Audit Notes: FCIC’s Missing Media, What Crisis?, L’Affaire AIG

What did we miss as press coverage of the Financial Crisis Inquiry Commission fizzled last week? On Friday, we pointed out the dearth of reporting on the state-regulators’ testimony.

But Greg Kaufman of The Nation was there and “wondering where the hell are the media?”

For the first day of panels, reporters were squeezed together in the back rows after filling more reserved seating than I’ve seen at any prior hearing during this session of Congress. But as I wrote previously, after the banksters had preened for the cameras and recited their testimony like four schoolboys BSing their way through an oral report, the press vanished, missing out on more candid and informative witnesses.

Yesterday, day two of the hearings, maybe a dozen reporters attended, fewer than were at for the press conference afterward.

He’s on the state-regs angle:

State attorneys general Lisa Madigan of Illinois and John Suthers of Colorado revealed that not only were their warnings about unscrupulous and predatory lending practices ignored but that their investigations were actively thwarted by federal regulators who in turn did nothing—under the guise of pre-emption.

Madigan also described how rate sheets reveal that Wall Street paid mortgage brokers and loan officers more for risky mortgages—with low teaser rates, pre-payment penalties, low or no documentation—because the consequent higher interest rate paid by the borrower would bring in more income. Wall Street wasn’t the victim of bad underwriting that it claims to be; indeed, it incentivized it.

Indeed. And more:

For starters, FDIC Chairman Sheila Bair testified that the credit-default swaps (CDS) market still poses a systemic threat and that even she can’t access CDS information to accurately assess financial institutions’ exposure.

Anybody want to do a story on that? Good for Kaufman and The Nation for actually covering this stuff.

Barry Ritholtz skewers The New York Times for this lame article which laughably blames the lack of tech IPOs in the last couple of years on things like Sarbanes-Oxley and executive-compensation “restrictions.”

As Ritholtz points out, the latter have absolutely nothing to do with tech companies. The former? Well, maybe the NYT should have mentioned the economic crisis before it swallowed the old Sox line. Here’s Ritholtz:

Even more amazingly, the author somehow fails to deploy so much as one single word regarding the total collapse in the markets, or the simple fact that investors have seen precisely zero gains over the past 11 years.

Quite bluntly, I am embarrassed that this is what passes for Journalism today.

The Wall Street Journal Dennis Berman takes a closer look at an aspect of the AIG backdoor bailout that’s been pretty well ignored: The idea that French companies would have been breaking their country’s law by taking a haircut on their distressed AIG credit-default swaps.

There were some factors to suggest a lower, negotiated price was in order. The securities’ market value had fallen significantly. And absent the extraordinary U.S. bailout, AIG would have been in bankruptcy, potentially leaving counterparties with zero…

“There is no clear-cut provision that would have prevented SocGen or Calyon” from negotiating a discount, said one of Paris’ top lawyers, who works for the banks.

Another Fed excuse debunked.

Andrew Ross Sorkin can’t make up his mind this morning in a tossed-off column on the too-big-to-fail problem. On first read, I thought the bottom of the column had gotten chopped off accidentally.

But no, it just doesn’t make much sense. Felix Salmon has all you need to read on what’s wrong with the column, tossing aside a weak Sorkin excuse for the benefits of TBTF banks and Salmon doesn’t hem and haw about the meat of the matter:

If you want to truly address the problem of TBTF banks, there’s only one way to do so: make them smaller. But the fact is that Jamie Dimon et al don’t need to worry about that happening any time soon. None of the financial regulations currently being debated would force them to shrink noticeably. Which means that they will continue to pose a massive risk to the global economic system for the foreseeable future.

It’s really simple. If they’re too big to fail, they’re too big to exist. Sheesh, even Alan Greenspan gets that.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.