Former state treasurer Phil Angelides recently finished out his term as chairman of the federal Financial Crisis Inquiry Commission. He’ll be at the Avid Reader at 1600 Broadway today, Feb. 17, signing copies of the commission’s official report, which made it to #10 on the New York Times nonfiction paperback bestseller list this week.
Are you surprised that this became a bestseller?
I believe there is a deep hunger in this country to know what happened. Why is it that there are 27 million people who are out of work, can’t find fulltime work, or stopped looking for work? Why is it that four million families have lost their homes to foreclosure, and that number may rise to 13 million?
This was not a small event, even though some on Wall Street and in Washington want to consign this to the memory bank. This was a cataclysm. It almost brought our whole economy down.
I am pleased that we made the decision as a commission to write this as a narrative for the American people, not jargon, for folks with PhDs only or folks on Wall Street who talk in their own language. We wanted to lay this bare and make this a true historical accounting of the events that led to this crisis, and do it in a way that Americans could read it.
As I understand it, there were three reports?
There’s one report. Of the 576 pages, the bulk of the report is the facts. It is the accounting of the events that led up to the crisis, and the crisis itself. The commission, by six votes, adopted the conclusions of what we thought caused that crisis. We thought it was avoidable. We believed there were widespread failures of financial regulation. We believed there were dramatic breakdowns in corporate responsibility. Of the six members who voted for it, there were five Democrats and one independent.
Now there were two dissents filed, one by three Republicans and one by a fourth Republican. I will that while we didn’t come to agreement on all conclusions, between the six members and the three members there were a lot of areas of common ground. We all agreed that the Community Reinvestment Act some had blamed for this crisis wasn’t the cause. We agreed that Fannie Mae and Freddie Mac contributed, but were not the cause. We agreed on the failures of credit rating agencies and regulatory bodies like the SEC. One of the members attributed the crisis fully to government housing policy. His three Republican colleagues did not concur. Most economists do not believe that was a moving force in this.
Was there anything that surprised you?
Just the sheer intensity. Over the course of a year plus, we interviewed over 700 witnesses, reviewed millions of pages of documents, held 19 public hearings in Washington, New York and communities that were hard-hit across the country.
A lot of people like to focus is we should have done the bailout or not. The real question is how did we get to the point in this country where in 2008 the only two choices appeared to be either let the whole system collapse or inject millions of dollars of taxpayer money? I think what struck me most was how many warning signs were ignored. What surprised me most was how avoidable this crisis was. A lot of people on Wall Street say it was a perfect storm, it was an ill wind. Lloyd Blankfein from Goldman Sachs said it was like a hurricane.
But we came to the firm conclusion that it was human action, inaction and misjudgment. The Federal Reserve had all the authority they needed to control predatory, egregious subprime lending. They watched it develop, they saw the warning signs and they sat on their hands. At the same time the states were trying to force fair lending laws and cut off the flow of toxic mortgages, the federal government was trying to stop states. In 2004, the FBI warned about an epidemic of mortgage fraud. I think what was most clear to us is that all these warning signs were ignored by the chief executives of major Wall Street firms and by the regulators who were supposed to protecting the public.
Now Rep. Darrell Issa is trying to look into the commission.
I’m back here in Washington to testify to the House Financial Services Committee. I’ll be testifying before the Senate Banking Committee. I am happy, as are my fellow commissioners, to appear before any Congressional committee. Mr. Issa has requested information from the commission, but we closed officially by law. All that information is available to him at the National Archives and the GSA.
If you had the ability reform the financial industry across the board, what changes would you make?
I believe the Dodd-Frank legislation that was passed last year is strong and powerful legislation and needs to be fully implemented. I have spent 20 years in the private sector, eight years as treasurer of California. I came to this task with some reasonable knowledge of the financial system. Here’s what shocked me: the extent to which Wall Street had become a casino. I felt like I walked through the door of our local community bank and saw a casino floor as big as New York, New York. In 1980, 15 percent of the corporate profits in this country came from the financial sector. By the mid 2000s, it was 33 percent. A lot of what was happening on Wall Street was creating securities, repackaging those securities, repackaging them again, creating what are called synthetic securities, which are bets on real securities. I think one of the biggest we have to think about in this country is getting back to a Wall Street that provides capitol to create jobs and business and wealth for the nation as a whole, versus a Wall Street that’s all about money making money.