By Ronald D. Orol, MarketWatch
"They should ask the bank CEOs why is it that taxpayers gave billions and you are lobbying against one of the most critical reforms, the creation of the CFPA," he said.
As U.S. bank bosses face scrutiny before the Washington inquiry commission, U.K. bank executives faced similar scrutiny on the other side of the Atlantic. Royal Bank of Scotland Chief Executive Stephen Hester told a parliamentary committee Tuesday that the bank's restructuring has progressed well ahead of his expectations, and that the government should be able to sell some of its shares profitably over the next few years. Read more about RBS chief's remarks.
Pecora Commission II?
House Speaker Nancy Pelosi, D-Calif., led the effort to create a panel examining the crisis early last year, when she suggested that Congress should create a panel made up of House lawmakers based on the Pecora Commission, which was established in 1932 to investigate the causes of the Wall Street crash of 1929.
Yet in the end, she backed a panel of ex-lawmakers and other private citizens, arguing that it was necessary for the American people to understand how the financial collapse came to happen so the United States could "avoid these problems in the future."
The lengthened timeline was modeled, in part after the 9/11 commission, which took over 18 months to produce a report on failures within the U.S. national-security apparatus in the wake of the Sept. 11, 2001 terrorist attacks.
Lawmakers decided to have an external review, in part, because the report it produces would be less partisan than one produced by senators or House members. However, critics argue that recommendations produced by an external committee are less likely to be considered for legislation than a study completed in the House or Senate.
Other key members of inquiry panel
One notable member of the inquiry commission is Brooksley Born, who oversaw the Commodity Futures Trading Commission between 1996 and 1999.
'You only get securities legislation that is significant when you have a major scandal. Lobbyists can block legislation in most normal times.'
John Coffee, Columbia Law School
Born is well known these days for warning Congress and the president during her tenure as CFTC chairwoman about the need to hike regulation of the over-the-counter derivatives market, which later contributed to the financial crisis -- in part by leading to the failure of giant insurer American International Group Inc. /zigman2/quotes/203700638/composite AIG -3.59% Her warnings were disregarded.
The inquiry panel has subpoena power, which observers say is critical to bring key government and banking officials to testify. Columbia's Coffee argues that the 1932 inquiry was successful at generating ideas for Depression-era legislation because the panel had subpoena power and a strong prosecutor with its chief counsel, Ferdinand Pecora.
"Pecora was the right person for the job because he was a strong, trained litigator," Coffee said. "You only get securities legislation that is significant when you have a major scandal. Lobbyists can block legislation in most normal times."
This time around, subpoena power is necessary, he added, in part because many influential individuals or groups will resist the commission's attempts to have them testify. Coffee said he expects Federal Reserve officials to resist requests from the panel.
On Thursday, the panel will drill regulators, including Federal Deposit Insurance Corp. Chairwoman Sheila Bair and Securities and Exchange Commission Chairwoman Mary Schapiro, with questions about how each agency failed to rein in the excesses during the buildup to the crisis that nearly led to the financial system's collapse.
Also, regulatory observers expect that in addition to Schapiro and Bair, other regulators will be asked or subpoenaed to testify before the commission, including former SEC Chairman Christopher Cox.
Cox was chairman of the agency in the years before the crisis, and has been criticized for failing to require investment banks registered as consolidated supervised entities with the agency to maintain sufficient capital standards. His predecessor, William Donaldson, led an effort in 2004 to impose loose SEC leverage limits for some of the biggest investment banks.