THE FINANCIAL TRUTH COMMISSION / THE NEW YORK TIMES EDITORIAL ( SUGGESTED READING )

July 29, 2009

Editorial

The Financial Truth Commission

Congress has pledged to reform the banking system, but too often over the past year lawmakers have chosen instead to shield the financial industry, a big campaign contributor, from accountability.

So the public has every right to ask whether the newly formed Financial Crisis Inquiry Commission — created by Congress to investigate the meltdown — can be counted on to put the public interest ahead of political loyalties, professional ties and ideological biases.

The men and women on the panel are accomplished in their fields — business, law, economics and academia — and many have past government experience. They have been chosen to perform a service that is crucial to restoring trust in the markets and in the government; their findings will also inform regulatory reform efforts.

The 10 members — six chosen by the Democratic leadership, four by the Republican leadership — also have long partisan histories and at least one has strong ties to the financial industry.

The Democratic chairman, Phil Angelides, a former California state treasurer, has given, together with his wife, nearly $327,000 to Democratic candidates over the past two decades, according to the Center for Responsive Politics. The vice chairman, former Representative Bill Thomas, a Republican, received $1.6 million in campaign contributions from financial, insurance and real estate interests during his nearly two decades on Capitol Hill. He is now an adviser to a law firm that represents banking and financial-services clients.

All of this suggests that the commission’s efforts bear close monitoring. Here are some early indicators to watch to see whether they are rising to the occasion.

CHOOSING A LEAD INVESTIGATOR It is imperative that Mr. Angelides and Mr. Thomas agree on a strong investigator — with a proven record of exposing deceptive or fraudulent activities — to serve as the commission’s director. The director must also be given the resources to assemble a strong team of experts and have the commission’s full support to press the investigation.

The law allows the commission to issue subpoenas if the chairman and vice chairman agree or if a majority of the panel agrees, as long as the majority includes at least one Republican. If subpoenas are inhibited by partisan votes, the commission will be hamstrung.

STANDING UP TO THE BANKS The law requires the commission to investigate each failure of a major financial institution during the crisis, such as Lehman Brothers, and each major failure that was averted by assistance from the Treasury. Some banks may try to argue that although they received assistance, they were never in danger of failure, and thus are off limits to commission investigators. But all of the major banks are implicated in the crisis, and none should be outside the commission’s purview.

STANDING UP TO THE GOVERNMENT The law requires government agencies and departments to furnish information to the commission upon request. Even though much of what the panel will investigate happened under President Bush, the executive branch tends to guard its secrets. President Obama has already reserved the right to assert executive privilege. The commission must be willing, if necessary, to fight for access to documents.

The commission is expected to hold its first meeting around Labor Day. As its work unfolds, there will be more benchmarks of success, or lack thereof. For now, it is important that it gets started with the right staff and a commitment to use its powers to the fullest.

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