Financial Crisis Panel To Scrutinize Wachovia
A panel investigating the cause of the financial crisis turns its attention on Wachovia today. Former CEO Bob Steel has been summoned to appear before the Financial Crisis Inquiry Commission in Washington. "Hot seat" is not an exaggeration when it comes to the witness stand where Bob Steel will testify today in Washington. Here's just a taste of the questioning directed at Wall Street's heaviest hitters at the first meeting of the Financial Crisis Inquiry Commission in January: "What are the two most significant instances of bad behavior in which your firm engaged and for which you would apologize?" demanded commission chairman Phil Angelides, speaking to the CEO of Goldman Sachs. Bank of America CEO Bryan Moynihan was at that hearing, too. But today is the first time the commission will turn its scrutiny on Wachovia. The topic of the hearing is how the government handled banks it deemed "Too Big to Fail" during the financial crisis. "Far from really dealing with the problem of too big to fail, we made it worse by making these banks even bigger," says Lawrence Baxter, a law professor at Duke University and a former Wachovia executive. (He left the bank in 2006.) Baxter says the hurried marriage of Wachovia to Wells Fargo in the throes of crisis gets to the heart of the "too big to fail" issue. "It was a very messy deal in which first it was with Citibank and then after that it was with Wells Fargo and there was litigation spawned from it and so on," says Baxter. "All of which borne out of the realization that if a company the scale of Wachovia were to fail there would be huge consequences." The Financial Crisis Inquiry Commission will also hear from the former CEO of Lehman Brothers, Dick Fuld, whose bank was allowed to fail. The ensuing chaos in the markets prompted the government to aggressively court a merger for Wachovia and later to distribute billions of dollars in "bailout funds" to the biggest banks. The Chairman of the Federal Reserve and the head of the FDIC will both testify for the Financial Crisis Inquiry Commission tomorrow. The commission will issue a report to Congress and the President by mid-December.