September 18, 2009 Delahunt, lawmakers probe financial meltdown Play video

(NECN: Peter Howe, Boston) - What's being called the 9/11 Commission of last year's financial meltdown, spurred in large part by a New England congressman, launched its work this week.

With most observers calling the key turning point from financial trouble to crisis September 15, 2008, the day Lehman Brothers filed a $600 billion bankruptcy, it may come to be known as the 9/15 Commission.

Rep. Bill Delahunt (D-Massachusetts) co-sponsored legislation to create the 10-member Financial Crisis Inquiry Panel and got it attached to a mortgage-fraud bill Congress enacted last spring. The panel, led by California congressman Phil Angelides, a Democrat, and Bill Thomas, a Republican former Ways and Means Committee chairman, is armed with congressional subpoena power and a $5 million budget. It held its first meeting Thursday.

In an interview Friday, Delahunt said the goal is, "Let's do a thoughtful discussion. Let's not become involved in an exchange of sound bites. I thought it was vital that we do a deliberative, non-partisan, thoughtful review of how we got to this point in time where we're dealing with an economic challenge that is unparalleled since the Great Depression. Because there are lessons to be learned for sure.''

Likely targets for questioning: government regulators, the Federal Reserve, and executives of companies at the heart of the meltdown like Fannie Mae, Freddie Mac, American International Group, Citigroup, and Lehman Brothers.

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panel's final report due in December 2010, deliberately after the next congressional elections. "We couldn't do it in Congress because it would obviously provoke strong partisan passions,'' Delahunt said. However, the commission may seek to release some findings ahead of time in order to help shape financial-regulatory overhaul legislation that President Obama and Rep. Barney Frank (D-Massachusetts), chairman of the House Financial Services Committee, hope to get passed by the end of this year.

Cornelius K. Hurley, director of Boston University's Morin Center for Banking Law and a former general counsel to the Fed, says this commission can take the long view of what happened. "Everybody has their own opinion: It was the fault of the homeowners. It was the fault of the Fed. It was the fault of the banking regulators. It was the fault of the shadow-banking system [of non-regulated lenders]. Everybody's got their pet theory.''

What Hurley calls the key difference for the financial crisis commission: Power to make people tell the truth, through hours of sworn testimony. "It has subpoena power, and I wouldn't underestimate that for a moment. What it has the ability to do is gather everything that's been investigated so far, supplement that with truth, under oath, and come up with a conclusion and recommendations.'' Hurley said he especially looks forward to seeing whether the panel concludes the financial collapse reflected a failure of government regulatory policy, or a failure of specific institutions charged with protecting the smooth functioning of the nation's banking system and economic institutions.

Delahunt said: "We cannot withstand another economic meltdown like the one we experienced. We have to avoid that.''

Howe: On one level, we largely know what happened last September. A society-wide bubble of real-estate speculation that had built up for years and infected the whole economy finally burst, catastrophically. But just as the 9/11 Commission showed why intelligence agencies had failed to ask the right questions and connect the dots before the terrorist attacks of Sept. 11, hopefully the 9/15 Commission can show why financial regulators failed to ask the right questions and connect the dots before the economic meltdown that hit last September.