US panel to delve deeper into causes of financial meltdown

Leading figures blamed for credit crisis to be hauled over the coals

The men often painted as the biggest villains of the credit crisis will be hauled before a panel investigating the causes of the financial meltdown this week.

But as Alan Greenspan, the former chairman of the Federal Reserve, and Robert Rubin and Chuck Prince from the bailed-out bank Citigroup prepare to face questions, doubts are setting in that the inquiry commission will achieve more than sporadic moments of political theatre.

Even its leaders have taken to complaining that the commission is underfunded and overstretched for the task of rooting out all the causes of the crisis. And it now appears that Congress could pass a package of financial reforms by the summer, months before the commission puts out its report and recommendations for avoiding a repeat of the meltdown.

The second hearings of the Financial Crisis Inquiry Commission (FCIC) begin tomorrow with testimony from Mr Greenspan, who is accused both of holding US interest rates so low for so long in the early part of last decade that it led to a dangerous bubble in the housing, and of fighting against additional regulation of lenders that might have prevented the collapse in underwriting standards.

In 2008, the bewildered-sounding economist had admitted to a Congressional panel that he had found a "flaw" in his world view, which had assumed that banks do not take excessive risks.

On Thursday, there will be a joint appearance by Mr Rubin, whose long career has included stints at the summit of Wall Street banks and in government at the US Treasury, and Mr Prince, who was chief executive as Citigroup as it invested more and more heavily in the mortgage derivatives whose collapse took it to the brink of bankruptcy in 2008. Mr Prince received a pay-off worth more than $10m when he was asked to leave the firm in the wake of multi-billion dollar losses at the end of 2007.

There will also be testimony this week from the former bosses of Fannie Mae and Freddie Mac, the two government-sponsored housing finance giants which are blamed for promoting home ownership among groups that ultimately could not afford mortgages.

Phil Angelides, the California Democrat who chairs the FCIC, has taken to comparing its budget – $8m – to the $38m that a court-appointed examiner spent to investigate the collapse of Lehman Brothers. That examiner's report uncovered for the first time the accounting trickery that the bank used to hide the scale of its leverage. With a fraction of the budget, Mr Angelides is expected to cover the activities of all the Wall Street banks – and more besides.

Modelled on the bipartisan 9/11 Commission, the FCIC has been asked to report on 22 factors in the onset of the crisis, from fraud and due diligence failings to monetary policy and regulation. Recommendations are due on the President's desk by 15 December, and the commission has already suffered delays because it took longer than expected to hire its staff of 50. Reports surfaced yesterday that the commission is split on whether to publish interim findings so as to influence the passage of financial reform, currently the subject of a fierce partisan battle in Congress.

The work of the commission is attracting intense scrutiny, but hopes are fading that it will blaze the same sort of trail as another inquiry from a previous era to which it was initially compared: the Pecora commission, carried out by Congress in the wake of the 1929 stock market crash and subsequent Great Depression. That commission hauled Wall Street executives over the coals, extracted confessions of outrageous wrongdoing and demanded reforms that shaped finance for the next half-century.

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