Financial crisis commission: One more time

And it won't be the last time. Congress goes through this exercise with regularity - about every 10 years lately.

Both the 20th century and the new millennium started as financial disasters. The panic of 1901, a New York Stock Exchange crash, was followed by another panic in 1907 with bank failures and a recession. We faced the dot-com bubble in 2001 and the Great Recession in 2007. (Before that the savings and loan crisis in 1989-90.)

Washington never learns.

So our ever proactive Congress enacted the Fraud Enforcement and Recovery Act of 2009, which created the Financial Crisis Inquiry Commission, a 10-member bi-partisan commission that went to work this week "to examine the causes, domestic and global, of the current financial and economic crisis in the United States," and issue a report by Dec. 15.

There are some talented people on this panel, and some potentially useful experts and witnesses. None of the panel holds a government job or political office. It is technically an arm of Congress and has no real power, but can be influential.

Patterned after the so-called 2002 "9/11 commission," it is worthwhile to compare the chairpersons of both to get a sense of the talent and politics. Nancy Pelosi and Harry Reid selected Phil Angelides, former California state treasurer, as chairman, and the Republicans selected former Congressman Bill Thomas, as vice chairman.

To begin with, California is a fiscal disaster with a deficit alone larger than the budgets of a majority of states. Nevertheless, Angelides got reelected as treasurer in 2002 and unbelievably ends up chairing a federal financial crisis inquiry commission! As to his "bi-partisan" demeanor, Angelides is the former chairman of the California Democrat Party, and was quoted as saying, "I believe President Bush is running deficits in Washington very deliberately. His plan is to finally run up so much debt that it inevitably creates pressure on the things that count ... " (And Obama?)

To sum up Thomas, who retired after 28 years in Congress: He was voted by congressional aides as No. 2 for brainiest, No. 3 for being a workhorse and No. 1 for losing his temper when people are unprepared.

On the other hand, the 9/11 Commission was chaired by Thomas Kean, former hugely popular governor of New Jersey, limited to two terms by the state constitution. Lee Hamilton, vice chairman, was a former congressman for 35 years. During this time he chaired far too many committees to mention. A known bipartisan, he has since been sought out to serve on many advisory boards. The sensibility skills of both Keane and Hamilton were widely recognized during the hearings. Ironically, the Bush White House had a better relationship with, and preferred dealing with Hamilton, a Democrat.

For this commission to be successful in gathering useful information from witnesses, Angelides and Thomas must demonstrate leadership skills, bi-partisanship and even-handedness. (Think of a lawyer taking a deposition. With no jury in attendance there is no need to make "political" points. Just laser in on getting all the facts so the client can be properly advised.)

It doesn't help matters that President Barack Obama just gave a stinging populist lecture to financial and banking institutions, like he also does when he attacks insurance companies, to gin up his popularity. Angelides, unfortunately, is also in that strident mold so typically Californian and anti-business - including Wall Street. He is reported to have said, "In 1929 people were throwing themselves out of windows; in 2009, they were lining up for bonuses." While most of us loathe the fact that these Wall Street wizards will get bonuses after nearly destroying the global economy, this commission needs to get these witnesses to be forthcoming, so the panel can get all the facts and expert advice available in order to provide Congress with insight for a possible legislative fix. As it is, Obama will try to push through remedial legislation before the commission's final report, so as to make partisan political points before the 2010 elections.

Congress cannot legislate away bonuses. It is the Wall Street bonus system that needs a reality check. (Even athletes get signing bonuses with mediocre records and playing for a losing team.) Capitalism has long been the engine for growth both in the United States and globally, and bonuses dangled in front of creative people, are like supercharged fuel in an engine.

Capitalism and democracy are the two things that define us as a nation, and are the messiest philosophical systems known to man - yet economists and political scientists haven't found anything better. To add to this puzzle economists have offered many theories about how financial crises develop and how to prevent them, but there is no consensus even among the experts.

This commission would be well served if it focused on the unhealthy relationship between Wall Street and Washington - particularly the Treasury Department - which could be renamed "Goldman Sachs South." As it is, our economy is captive to the investment banking and finance sector, which fosters an attitude that they are the profit making engine for our economy - not the manufacturing and technology sectors. So our best and brightest gravitate to Wall Street and the excitement of competing in the leveraged high stakes capital markets. We need to entice these creative people into commercial banking - bonuses included - to get loans to entrepreneurial businesses that create jobs. It's all about jobs.

The commission needs to examine how regulators can keep up with the wizardry of technology and financial innovation that may trigger another crisis.

The Democratic Congress will want to keep the focus off its lack of oversight, and Washington stupidity; and to make political points, focus on the greedy on Wall Street with their toxic loan derivatives. But the commission should investigate the sub-prime mortgage mess, along with Fannie Mae and Freddie Mac, the underlying causes for this disaster, and press for prosecutions at all levels - from the lowly buyers who committed fraud - clear up the financial food chain. It's a shame regulators and politicians can't be indicted for having done nothing to prevent this train wreck.

All this may make for dull reading. But this conduct is what fostered insanely inflated real estate values, the global financial collapse and, ultimately, the loss of jobs.