Financial Inquiry Panel to Become Law

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May 18, 2009, 7:32 pm

Financial Inquiry Panel to Become Law

By Kate Phillips

With final passage by the House on Monday night of a bill to expand enforcement against fraudulent financial practices, Democratic and Republican leaders will soon appoint a 10-member investigative panel with far-reaching authority to delve into the nation’s economic collapse.

The Senate last week had already unanimously passed the broader legislation, which would extend law enforcement powers against financial institutions and mortgage lenders, and would allocate more money for agencies to prosecute predatory lending in the mortgage industry. The White House has indicated that President Obama would sign the bill.

With both chambers facing a weeklong Memorial Day break, the House vote of 338 to 52, (43 did not) on Monday represented the beginning of a week in which Democratic leaders hope to forward several major pieces of legislation — including credit card protections for consumers — to President Obama’s desk for signing.

In the financial fraud bill, a lesser-known provision that began attracting more attention in recent weeks called for creation of the Financial Crisis Inquiry Commission, as support began swelling for an independent investigative body in the wake of public outrage over corporate executive bonuses and other compensation for employees at firms receiving federal bailouts.

With Speaker Nancy Pelosi’s support and that of leading senators on both sides of the aisle, the proposal that emerged mandates an independent panel — congressional lawmakers may not take part — with a budget of $5 million and subpoena power.

Lawmakers invoked the Sept. 11 commission as a recent example of a successful investigative commission; some reached back to the 1930s, when Ferdinand Pecora led a Senate inquiry during the Depression that summoned the most prominent Wall Street bankers before it.

Both panels led to significant reforms. Democratic leaders, and some Republicans, have described the financial panel’s jurisdiction in vast terms, saying they hoped it would investigate the root causes of the economic recession, from failing banks, to the mortgage meltdown, to risky investments like derivatives and the oversight (or lack thereof) by various agencies and government institutions.

The speaker appoints three members; Senate Majority Leader Harry Reid appoints three, and the minority leaders in both chambers appoint the remaining four members. The commission would be empaneled until December 2010, be expected to issue a report and appear before Congress afterward to discuss its findings and make any recommendations necessary.

(We previously explored the history of the Pecora hearings, complete with a slide show.)