Financial crisis is 'like a Tsunami'

"The list of regulatory mistakes and misjudgments is long, and the cost to taxpayers and our economy is staggering," Chairman Henry Waxman said at the Committee on Oversight and Government Reform hearing on the financial crisis and the role of federal regulators.

Testifying was Alan Greenspan, former Chairman of the Federal Reserve System, Christopher Cox, Chairman of the Securities and Exchange Commission, and John Snow, former Secretary of the Treasury under President George W. Bush.

Greenspan highlighted that in 2005 he had raised concerns that the protracted period of underpricing of risk would have dire consequences. Greenspan went on to say that even though he raised concerns about possible financial problems, he could not have imagined it to be as broad as it was. "The financial landscape that will greet the end of the crisis will be far different from the one that entered it little more than a year ago. Investors will be exceptionally cautious. Structured investment vehicles and other exotic financial instruments are not now, and are unlikely to ever find willing investors. Subprime mortgages will also be on that list, this market for which has virtually disappeared," Greenspan said.

Greenspan flip-flopped on issues surrounding regulations in banking institutions and what he had previously stated. In previous interviews, Greenspan had stated that he believed it should be left up to the banks to regulate and not the government. Waxman asked Greenspan if he still thought it was a good idea to let the banks regulate instead of having the government step in. "I was partially wrong with saying that banks should regulate themselves. The problem I'm having is that I still don't understand fully how this crisis happened and why it happened. When the facts change, I will begin to change my view," Greenspan said, commenting on Rep. Waxman's questioning.

Cox said that he thinks one of the reasons why the crisis happened was because a lot had changed since 1999 and the time of the Clinton Administration. "Credit default swaps were just emerging in 1999, but now they are between 10 to 15 percent of the financial institutions, and one of the main issues surrounding the financial crisis," Cox said.

Snow believes that if Congress would have done more in 2005, the financial crisis may be completely different. He said that with a "stronger regulatory set in place back then, and if our Government would have gotten more involved with the issues surrounding credit default swaps, taxpayers would be looking at the economy differently today."

One statement all three panelists and Chairman Waxman agreed on was that the crisis will pass and America will reemerge with a far sounder financial system. Chairman Waxman concluded with the statement that he hopes to further these investigations, and find a "clear cut reason why all of this happened."

Electrocutions in Iraq: Inspector General and Congress play the blame game

An Inspector General interim report released on July 28 found that the Department of Defense investigation of the accidental electrocution of Staff Sgt. Ryan Maseth revealed that Kellog, Brown, and Root (KBR) did not know about the electrical hazards prior to Maseth’s death. However, at a House Committee on Oversight and Government Reform hearing, Chairman Henry Waxman (D-Cali.) disclosed documents obtained by the Committee which show that a soldier notified KBR of the electrical problems well before Maseth’s death.

Staff Sgt. Justin Hummer, who was the previous tenant of Maseth’s room at the Radwaniyah Palace Complex in Baghdad, filed a work order on July 8, 2007, that states, “Pipes have voltage, get shocked in shower,” according to a copy of the report provided by the Committee. Also, in a statement signed by Maseth on June 6, 2008, six months before his death in January, he claimed, “On at least one of these occasions [when he was shocked in the shower] I have to use a wooden handle to turn off the shower nozzle because the electrical current was so strong.”

Inspector General of the Department of Defense Gordon Heddell said the Department of Defense is investigating 15 deaths from electrocutions. The deaths fall into two categories: soldiers who died from contact with power lines and those who died from ungrounded and/or faulty equipment. The first death occurred back in 2003, according to Heddell. Chairman Waxman asked why it took four years for the Department of Defense to begin overseeing KBR.

According to Thomas Bruni, Theater Engineering and Construction Manager for KBR, KBR was not responsible for maintaining the facility where Maseth died because it was a “Level B” facility. There are two types of contracts in these facilities: “Level A”, which allows KBR to perform maintenance and repairs without orders from the Army, and “Level B”, which restricts KBR to only performing repairs with specific Army instruction.

When pressed numerous times by Rep Tom Davis (R-Va.) to pinpoint the organization responsible, Bruni hesitantly admitted the Army was responsible. Rep. Stephen Lynch (D-Mass.) said KBR should have pulled the plug on the faulty equipment as soon as it found out. Lynch said KBR did not have to repair it, but should have ensured that no soldiers used it.

Rice may be subpoenaed by Congress

Rep. Henry Waxman (D-Calif.) , chair of the House Oversight and Government Reform Committee, discussed the influence his committee has on public policy in the United States at the National Press Club. Waxman discussed a number of topics including proceedings involving tobacco executives, steroids in Major League Baseball, Iraq, and Hurricane Katrina. Waxman said his committee is able to enact changes without passing laws due to its visible role in many aspects of American life.

Waxman emphasized the importance of congressional oversight and criticized Republicans for taking a partisan position on the topic. He said the Republican controlled committee investigated numerous trivial topics during the Clinton administration and failed to analyze large profile events during the first six years of Pres. George W. Bush’s administration. Waxman said the committee’s purpose is to monitor government decisions and to make government work for people, not to enhance party politics.

An example given by Waxman of the committee’s failure to better the lives of Americans involved the presence of formaldehyde in the FEMA trailers provided to those without homes following Hurricane Katrina. Waxman accused FEMA of “sitting on its hands” and ignoring its obligations to help those in need while criticizing the Oversight and Government Reform Committee for allowing such events to occur. He stated that FEMA failed to help those in need and that the committee’s indifference allowed FEMA to be run inefficiently.

When asked if Secretary of State Condoleezza Rice would be subpoenaed by the committee to discuss when the Bush administration realized that Iraq had no nuclear weapons prior to invasion, Waxman said “maybe” and that the idea is under discussion. Waxman also suggested that the success of the Iraqi insurgency can be attributed in part to the American ambassador’s decision to distribute $8.8 billion to Iraqis without any form of accountability.