FCIC

Gary J.

“Shadow banking” refers to bank‐like financial activities that are conducted outside the traditional commercial banking system, many of which are unregulated or lightly regulated. Within this broad definition are investment banks, finance companies, money market funds, hedge funds, special purpose entities, and other vehicles that aggregate and hold financial assets.

The Financial Crisis Inquiry Commission will be holding hearings on Wednesday and Thursday focusing on “The Shadow Banking System” – the system of bank-like financial institutions and markets “operating outside of the regulatory structure for traditional banking activities.” The sessions will be at the Dirksen Senate Office Building in Washington and will be webcast live at FCIC.gov. 

Comptroller of the Currency John C. Dugan told the Financial Crisis Inquiry Commission today that a key factor in the financial crisis was poor credit underwriting, particularly by nonbank lenders that were subject to little or no regulation, and said action is needed. 

If you haven’t been watching the Financial Crisis Inquiry Commission hearings today, you missed a rather startling statement by Citigroup’s former CEO, Charles Prince: “Let me start by saying I’m sorry. I’m sorry the financial crisis has had such a devastating impact for our country. I’m sorry about the millions of people, average Americans, who lost their homes.

In addition to the SEC’s Mary Schapiro, whose testimony we just discussed, other federal officials, as well as state and local officials, will be speaking to the FCIC today about “Current Investigations into the Financial Crisis." The schedule:

Securities and Exchange Commission chair Mary L. Schapiro is speaking to the Financial Crisis Inquiry Commission today about the financial crisis.

The WilmerHale law firm has summarized today's FCIC hearings in a document entitled "Financial Crisis Inquiry Commission Holds First Public Hearing" and available at http://wilmerhaleupdates.com/ve/ZZuL80t9173W8275Chf.

Another interesting tidbit from today’s hearings by the Financial Crisis Inquiry Commission: When asked for his view as to whether the federal government would allow a big bank to fail today, Goldman Sachs head Lloyd Blankfein said no. “I think . . ., in the context in this environment, at some level, the government would intervene." He added that, “There would be something done” because of the “fragility” of the “system today, I believe. A year and a half ago, maybe not, a year and a half from now, maybe not."

Wow. Jamie Dimon of J.P. Morgan Chase just said at the FCIC hearing: "Somehow we just missed that home prices don't go up forever."