In 9 days time the US Financial Crisis Inquiry Commission begins hearing what senior bankers have to say about the causes of the crisis.

I will be keeping a close eye on the Commission’s work and posting background and analysis here on the APEsphere blog. Let me explain why.

The FCIC in a nutshell

Phil Angelides (pictured above), the man appointed to chair the commission, last September defined the FCIC’s mission as being “to conduct a full and fair investigation in the best interests of the nation—pursuing the truth, uncovering the facts, and providing an unbiased, historical accounting of what brought our financial system and our economy to its knees.”

The Commission’s 10 members — six chosen by Democrats, 4 by Republicans – have until December to report back to Congress. They have the power to subpoena witnesses, and to refer individuals for criminal investigation and prosecution.

Who cares?

The Commission is investigating the worst financial crisis since the Great Depression. The Global Financial Crisis (GFC) has produced a longer term Global Economic Crisis that has impacted the everyday lives of real people around the world to an extraordinarily severe degree:

• it has increased the number of people around the world in chronic hunger and poverty by over 100 million, to 1.02 billion;
• widespread conflict and state fragility is being anticipated and has already begun to be realised;
• between 200,000 and 400,000 more babies could die each year between now and 2015 if the crisis persists;
• the crisis has undermined the will to make progress on combating climate change, thus contributing to the ecological, social and political risks associated with that phenomenon. Earlier predictions that the recession would reduce emissions have proved ill-founded;
• an increase in global unemployment by between 29 million and 59 million people;
• one in eight US mortgage borrowers is behind on mortgage payments or facing foreclosure at the end of the second quarter 2009;
• pensioners relying on developed country stock market returns for their retirement incomes have seen their savings fall by 45%. The links between the crisis and retirement incomes are explained here.

No wonder countries are marking an upward trend in stress-related mental illness and crime.

What could this Commission achieve?

We want to ensure that this crisis cannot be repeated. A thorough public investigation of the causes can help channel anger into the political will to undertake effective regulatory reform, including the dismantling of powerful institutions known to be “too big to fail”. While regulatory reform is already underway in Washington and elsewhere, further and more profound reform is a potential outcome of this Commission’s work.

The committee set up in 1934 to investigate the causes of the 1929 crash and the Great Depression that followed it signals what is possible. Once Ferdinand Pecora became the committee’s lead investigator and began cross-examining Wall Street’s leaders the ground was laid for reforms that included the establishment of the Securities and Exchange Commission and the Glass-Steagall Act that separated staid commercial banking from risk-fuelled investment banking – reforms that kept Wall Street out of systemic trouble for forty years.

But the FCIC could achieve much more than this, and needs to do so.

When South Africa emerged from apartheid, a Truth and Reconciliation Commission was established to consign to history the egregious, state-supported human rights violations that were committed against a large section of its people.

In 1995, after decades of the systematic abuse of economic, social and political rights known as apartheid, the South African government set up a Truth and Reconciliation Commission to give ordinary people an opportunity to air their grievances against a system that institutionalized racial segregation and discrimination in all aspects of life.

According to the then Minister of Justice Dullah Omar, "... a commission is a necessary exercise to enable South Africans to come to terms with their past on a morally accepted basis and to advance the cause of reconciliation."

The TRC was a forum in which anyone who felt that he or she was a victim of the system could be heard. Those on both sides who had done wrong could also give testimony and request amnesty.
Now, political establishments around the world have been shown to have placed the interests of a powerful financial minority above those of the majority.

Dead babies will never learn to speak, and how do you give voice to the 100 million starving? But what the FCIC can do is provide public, open and free discussion of the causes of the crisis, confront those responsible with those they have impacted, raise the question of prosecution and possible amnesty rather than assume as now a cosy settlement between corporations and regulators.

How else do governments and financial institutions expect the results of egregious risk taking at great cost to communities and individuals to be put behind us? How else will they lay to rest the cynicism, mistrust of institutions and raw anger that that behaviour has garnered?
 

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