Asked by a member of the Financial Crisis Inquiry Commission about whether there was a singular event—the Gramm-Leach-Bliley Act, say, or looser capital requirements at banks, or the staggering decline in underwriting standards—that led to the financial meltdown, Peter J. Solomon, a veteran investment banker, had this to say:

"It was a perfect storm from inside. It was a confluence. If you listed the number of villains in this tale, you wouldn't have a plot."

Solomon's remark, delivered in the second of the FCIC's three hearings today, came amidst a much livelier debate from three finance experts not tied to the big supermarket banks or investment houses on the causes of the crisis. For more on that and the third hearing, check back here at the MoJo blog a bit later today.


FCIC's Dull Opening

Like boxers sizing each other up and tossing the occasional jab, the opening hearing of the Financial Crisis Inquiry Commission got off to fairly predictable start this morning, with four of the biggest executives on Wall Street—Lloyd Blankfein of Goldman Sachs, Jamie Dimon of JPMorgan Chase, John Mack of Morgan Stanley, and Brian Moynihan of Bank of America—outlining their reasoning for why the meltdown happened and fielding questions on anything from lending practices to risk management to compensation from the 10-person commission.

The four Wall Street execs almost unanimously agreed in their prepared testimonies that the root of the financial crisis lay in the housing market, and more specifically, in predatory and reckless practices and products, like not verifying a borrower's income for a loan or peddling mortgages where you can pick how much to pay or interest rates drastically reset after a few years. Those kinds of practices fueled a massive housing bubble, Dimon said, which in turn "helped fuel asset appreciation, excessive speculation and far higher credit losses" that spread throughout the financial markets. As banks and investors kept making larger and larger bets on both housing and other markets, they failed to adequately managing the risks that accompanied those outsized bets should they fail, Blankfein said, and when the housing bubble popped and so many of those risky bets soured, institutions like Lehman Brothers and Bear Stearns collapsed.

Boiled to its essence, that was what the four execs pointed to as the main root cause of the crisis. Aside from that, however, the morning's questioning didn't shed much light on anything. Daniel Indiviglio at The Atlantic bemoans FCIC chairman Phil Angelides' apparent lack of finance know-how in his questioning of Blankfein (which I mostly agree with); and to be honest, none of the FCIC's commissioners—barring perhaps former CBO director Douglas Holtz-Eakin—seemed to ask anything that hadn't been covered before. Former congressman Bill Thomas did request that all four men to answer the questions featured in today's New York Times op-ed page—questions far more probing than what the FCIC asked.

But in all fairness, the commission is just getting warmed up and I'm sure their work will only get better going forward. Especially if do the gritty, investigative work that my colleague Nick Baumann writes about today, like subpoenaing documents and records and even tracking down whistleblowers for testimony. That'll bring out the juicy details that can really shed some light on what happened behind the scenes, the kind of decisions and actions that Lloyd Blankfein or Jamie Dimon are never going to share.


The FCIC's Real Work

Four top bank CEOs—Bank of America's Brian Moynihan, Morgan Stanley's John Mack, JPMorgan's Jamie Dimon, and Goldman Sachs' Lloyd Blankfein—are on Capitol Hill today to face the Financial Crisis Inquiry Commission, which is charged with putting together a 9-11 Commission-style report on the causes of the financial crisis. The CEOs are still taking questions, but they haven't really been telling the commission anything its members didn't already know.

That's not really a surprise. The FCIC's ten members have asked a lot of good questions—and Bill Thomas, the commission's vice-chairman, demanded the CEOs submit answers to New York Times reporter Andrew Ross Sorkin's hard-hitting queries. But bank CEOs aren't stupid, and they have great lawyers. They're very unlikely to say anything that could hurt them or their companies. So it's important that people recognize that this part of the commission's work is really just political theater. Unless someone makes a big mistake, we're not going to learn anything new or surprising just because Lloyd Blankfein made it to Capitol Hill on time.

While ruining Blankfein's day is the most public part of the FCIC's job, the most important part of its mission is the grunt work of investigating. The biggest revelations always come when investigators obtain documents that illuminate truths interested parties wouldn't reveal of their own volition. (Whistleblower testimony is good, too, but it's not as solid as actual records.) The FCIC has an $8 million budget and a lot of power—it can subpoena witnesses and documents and grant whistleblower protection to encourage people to come forward with information. It's all well and good to ask these guys questions. But it's other things—like hunting down key documents (the AIG emails would be a good start) and finding witnesses who aren't, like the CEOs, paid to protect their institutions—that comprise the commission's real work. Its success will be determined by how well it's able to do those things—not by how roughly it can question Jamie Dimon.

In the wake of the devastating earthquake, American eyes are again turned toward Haiti—something that only seems to happen when yet another disaster strikes, and never during the daily chaos and misery that plague the poorest country in the Western Hemisphere. I’ve spent a good deal of time in Haiti, reporting first on the repression under the Duvaliers, then on the rise of Jean-Bertrand Aristide's popular movement, and then on the 1991 military coup that brought him down. I was there during the period of the 1994 military intervention that restored Aristide to power.

US interest in the country seemed to wane with the departure of American troops, and in the aftermath of September 11 and the Bush administration's numerous adventures around the world, Haiti returned to its usual state of invisibility in Western eyes. Few people noticed a remarkable report that appeared in the New York Times in 2006, based in part on the analysis of former ambassador Brian Dean Curran, showing how US policy helped to destabalize Haiti in the years leading up to 2004, when Aristide was again forced out by armed rebels under an accused death squad leader. Written shortly before the election won by current president Rene Preval, Walt Bogdanich and Jenny Nordberg titled their story "Mixed U.S. Signals Helped Tilt Haiti Toward Chaos." Here's their account of the events following Aristide's 2004 departure:

Haiti, never a model of stability, soon dissolved into a state so lawless it stunned even those who had pushed for the removal of Mr. Aristide, a former Roman Catholic priest who rose to power as the champion and hero of Haiti’s poor.

