Congress Begins Hearings, Will Look for Blame

Henry Waxman (D-CA), chairman of the House Committee on Oversight and Government Reform, announced late last week that his committee will hold five hearings in October on the financial meltdown, signaling the start of a Congressional witch hunt to determine who is most to blame for the mortgage and financial ills that now threaten the broader U.S. economy. The announcement comes after previously-scheduled hearings, such as a hearing this Monday afternoon that looks to examine the “regulatory mistakes and financial excesses” that may have led to the file for bankruptcy by Lehman Brothers Holdings, Inc. in September. The committee also scheduled a hearing for Tuesday over the $85 billion bailout of American International Group, Inc. (AIG). “This financial crisis has shaken the global economy,” Waxman said in a statement.  “Congress cannot wait until a new administration arrives in January to examine what went wrong and who should be held accountable.” The three additional hearings announced last week include a look at regulation of hedge funds, the role of the credit rating agencies in enabling the current financial mess, and the role federal regulators played in making all of this happen. Waxman has invited five fund managers, all of whome who earned over $1 billion last year, to testify about the role of hedge funds in the financial markets and their regulatory and tax status. The CEOs of the nation’s three largest credit rating agencies have been invited to discuss their part in the financial excesses on Wall Street, as well. And former Federal Reserve chairman Alan Greenspan, former Treasury cecretary John Snow, and current SEC chairman Christopher Cox have been asked to testify in regards to the responsibility of federal regulators in the financial crisis. “Lax oversight and reckless investments on Wall Street are causing massive disruption throughout our economy,” said Waxman in a statement. “Our hearings will examine what went wrong and who should be held to account.” Inquiries into Lehman Brothers are clearly just the beginning of what proves to be a long process on Capitol Hill to ferret out players and blame. Waxman and his committee are out to hold those deserving accountable — although we’re pretty sure the blame will be felt far and wide when all is said and done. Lehman Brothers, for its part, headed into the largest corporate bankruptcy in September after federal regulators declined to bail the company out; Lehman was one of the largest Wall Street investment banks in the mortgage space. The Wall Street firm was done in by the very mortgages that helped it climb to new heights in recent years and in the wake of its failure a spate of accusations have emerged pointing the finger at JP Morgan Chase & Co. (JPM) as a potential cause of the investment bank’s demise. Disclosure: The author held no relevant positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade. Editor’s note: To contact the reporter on this story, email [email protected].

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