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On the report of the Angelides commission

by Robert Teitelman | Published January 31, 2011 at 2:22 PM

The report of the Financial Crisis Inquiry Commission, festooned with its various Republican dissents, has receded into the past faster than this year's Davos meeting. The two phenomenon actually share quite a lot. Both represent the triumph of politics and self-promotion over substance. Both found themselves outstripped by events almost as soon as they began. And both were fueled by a kind of overheated rationalism that crumbles against the ferocity of real events - from another bubble building or contagious revolutions across the Middle East. Let's be up front here: I have not yet read the Financial Crisis Inquiry Commission report (didn't get the invitation to the secret bunker to read the text early, as described by Joe Nocera in The New York Times) nor was I fondling the shrimp onsite at Davos. The press on the report has not been kind (and snarky jibes about Davos have become something of a genre, increasingly from folks who actually attend: Marketplace this morning quoted Nouriel Roubini describing Davos as a sort of G0, as opposed to G-20). Nocera, whose book with Bethany McLean, "All the Devils Are Here," represented an earlier version of this report, tries to be kind, but ends up damning the effort. After comparing the crisis to the Dutch Tulipmania, Nocera offers, "To have so many people acting so foolishly required the same kind of delusion, only this time around, it was about housing prices. Getting to the bottom of this requires less the skills of an investigator than the talents of a psychologist."

That's exactly the point. The commission set itself up on the Pecora model, intent on finding smoking guns, like, to cite another investigation, the Henry Blodget (who blogged from Davos last week) e-mails that Eliot Spitzer unearthed in analystgate. Apparently, the commission found no blatant admissions of maleficent forethought and thus ended up repeating what several dozen books written on the crisis have already discussed in detail: that it was a broad, multicausal crisis with delusion, as opposed to criminality, at its heart. In fact, it's worth saying one last time what's been readily apparent for over a year: The commission was never meant to replicate the Pecora hearings; it was designed for obsolescence. The commission was set up and structured so that it would report long after the requisite legislation, in this case Dodd-Frank, was passed. The Pecora hearings represented an attempt to shape public opinion to provide momentum for legislation; the commission had no link to remedies, and its public role seems to have been to show that something was being done. (This continues: Dodd-Frank mandates that the head of the Financial Stability Oversight Board, Tim Geithner, do a report on basic questions like financial institution size and complexity, which, of course, is ass backwards, like writing a paper, then concocting the bibliography.)

Throughout the affair, the panel's chairman, Phil Angelides, was the circus master with a gift for the obvious. Last week, he came through again. "This was an avoidable crisis," he declared in the press conference for the report. Well, yes. But even some of those who argued for a strong form of mass delusion would agree that human agency -- better regulation, a little less pump priming at the Federal Reserve, a little more sensitivity to global imbalances -- might have done the trick. But necessary steps were not taken, and because they were not, a kind of popular choice between criminality and determinism arose. If the crisis was avoidable, failure to act must represent at the least, a breach of trust, and possibly a crime, thus the search for warm guns. But a crude version of determinism also emerges as a kind of countervailing response: Nobody could have done anything different than what they actually did -- a process that closely resembles fate. If that's the case, then all the reports, books and reportage in the world are just so much dust in the wind. In fact, there is a broad middle ground here where you can believe that the crisis was not inevitable, just difficult to discern.

The deeper problem with Angelides' notion of avoidable crisis is that, at any one moment, there are a hundred avoidable crises unfolding beneath the surface: Who saw Tunisia or Egypt? What will happen in emerging markets or China? And my favorite: If the crisis was avoidable, who on the commission, Angelides included, saw it coming? The fact is, there are crises we can catch, others we will miss. What he does not say, is that while the financial crisis may have been avoidable, it was extremely difficult to predict in its depth, in its systemic implications and in its timing. As a society we reached a state of mind that only in retrospect seems delusional, between reasonably good current times and the possibility that the future might be bleak. We saw the future through a rosy present and discounted disaster.

I will now indulge in my own statement of the obvious: The future remains uncertain and cannot be fully penetrated, no matter your credentials or expertise. This is reality that renders gabfests like Davos and wrinkle-browed panels like the crisis commission faintly absurd and profoundly temporal. No one really cares about what happened back then; they just want to know what's going to occur in the future. And if the past tells us anything, all the power, all the expertise, all the wealth and its trappings not only won't help us out very much but may well be a distraction from seeing clearly. - Robert Teitelman

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