Chamber Of Commerce Denounces Report That Undermines Its Partisan Interests

January 28, 2011 10:53 am ET

Yesterday, the Financial Crisis Inquiry Commission released its final report on the causes of the financial crisis. The report concluded that recklessness and greed on the part of Wall Street, bad analysis by credit rating agencies, and a failure on the part of government regulators created an otherwise avoidable crisis. Almost immediately, the U.S. Chamber of Commerce attacked the report's conclusion. In a press release, the Chamber slammed the commission's report, writing, "The failure of this commission to do its job is more bad news for workers and businesses who depend on robust, well-regulated, world-leading capital markets to fund growth and job creation." Of course, the commission did exactly what it was tasked to do. The Chamber — which is paid to shill for Wall Street — just doesn't want to accept the facts. Not only do the Chamber's complaints about the Commission hold no water, but time and time again, the Chamber has been at the very center of problems that the commission concluded was responsible for the crisis.

CHAMBER COMPLAINT: Financial Crisis Report Doesn't Count Because Republican Commissioners Disagree With Findings

Chamber Complaint: Report "Fails To Reflect The Views Of The Commission As A Whole." The Chamber's press release reads, "Executives at the U.S. Chamber of Commerce called today's release of the Financial Crisis Inquiry Commission's final report another 'missed opportunity' to objectively investigate the 2008 financial crisis, pointing out that this report 'fails to reflect the views of the Commission as a whole.'" [Chamber of Commerce, 1/27/11]

FACT: Report Only "Fails To Reflect The Views Of...The Whole" Because Republican Members Wanted To Ban References To "Wall Street" And "Deregulation"...

All Four Republican Commissioners Voted To BAN Words Like "Wall Street" And "Deregulation" From The Report On The Financial Crisis. As the Huffington Post reported: "During a private commission meeting last week, all four Republicans voted in favor of banning the phrases 'Wall Street' and 'shadow banking' and the words 'interconnection" and 'deregulation' from the panel's final report, according to a person familiar with the matter and confirmed by Brooksley E. Born, one of the six commissioners who voted against the proposal." [Huffington Post, 12/15/10]

  • Terms Republicans Wanted To Ban Refer To Wall Street's Unsupervised, Risky, Interdependent Way Of Managing Housing-Related Financial Instruments Ahead Of Crisis. From the Huffington Post: "The shadow banking system refers to the part of the financial system in which investors and other nonbanks like hedge funds and investment firms provide credit to borrowers, as opposed to more traditional banks. Interconnection refers to the links that bind financial institutions to one another, like derivatives, borrowings, and investments. 'I certainly felt, and I think the majority of the commission felt, that deleting those phrases would impair the commissioners' ability to give a full and fair and understandable report to the American people about the causes of the financial crisis,' [commission member Brooksley] Born said." [Huffington Post, 12/15/10]
  • Republican Commissioner Holtz-Eakin Previously Blamed Wall Street For The Crisis. Appearing on CBS's Face the Nation in 2008, Douglas Holtz-Eakin said: "I think if you step back, the real big difference in this crisis situation is sort of where do you place your faith? Do you place it in the institutions that have failed us, which, quite frankly, are in Washington and in Wall Street? Or do you put the money in the places where we know we can get effective results?" [Face the Nation, 10/26/08]
  • Republican Commissioner Holtz-Eakin Previously Criticized "Shadow Banking." Appearing on BloombergTV's Starting Bell in 2010, Douglas Holtz-Eakin said: "The goal in these two days is not so much to understand Bear Stearns or GE Capital or the other witnesses, but to understand what happened with this set of practices that is referred to as shadow banking. Short term funding for long term investments went badly, badly wrong." [Starting Bell via, 5/5/10]
  • Republican Commissioner Hennessey Previously Warned Of Firms Being "Too Big And Interconnected To Fail Suddenly." In a post on his website in 2008, Keith Hennessey wrote: "Banks and other financial institutions that bought mortgage-backed securities (and other mortgage-related investments) lost a lot of money when these securities later declined in value.  Because many of these institutions (especially large investment banks) were highly leveraged, they faced a greater risk of failure from a bad bet, and the consequences of that failure were much greater.  Many of those banks that did not fail still lost a lot of their capital.  Some of these large financial institutions were so big and so interconnected with other institutions, that their failure would create a domino effect.  This is what we call 'too big to fail', which should more precisely be called 'too big and interconnected to fail suddenly'." [, 10/18/08]

