Like US, Dutch launch inquiry into banking crisis

Both the Dutch and US governments have begun inquiries into the origins of the financial crisis. Five questions on them answered.

Public hearings by committees of inquiry into the current financial crisis have been launched in both the US and the Netherlands. Last Wednesday, the first four American bankers reported to the American Financial Crisis Inquiry Committee. This Monday, in The Hague, the Temporary Committee Investigating Financial Systems, better known as the De Wit Committee, holds its first public hearing. What are the most important similarities and differences between the two approaches?

What are the committees investigating?

The Dutch committee, named after its chair, Jan de Wit, will first analyse the background of the crisis. Two cases will be highlighted: the role of the supervisors played in the fiasco surrounding the bankruptcy of Iceland’s Icesave bank and in the government’s 2007 take-over of the Dutch bank, ABN Amro. A second, subsequent investigation will look into the 2008 crisis intervention by political leaders and supervisors.

The US committee was proposed by president Obama and appointed by Congress to investigate the causes for the current financial and economic crisis in the US. Its chair, Phil Angelides, says he will deal with the “greed, stupidity, hubris and outright corruption” of the financial sector.

Who are the people on the committees?

The De Wit committee comprises eight members who come from the various political parties that hold seats in the Dutch parliament. Its chair comes from the Socialist Party.

The 10-member American committee was nominated by the political parties, six members by the Democrats, who hold the majority in Congress, and four by the Republicans. It includes former politicians and business leaders. Its chairman, Phil Angelides, was formerly a financial official in the state of California. Two of the members are controversial. Democrat Byron Georgiou is a lawyer at a firm which is involved in lawsuits against Wall Street banks. The Republican vice-chair, Bill Thomas, a lobbyist for a legal firm that represents merchant banks, received 1.6 million dollars in donations from banks while he was a member of Congress. During a recent interview, he referred to the chairman Angelides as “a wacko Democrat liberal”.

How will the inquiries proceed?

The De Wit committee will not hear testimony from suspects, but from people involved. Two directors have turned down an invitation to appear before it, a former director of Fortis bank and one from Iceland’s central bank. People invited to appear before the committee are not obliged to answer questions, nor are they under oath. The committee uses external experts and has outsourced some of the research to Utrecht University, which will examine the international supervision and regulation of the financial system. The total cost of the study has been estimated at 1.5 million euros, which will be paid for from the parliamentary budget.

The American committee can summon people to appear before its members or supply information. Everyone who is called on must appear and discuss documents (even though lawyers for the banks will do their best to prevent this). The committee can hand over offenders to the justice department, unless a majority including at least one Republican votes against this. A 30-person research staff has been placed at its disposal, and a research budget of eight million dollars, courtesy of the government. According to chair Angelides, that is “certainly as much as each of the banks is spending to prepare its own testimony”.

Who will appear before the committees?

The De Wit committee has confidentially interviewed about 60 people. In the next three weeks, about 40 more will publicly appear before its members: experts, bankers, accountants, insurers, politicians and banking supervisors. By the beginning of April it will deliver its final report. Then the second inquiry into the crisis intervention will take place.

The American committee will interview hundreds of people. It began last week with senior bankers and analysts and the justice minister, and private hearings with treasury secretary, Timothy Geithner and central bank director, Ben Bernanke, both of whom must also appear during the public sessions. It will present its report on December 15.

Are these committees of any value?

The De Wit committee must deliver clear analysis from which lessons can be drawn. According to its deputy chair, Jan Schinkelshoek, parliament has to account for the billions that have gone to banks and insurance companies.

The American committee says the anger against Wall Street has to be directed. “The American financial system is like a patient who has had a near-death experience,” Angelides said “What we are about is the diagnosis.”