Today, the capital, Port-au-Prince, is virtually paralyzed by kidnappings, spreading panic among rich and poor alike. Corrupt police officers in uniform have assassinated people on the streets in the light of day. The chaos is so extreme and the interim government so dysfunctional that voting to elect a new one has already been delayed four times….

Yet even as Haiti prepares to pick its first elected president since the rebellion two years ago, questions linger about the circumstances of Mr. Aristide's ouster—and especially why the Bush administration, which has made building democracy a centerpiece of its foreign policy in Iraq and around the world, did not do more to preserve it so close to its shores.

 This is predictable: Wall Street is messing with you.

At a Paris conference on new approaches to capitalism last week, Nobel winning economist Joseph Stiglitz told reporters that "Wall Street is talking up the recovery because it would like to sell stocks." This is consistent with the financial industry's shady tactics that David Corn and Kevin Drum discussed last Friday on Bill Moyers' Journal. Instead of acting morally, Wall Street executives will do whatever they can to make a buck. And it's all legal under our easygoing financial regulations.

In the current issue of Mother Jones, Stiglitz attacks this moral bankruptcy head on. If we know that these economic villains knowingly trashed our economy, he asks, why do we let them get away with it? Here's an excerpt:

How the market has altered the way we think is best illustrated by attitudes toward pay. There used to be a social contract about the reasonable division of the gains that arise from acting together within the economy. Within corporations, the pay of the leader might be 10 or 20 times that of the average worker. But something happened 30 years ago, as the era of Thatcher/Reagan was ushered in. There ceased to be any sense of fairness; it was simply how much the executive could appropriate for himself. It became perfectly respectable to call it incentive pay, even when there was little relationship between pay and performance. In the finance sector, when performance is high, pay is high; but when performance is low, pay is still high. The bankers knew—or should have known—that while high leverage might generate high returns in good years, it also exposed the banks to large downside risks. But they also knew that under their contracts, this would not affect their bonuses.

Read the piece for more on the Wall Street's deals with the devil and why we continue to let executives bring home massive bonuses instead of hold them accountable. 

Over the years, the US and its international partners have directed an impressive amount of development funding to Afghanistan. Not so impressive: their efforts to ensure billions in aid is actually reaching the intended targets. Afghanistan's foreign minister, Rangeen Dadfar Spanta, once estimated that only about $10 or $20 out of every $100 in US development assistance ends up filtering down to the communities it was meant for. Where does the rest go? Some is eaten up by unwieldy chains of contractors and subcontractors, which take their cut and pass the work on until there is little money left to actually complete the projects they were hired to carry out. Some is siphoned off by corrupt officials and contractors. Some—well, we're not entirely sure where it went. Meanwhile, Afghans have complained bitterly about the state of development efforts. In some cases, the promised aid simply hasn't materialized—or, if it has, the result has been shoddily constructed (yet high-priced) projects that are basically useless.

Along with an influx of troops, the Obama administration is planning a surge of civilian personnel and funding to address Afghanistan's formidable development challenges. That's the good news. Here's the bad: part of this effort will likely be overseen and coordinated by a UN division that has been plagued by allegations of waste and mismanagement and the US development agency that has turned a blind eye to its transgressions.

US Army Lt. Gen. William G. Webster, right, and Soldiers teach Kuwaiti officials about US military vehicles that will be using a new road designated by the Kuwaiti government for use by US military convoys. The brief lesson occurred shortly after a ribbon cutting ceremony, Dec. 30, 2009, to celebrate the completion of the road. (US Army photo by Spc. Jason Adolphson)

The must reads from around the web and in today's papers:

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Okay, you know what happened in Haiti. Here's what you can do besides wincing at the Times through gritted teeth and saying, "Ohmigod, that's awful":

  • In theory, you can get help finding your friends/relatives in Haiti by calling the State Department at 888-407-4747, but the lines have been too flooded to get through.
  • Read the eyewitness reports, like of @RAMhaiti, on Twitter (h/t @globalvoices):  

Just about all the lights are out in Port au Prince.. people still screaming but the noise is dying as darkness sets.

lot's of rumors about which buildings were toppled..The Castel Haiti behind the Oloffson is a pile of was 8 stories high 

Our guests are sitting out in the driveway.. no serious damage here at the Oloffson but many large buildings nearby have collapsed

I'm told that parts of the Palace have collapsed..the UNIBANK here on Rue Capois has collapsed

people are bringing people by on stretchers

Port au Prince is dark except for a few fires

For as long as you can, anyhow.

when my batteries die I will no longer be able to's going to be a long night..our prayers go out to everyone


For updates on Haiti, follow Mac on Twitter.


Health insurers secretly funded attack ads aimed at killing or gutting health care reform even as they publicly claimed to support strong action in Congress, the National Journal reports today.

Since last summer, six of the nation's biggest health insurers have funneled up to $20 million to the US Chamber of Commerce to fund ads critical of leading Democratic reforms, according to an anonymous lobbyist quoted by the Journal. The money was solicited by the Association of Health Insurance Plans, the industry's main trade group. The lobbyist said the industry wanted to avoid the political flak that it drew when it aired its famous "Harry and Louise" ads that helped derail Bill Clinton's health reform plans more than a decade ago.

The revelation paints insurers in a duplicitious light. In October, when AHIP was already funneling attack money to the Chamber, its president, Karen Ingani, penned a letter to the Washington Post claiming that "health plans contine to strongly support reform." Just not the reform being debated in Congress, it now seems.