FACT: Chamber, Republican Commissioners Seek To Blame Government, Downplay Role Of Subprime Lending

Chamber President: Subprime Lending Is Not A Problem, Recession Unlikely To Occur. In 2007, Thomas Donohue, President of the U.S. Chamber of Commerce, cautioned that subprime lending was not as big problem as some were arguing and predicted that a recession was unlikely to occur:

Yet it's important to keep in mind that the estimated $1.3 trillion in subprime loans represents a small portion of the $10 trillion in total outstanding mortgages. It represents an even smaller share of a securities market that is worth $100 trillion. Furthermore, only half of the subprime loans have adjustable rates.

While the alarmists are getting plenty of ink in the press these days, at the Chamber, we don't see the subprime crisis spreading to other parts of the mortgage market or the broader economy. Growth will slow for awhile, but the chance of a recession remains small. With some action from the Fed, the market is already righting itself. [Free Enterprise, 10/2/07]

Republican Commissioners Seek To Blame Government Actions For The Crisis. From the Huffington Post:

The four Republicans appointed to the commission investigating the root causes of the financial crisis plan to bypass the bipartisan panel and release their own report Wednesday, according to people familiar with the commission's work.

The Republicans, led by the commission's vice chairman, former congressman and chair of the House Ways and Means Committee Bill Thomas, will likely focus their report on the explosive growth of subprime mortgages and the heavy role played by the federal government in pushing mortgage giants Fannie Mae and Freddie Mac to purchase and insure them. They'll also likely focus on the Community Reinvestment Act, a 1977 law that encourages banks to lend to underserved communities, these people said.

The Republicans' report is expected to conclude that government policy helped inflate the housing bubble and that prices weren't expected to crash because the government pushed homeownership so aggressively. They say that the report will note that once the bubble burst, a financial panic followed because firms weren't adequately prepared. [Huffington Post, 12/15/10]

Subprime Mortgage Data Do Not Support Claim That Government Actions Triggered Crisis. Barry Ritholtz, who wrote the book Bailout Nation about the housing bubble and ensuing financial crisis, reports:

Federal Reserve Board data show that:

-More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.

-Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.

-Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics. [The Big Picture, 12/16/10]

Three Republican Members Of Commission Place Blame On Subprime Lending By Private Firms Like Countrywide. According to the Reuters:

The three Republicans' dissent lists 10 causes for the 2007-2009 crisis that shocked capital markets and dragged the economy into a severe recession from which it has yet to fully recover:


SUBPRIME LENDING. Subprime mortgage lending exploded and was often deceptive and confusing, fueled by cheap credit. Leading lenders were Countrywide, Washington Mutual, Ameriquest and HSBC Financial. This amplified the housing bubble.
[Reuters, 1/27/11]

CHAMBER COMPLAINT: Commission Tasked With Explaining Financial Crisis To America Is Too Obsessed With "Transparency"

Chamber: Transparency Into Causes Of Crisis Would "Effectively Create A Government-Sanctioned Wikileaks." Responding to the FCIC report, the Chamber's Lisa Rickard wrote: "The commission's final report and its pledge to post raw materials - apparently including information obtained from companies as well as other government agencies - is an astounding abuse of process that would effectively create a government-sanctioned Wikileaks." [Chamber of Commerce, 1/27/10]

