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Financial Crisis Inquiry Commission to Wall Street: Save Those Documents

The Financial Crisis Inquiry Commission (FCIC) is acting under a legal mandate to investigate the “causes of the collapse of each major financial institution” that failed or received a government bailout in the panicked days of last fall — and the FCIC intends to act quickly, Chairman Phil Angelides said today.

By the end of October, Angelides said at this morning’s first FCIC meeting, the panel will “be sending letters to companies referenced in the statute to make sure records are preserved.”

The FCIC was given a $5 million budget as well as 22 separate financial issues and products to investigate as possible causes of the economic meltdown. (A list of all 22 is available after the jump.) Angelides said the panel soon would “boil those [22] down” and give the public a sense of in what order they would tackle.

As it moves forward — potentially striking fear in the hearts of any bank executive who’s considered turning on the shredder — the FCIC plans to open a full-time Washington office and hire more staff members. The panel’s senior aide has already started work: Thomas Greene, a 25-year veteran of the California attorney general’s office and leader of the civil prosecution team that took on Enron.

The FCIC’s 22 areas of focus cover the horizon of financial practices that have come under fire for helping to encourage unsustainable risk, subprime mortgage lending, and the securitization of just about everything under the sun. Indeed, its biggest obstacle in leaving no stone unturned may not be the political ties of its members or Congress’ uncertain regulatory reform effort, but rather the rules for issuing subpoenas.

The law that created the FCIC, which is split 6 to 4 in favor of Democratic-named members, specifies that subpoenas must be approved by at least one GOP-appointed member in order to be valid. Thus, Republicans could theoretically stave off a summons to a former Bush administration official by withholding their votes and pressing for private discussions rather than public testimony.

The bipartisan 9/11 Commission, which was evenly matched between Democrats and Republicans, accepted private, time-constrained interviews with former President George W. Bush and Vice President Dick Cheney, while former President Clinton and Vice President Al Gore agreed to take questions in public without a time limit.

The FCIC’s mission, according to the statute that created it, is “to examine the causes of the current financial and economic crisis in the United States, specifically the role of”:

(A) fraud and abuse in the financial sector, including fraud and abuse towards consumers in the mortgage sector;

(B) Federal and State financial regulators, including the extent to which they enforced, or failed to enforce statutory, regulatory, or supervisory requirements;

(C) the global imbalance of savings, international capital flows, and fiscal imbalances of various governments;

(D) monetary policy and the availability and terms of credit;

(E) accounting practices, including, mark-to-market and fair value rules, and treatment of off-balance sheet vehicles;

(F) tax treatment of financial products and investments;

(G) capital requirements and regulations on leverage and liquidity, including the capital structures of regulated and non-regulated financial entities;

(H) credit rating agencies in the financial system, including, reliance on credit ratings by financial institutions and Federal financial regulators, the use of credit ratings in financial regulation, and the use of credit ratings in the securitization markets;

(I) lending practices and securitization, including the originate-to-distribute model for extending credit and transferring risk;

(J) affiliations between insured depository institutions and securities, insurance, and other types of nonbanking companies;

(K) the concept that certain institutions are `too-big-to-fail’ and its impact on market expectations;

(L) corporate governance, including the impact of company conversions from partnerships to corporations;

(M) compensation structures;

(N) changes in compensation for employees of financial companies, as compared to compensation for others with similar skill sets in the labor market;

(O) the legal and regulatory structure of the United States housing market;

(P) derivatives and unregulated financial products and practices, including credit default swaps;

(Q) short-selling;

(R) financial institution reliance on numerical models, including risk models and credit ratings;

(S) the legal and regulatory structure governing financial institutions, including the extent to which the structure creates the opportunity for financial institutions to engage in regulatory arbitrage;

(T) the legal and regulatory structure governing investor and mortgagor protection;

(U) financial institutions and government-sponsored enterprises; and

(V) the quality of due diligence undertaken by financial institutions

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