Why Did the Financial Crisis Commission Subpoena Goldman?

Goldman Sachs is likely in for some more abuse. The Financial Crisis Inquiry Commission didn't want to be the only watchdog in Washington to miss out on the pleasure of flogging the top investment bank. It's issued a subpoena (.pdf) to the firm for "failing to comply with a request for documents and interviews in a timely manner." At what point will Goldman fatigue set in?

The press release does not specify which documents or interviews Goldman has failed to comply with. We put a request into the FCIC for that detail -- see update below. and they have yet to respond (we'll update this if they provide some detail). But considering the commission already talked to Goldman CEO Lloyd Blankfein in its first session, they're probably looking for something more granular. And given the hearings on shadow banking included some discussion about the deal surrounding the SEC lawsuit against Goldman and other synthetic collateralized debt obligations (CDOs), the future hearing will likely look a lot like the Senate's 11-hour marathon hearing in April.

But since the Senate has already held a hearing, and the SEC and Justice Department are already looking at the firm, what does the FCIC hope to accomplish here? Remember, the commission doesn't exist to prosecute: its charge is to issue a report explaining what went wrong to cause the financial crisis. Does it really expect to uncover something new about the financial crisis that they haven't already heard by talking to Goldman again?

That seems pretty unlikely. Another hearing will likely just take the same form as the Senate's hearing. You'll get a lot of the commission and witnesses talking past each other. You'll see the officials wondering how there could be such a conflict-of-interest, and the bankers wondering what conflict-of-interest they're talking about. Is this really going to help anyone understand the financial crisis better?

The FCIC's purpose is already questionable, given that financial regulation bill will be passed prior to its report being issued. If it decides to hold another Goldman Sachs witch trial, the commission may teeter on becoming completely irrelevant. Even though the masses love to hate Goldman, does anyone really want to watch a sequel to the Senate hearing? Unless the FCIC has some novel questions to pose to the bank that could really illuminate some of the few still unclear aspects of the causes of the crisis, it shouldn't bother with Goldman.

Update: The FCIC responded. They added additional information on the subpoena here (.pdf). It looks mostly like what was expected. They want additional info on synthetic CDOs (specifically asking about the ABACUS transaction -- from the SEC complaint) and to investigate potential conflicts of interest. They are also interested in Goldman's dealings with AIG.