  • Lisa Rickard Likes Transparency When It Comes To Trial Lawyers. In a post applauding the Florida legislature's move to create more transparency in the hiring of lawyers by the state, Lisa Rickard wrote: "Today with the signing of the Transparency in Private Attorney Contracting Act (TPAC) the Sunshine State becomes a model to the nation. This law will shine a much-needed light on the process that Florida attorneys general must follow when they hire private plaintiffs' law firms under a contingency fee arrangement to sue on behalf of the state." [Chamber of Commerce, 4/14/10]

Commission Conclusion: Lack Of Transparency Contributed To Crisis. Over and over, the final report from the commission notes how the lack of transparency contributed to the crisis:

Panic fanned by a lack of transparency of the balance sheets of major financial institutions, coupled with a tangle of interconnections among institutions perceived to be "too big to fail," caused the credit markets to seize up. [Financial Crisis Inquiry Commission, page xvi, accessed 1/27/10]

We conclude a combination of excessive borrowing, risky investments, and lack of transparency put the financial system on a collision course with crisis.  [Financial Crisis Inquiry Commission, page xix, accessed 1/27/10]

Within the financial system, the dangers of this debt were magnified because transparency was not required or desired. Massive, short-term borrowing, combined with obligations unseen by others in the market, heightened the chances the system could rapidly unravel. [Financial Crisis Inquiry Commission, page xx, accessed 1/27/10]

The soundness and the sustained prosperity of the financial system and our economy rely on the notions of fair dealing, responsibility, and transparency. In our economy, we expect businesses and individuals to pursue profits, at the same time that they produce products and services of quality and conduct themselves well. [Financial Crisis Inquiry Commission, page xxii, accessed 1/27/10]

The OTC derivatives market's lack of transparency and of effective price discovery exacerbated the collateral disputes of AIG and Goldman Sachs and similar disputes between other derivatives counterparties. AIG engaged in regulatory arbitrage by setting up a major business in this unregulated product, locating much of the business in London, and selecting a weak federal regulator, the Office of Thrif Supervision (OTS). [Financial Crisis Inquiry Commission, page 352, accessed 1/27/10]

Lack of transparency contributed greatly to the crisis: the exposures of financial institutions to risky mortgage assets and other potential losses were unknown to market participants, and indeed many firms did not know their own exposures. [Financial Crisis Inquiry Commission, page 386, accessed 1/27/10]

The Commission concludes the unchecked increase in the complexity of mortgages and securitization has made it more difficult to solve problems in the mortgage market. This complexity has created powerful competing interests, including those of the holders of first and second mortgages and of mortgage servicers; has reduced transparency for policy makers, regulators, financial institutions, and homeowners; and has impeded mortgage modifications. [Financial Crisis Inquiry Commission, page 410, accessed 1/27/10]

CHAMBER COMPLAINT: By Dividing Along Party Lines, Commission Failed To Adequately Address Problems With Financial Regulations

Chamber: Commission Missed Chance To Recommend "How To Strengthen Our Financial Regulatory System." In a press release responding to the report by the Financial Crisis Inquiry Commission, the Chamber of Commerce wrote: "Executives at the U.S. Chamber of Commerce called today's release of the Financial Crisis Inquiry Commission's final report another "missed opportunity" to objectively investigate the 2008 financial crisis, pointing out that this report 'fails to reflect the views of the Commission as a whole.' 'The report released by the Financial Crisis Inquiry Commission is yet another missed opportunity to produce an objective, non-partisan look at how to strengthen our financial regulatory system in order to prevent the next financial crisis,' said David Hirschmann, president and CEO of the U.S. Chamber's Center for Capital Markets Competitiveness." [Chamber of Commerce, 1/27/11]

FACT: The Report "Fails To Reflect The Views Of The Commission As A Whole" Because Republican Commissioners Oppose Regulation

