms of the federal government.
"Some of the people who were engaged in this system . . . are outside the transparency and the eyes of government," Isakson said. "But they should be scrutinized just like everybody else because they played a huge role in this."