With the opening today of the federal government's official Financial Crisis Inquiry Commission, at which the CEOs of the four biggest banks — Goldman Sachs, Morgan Stanley, JPMorgan Chase, and Bank of America — will be the first star witnesses, the sport of asking people what questions should be posed to them has intensified.
The New York Times assembled a distinguished group of contributors, who pose an excellent list of questions.
The single best question, surprisingly, comes from David Stockman, Ronald Reagan's then-wunderkind Director of the Office of Management and Budget from 1981-1985, who was "taken to the woodshed" by the President after being quoted in an Atlantic article as saying, "None of us really understands what's going on with all these numbers," among other seemingly incredibly naive things. Stockman's question is:
"Without the Troubled Asset Relief Program, Wall Street banks would not have survived the shock to the financial system that occurred in September 2008. Nor would they have subsequently accrued large profits and bonus pools in 2009. Shouldn’t a substantial share of those bonus pools be sequestered on bank balance sheets for several years to increase the banks’ capital levels and shield taxpayers against another bailout?"
The rudest questions — because terse and right to the point — come from Simon Johnson of MIT:
1. Describe in detail the three worst investments your bank made in 2007 and 2008 — that is, those transactions on which you lost the most money. How much did the bank lose in each case?
2. What was the total compensation of each manager or executive supervising those three transactions — including yourself — in 2007 and 2008?
3. Are those executives still with your bank? What investments do they supervise today? How much will they be paid for 2009, including their bonuses?
But the best, lengthier elaboration of those terse questions comes from consultant Yves Smith. Read it all here.