Republican Commissioners Voted To Ban The Word "Deregulation" From Commission Findings. As reported by Accounting Today: "The four Republican members decided last week to release their own nine-page version of the report, entitled 'Financial Crisis Primer,' through a think tank called the American Action Forum. In the process, they also have effectively disowned the 'final' version of the report that the Democratic-led commission now plans to release in January. They are concerned that the final report will end up putting the blame on Wall Street for the financial crisis, whereas they believe the blame should be placed instead on government-sponsored housing agencies like Fannie Mae and Freddie Mac, and the affordable housing goals of the Clinton and second Bush administrations.  The Republican commission members even voted in private to ban phrases like 'Wall Street,' 'shadow banking,' 'interconnection,' 'deregulation,' 'magic,' and 'alchemy' from the final report." [Accounting Today, 12/21/10, emphasis added]

Republican Member Of Commission, Peter J. Wallison, Specializes In Financial Deregulation. According to his biography at the American Enterprise Institute, "Peter J. Wallison, a codirector of AEI's program on financial policy studies, researches banking, insurance, and securities regulation. As general counsel of the U.S. Treasury Department, he had a significant role in the development of the Reagan administration's proposals for the deregulation of the financial services industry." [American Enterprise Institute, accessed 1/27/2011]

  • Financial Crisis Expert Barry Ritholtz: Wallison's Employer Sought To Cover Up His Ties To Deregulation. In a post for The Big Picture, Barry Ritholtz, author of the bestselling investigation into the causes of the financial crisis Bailout Nation, wrote: "It appears that the web editors at the AEI have been busy. Peter Wallison, currently a member of the Financial Crisis Inquiry Commission, was also the co-director of AEI's Financial Deregulation Project, along with his co-director, Columbia professor Charles Calomoris. Over at Calomoris's bio, his status as co-director of AEI's Financial Deregulation Project is the first sentence; Not so on [sic] for his co-director Wallison. Indeed, any reference to his participation on the Financial Deregulation Project is gone from Wallison's AEI bio.  Instead, the language has been replaced with the more benign 'codirector of AEI's program on financial policy studies.' Why the change? After all, it is the AEI's position that deregulation was not a cause of the crisis. The language change is a poor attempt to hide Wallison's role in the radial [sic] deregulation of derivatives, banking, leverage and sub-prime mortgages from casual inspection." [The Big Picture, 12/15/10, emphasis original]

Douglas Holtz-Eakin, Republican Member Of Commission, Complained About Banking Interests Weakening Regulation. During the debate over financial regulatory reform, Douglas Holtz-Eakin, former CBO director and economic advisor to John McCain, warned in Politico that "The biggest threat to regulatory reform is always the lobbying of the financial services sectors to preserve their status. This time, Congress must rise above the lobbying scrum and deal with three big problems." [Politico, 4/16/10]

FACT: The Chamber Opposes Strong Financial Regulations

Chamber In 2007: Regulations Are Antiquated. In a 2007 report exploring the various ways regulation could be weakened to make U.S. capital markets more competitive, the Chamber wrote, "Over the last two decades, markets have truly become global-corporations, accounting firms, investment banking firms, law firms, and now stock exchanges-all have internationalized. Yet, the U.S. regulatory structure is deeply rooted in the reforms put in place in the 1930s, a period that was closer in time to the Civil War than it is to today." [Chamber of Commerce, March, 2007]

Chamber Paid By Banks To Weaken Regulation. As the New York Times reported, "Prudential Financial's $2 million donation last year coincided with a chamber lobbying effort against elements of the financial regulation bill in Congress. A spokesman for Prudential, which opposed certain proposed restrictions on the use of financial instruments known as derivatives, said the donation was not earmarked for a specific issue. But he acknowledged that most of the money was used by the chamber to lobby Congress. 'I am not suggesting it is a coincidence,' said the spokesman, Bob DeFillippo." [New York Times, 10/21/10]

CHAMBER COMPLAINT: Commission Report Will Hurt Job Market

Chamber: Findings Of Commission Are "Bad News" For Job-Seekers. In a press release responding to the final report by the Financial Crisis Inquiry Commission, the Chamber complained that "The failure of this commission to do its job is more bad news for workers and businesses who depend on robust, well-regulated, world-leading capital markets to fund growth and job creation." [Chamber of Commerce, 1/27/11]

