PoMo politics Part 789

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.

Frustrated in part by the Financial Crisis Inquiry Commission's chairman, Phil Angelides, and the tenor of the panel's preliminary findings, the Republicans are choosing to ignore the five Democrats and lone independent and issue their document ahead of the commission's Jan. 15 release. Angelides is described as a demanding boss who's said to be difficult to work for. Both Thomas and Angelides pledged in January that they'd strive to reach bipartisan consensus.

The Republicans' move indicates that the highly-partisan nature of Washington has infiltrated the commission's work and threatens to derail it. With four commissioners now essentially going around the panel to describe their thoughts on the roots of the financial crisis, the public may not get the full picture when it comes to understanding how the actions of a few led to the worst economic downturn since the Great Depression.

Instead, the public will receive a report that could be discredited as being partisan, and another that is expected to largely conform with a Wall Street-friendly view that blames government for the crisis.

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.

"I think a number of us had really pulled for" bipartisan consensus, said Born, a Democratic commissioner who famously tried to regulate certain derivatives as head of the Commodity Futures Trading Commission. "But this action by the Republicans indicates they have decided to go their own way."

Born said the Republicans had not informed the commission of their plans, nor had they shared their report. She said she was "disappointed" because the views of her Republican colleagues would have been "useful."

The other Republicans on the panel are Peter Wallison, a fellow at the American Enterprise Institute, a conservative Washington research organization, who once served as general counsel at the Treasury Department; Keith Hennessey, who formerly served as George W. Bush's senior economic adviser while heading the National Economic Council and now works as a fellow at the Hoover Institution, another conservative research organization; and Douglas Holtz-Eakin, who formerly led the Congressional Budget Office and now heads the American Action Forum, a policy institute in Washington.