What was said about these documents to those up the chain of command at the banks?
What efforts were made to verify the conclusions Clayton reached, to evaluate what the consequences would be if their conclusions were correct, and to notify federal authorities of the risk posed by securitizing so many substandard loans?
What lawyers and investment bankers were told of this information, and what rating agencies had access to this information?
And were major banks shorting their own securitized products after seeing negative due diligence information that they had not shared with the market? This would be dangerous territory for the banks. As William D. Cohan wrote in the New York Times last week, many seem to have preferred ignorance to knowledge in this arena.
There is one other critical area of inquiry. A fair number of people have been troubled by the fact that certain law enforcement agencies saw these documents but did nothing with the critical information they revealed. So the question must be asked: What agencies had these documents, and what, if anything, did they do?
It is not too late to use the Clayton information to claw back bonuses and hold the banks, rating agencies, and government enforcement agencies accountable.