FACT: Chamber Position Is That Financial Regulations Inhibit Job Creation

Chamber President: Passage Of Financial Regulatory Reform Is "A Sad Day For The U.S. Economy, For Jobs." During debate over the financial regulatory reform bill, Chamber President Thomas Donahue complained, "Today is a sad day for the U.S. economy, for jobs, and for the future of our capital markets. This is, however, just the first leg of a marathon effort to reform our capital markets and create the rules of the road for decades to come. The Chamber will continue to work vigorously through all available avenues-regulatory, legislative, and legal-to ensure that we have the most efficient, transparent, and well-regulated capital markets in the world." [Chamber of Commerce, 6/25/10]

Chamber Opposed Consumer Financial Protection Agency. According to the Wall Street Journal:

The U.S. Chamber of Commerce is launching an advertising campaign of at least $2 million aimed at defeating a central plank of the Obama administration's financial-regulation overhaul.

But there won't be any mention of banks or Wall Street or insurance companies.

The first ads running in Washington-area newspapers feature a picture of a butcher with the line: "Virtually every business that extends credit to American consumers would be affected -- even the local butcher and the credit he extends to his customers."

The ads are aimed at the administration's proposed Consumer Financial Protection Agency, which would tightly regulate consumer products including mortgages and credit cards. It would have the power to ban certain practices and require financial firms to offer loans with simple terms and clear disclosure.
[Wall Street Journal, 9/8/09]

Banking Industry Opposed Consumer Financial Protection Agency. As CNN reported, "The consumer protection plan is the only one that already has broad support among key Democrats and could gain a consensus in Congress. And it's also the only one that so far the banking industry uniformly doesn't like. 'It's bad for the consumers,' said Steve Bartlett, president of the Financial Services Roundtable, a lobbying group for banks." [CNN, 6/16/09]

FACT: Despite Jobs Protestations, Chamber Supports Outsourcing

Chamber President: Outsourcing Is Great. Chamber President Thomas Donahue told that outsourcing made the overall economy stronger:

The bottom line: outsourcing has made the manufacturing process more efficient and productive, which has helped consumers and our overall economy. Outsourcing allows manufacturers to buy components from a vast array of suppliers, lowering costs for the manufacturer who is able to pass on the savings to consumers.

Outsourcing has also made us work smarter and made workers able to take advantage of one of the United States greatest assets - the spirit of innovation. The changes in the manufacturing sector have resulted in some of our best workers improving their workforce skills and in many cases, transitioning to careers in high-technology fields. With the help of the Federal Trade Adjustment Assistance programs, many of these workers have been retrained and are now working in high-tech industries.

For all of these reasons, the Chamber strongly believes manufacturing and service companies alike should have the freedom and flexibility to source and trade across our country-and around the world. We are not in the business of telling companies that they should outsource, but we are fighting to preserve their right to do so. Flexibility is one of the American economy's greatest strengths, and we are working hard before governments and regulators everywhere to preserve it.
[, 8/18/07]

Chamber Came Out Against Legislation Aimed At Curbing Outsourcing. As The Hill reported:

The U.S. Chamber of Commerce on Thursday announced its opposition to Senate legislation providing a payroll tax holiday to U.S. multinational companies that shift overseas jobs to the U.S.

The bill, Creating American Jobs and End Offshoring Act, grants a two-year payroll tax holiday for companies that take on new employees who perform services in the U.S. that were once done abroad. The Chamber deems the provision a "zero sum game" when it comes to boosting economic activity internationally.

"Replacing a job that is based in another country with a domestic job does not stimulate economic growth or enhance the competitiveness of American worldwide companies," wrote Chamber executive vice president Bruce Josten in letter to senators.
[The Hill, 9/23/10]