The Failure of the Financial Crisis Inquiry Commission -- and of Facts.

We had high hopes indeed for the Financial Crisis Inquiry Commission -- the New Pecora Commission, if you will -- when it got underway this year. But Shahien Nasiripour reports that partisanship has riven the commission and that the panel's Republicans, who have been limiting their participation in the effort since August, will release a dissenting minority report before the FCIC's official product is due:

During a private commission meeting last week, all four Republicans voted in favor of banning the phrases "Wall Street" and "shadow banking" and the words "interconnection" and "deregulation" from the panel's final report, according to a person familiar with the matter and confirmed by Brooksley E. Born, one of the six commissioners who voted against the proposal.

Maybe "Wall Street" is inflammatory, but "interconnection"? "Deregulation"!?

There are clearly key political disagreements between Republicans and Democrats about what caused the financial crisis, but these members were supposed to set them aside. More than that, though, there is plenty of blame to go around, and though I put more weight on the private sector, any objective observer could identify a variety of government policies that helped drive the crisis, from monetary policy to long-term housing subsidies. Heck, blaming "deregulation" isn't even a partisan position -- much of the deregulation was driven by Democrats under the Clinton administration.

All of which is to say: There should have been room for agreement here or at least a single product that included dissenting views. Splitting the commission's efforts robs the public and policy-makers of a clear narrative of the crisis. According to Nasiripour, the Republicans' account essentially says the crisis was averted until Lehman Bros. was allowed to fail. While that decision catalyzed the crisis, it doesn't get to the heart of the decisions, going back decades, that set the stage for the housing bubble's collapse.

This is sad news. This panel was charged with figuring out what happened, not setting policy, and we should at least be able to agree on the facts. The troubling trend of epistemic closure marches on.

-- Tim Fernholz

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