In April 2009, the Milken Institute think tank published a 526-page hardcover tome called The Rise and Fall of the U.S. Mortgage and Credit Markets. In scholarly detail, it describes how the financial markets heated up for most of this decade and then melted down in 2008. Amazon lists a couple of dozen other books that explain how Wall Street wrecked America. That's on top of saturated coverage of the unfolding crisis by the Wall Street Journal, New York Times, and dozens of other news organizations, economists, and historians. And of course Ben Bernanke, Tim Geithner, and their predecessors have had their say via endless hours of congressional hearings.
[Get ready for the miraculous hollow economy!]
But apparently the financial crisis is still something of a mystery, so the government is going to get to the bottom of it all through an official report due to be published in December 2010. You might think that's a typo, and the report is really due in 2009, which at least would be the same year as every other report on the Great Recession. But we're not talking about a tweet here. We're talking about some serious research that's going to require thousands of footnotes in order to refer to all the other reports that came first.
This eagerly anticipated report will be the work of the Financial Crisis Inquiry Commission, a panel of six Democrats and four Republicans that Congress appointed in July. Most are former politicians. They will start holding hearings this fall. By the time the group's conclusions arrive in 2010, the FCIC will have worked as long as the 9/11 Commission, which combed through 20 years of secret intelligence pried out of agencies loath to cooperate. The FCIC won't have to deal with much classified information, but it will have to master some awful acronyms, like TARP, TALF, and P-PIP. By D-Day in December 2010, it will also have worked longer than the 1932 Pecora Commission that investigated the 1929 stock market crash, savaged the banking industry, and led to the most sweeping financial reforms in U.S. history. But, of course, communication and information-gathering was so much faster back then, allowing government panels to streamline their work.
[See how Obama overload threatens the economy.]
The purpose of such blue-ribbon panels is often to create a set of guidelines for new laws meant to prevent the problem under study from happening again. But the Obama administration has already proposed its own thorough set of financial reforms, and Obama says he wants action this year. If he waited until the FCIC cleared its throat, Congress wouldn't pass anything until 2011, three years after the financial system began to collapse.
So what's the point? The chairman of the panel, former California Treasurer Phil Angelides, has said that financial reform can move in stages, suggesting there could be some new financial rules this year, then a few more new rules in 2011. But that's not how Washington works. When politicians take on a special interest as entrenched, well connected, and rich as the financial industry, they usually get one shot to shake things up. Keeping voters focused on the problem—and angry, if possible—is key, lest pressure fade and business-as-usual return. That's why Obama is pressing for all-at-once healthcare reform in the shortest time window possible.
Maybe we should just yawn and say OK, fine, what's one more government panel producing one more paperbound doorstop? Except that Obama has a big-government problem. The main barrier to stronger support for his healthcare reform is fear of mushrooming government that knows no bounds. Same with new financial regulations, which are desperately needed yet face skepticism even from moderates who wonder if Obama wants to run the entire economy from Washington. Obama has proposed dozens of new government agencies and over $1 trillion in new spending, while cutting virtually nothing out of the federal bureaucracy.
With a modest $8 million budget (yes, million, not billion, for once) the FCIC is a puny part of a massive federal apparatus. Still, Obama should show the pragmatism he's supposedly known for and either put the panel to good use or shut it down. The financial investigators should either do some crack research at Internet speed and issue findings this year, while they still might be relevant, or fold up their tent and let millions of pages of private-sector analysis state the case. Then we won't have to ignore the report when it comes out just in time for the holidays next year.