WASHINGTON — When Federal Deposit Insurance Corp. Chairman Sheila Bair testified before the House Oversight and Government Reform Committee last week, it was the fifth time the panel had convened this year to probe Bank of America Corp.'s problem-riddled deal for Merrill Lynch & Co.

By contrast, the committee has held just one hearing this year on the $700 billion Troubled Asset Relief Program, or Tarp, and three hearings related to the near-collapse of insurance giant American International Group Inc., which has benefited from more than $100 billion in taxpayer support.

Though B of A's deal for Merrill, which closed only after the government kicked in an extra $20 billion, was an important episode in the financial crisis, there are arguably far more important matters for Congress to probe, including the government-sponsored enterprises and the role of monetary policy. Observers point to the panel's fixation with the Merrill deal as emblematic of the haphazard and often lax way that Congress has investigated the Wall Street collapse.

"A lot of what's going on at the moment seems misdirected, or exaggerated importance is given to what are actually side issues," said Robert Hockett, a professor at Cornell University Law School. "Congress has spent an awful lot of time on what are important matters but in the end are tangential."

Lawmakers also are plowing ahead with legislation to rework the financial system — despite the fact that they have not stopped to investigate what caused the crisis in the first place. Congress has delegated that job to the Financial Crisis Inquiry Commission, which is not due to release its findings until yearend 2010.

"It's hard for me to understand why they're going forward when the commission is charged with telling Congress and the administration what the causes of the financial crisis were," said Peter Wallison, a member of the commission and a fellow at the American Enterprise Institute. "It's very much prescription first and then the diagnosis."

Some observers said Congress must act now or risk losing any chance to reform the system.

"If you don't act quickly when the iron is hot, you will lose the opportunity to legislate because a year from now or two years from now, there will be less public appetite for change," said Brian Gardner, an analyst at KBW Inc.'s Keefe, Bruyette and Woods Inc. "The other political dynamic is that somebody needs to be blamed for what happened, and Congress needs to show they have fixed the problem."

Besides, said Mark Zandi, the chief economist and a co-founder of Moody's Economy.com, widespread agreement exists on the issues that need to be tackled, including systemic risk and credit rating agencies.

"We have a pretty good grip on the causes," he said. "Everyone puts emphasis on different things, but if you were to look at everyone's list, the list would be roughly the same."

Lawmakers also insist that their hearings on issues related to the crisis, like the B of A-Merrill deal, have made a difference.

Rep. Edolphus Towns, the chairman of the House oversight panel, said its hearings affected the Charlotte banking company's actions.

"Public scrutiny and oversight by this committee has produced tangible results," the New York Democrat said at last week's hearing. "Bank of America paid back its entire $45 billion federal loan, plus interest. In addition, under pressure from the committee, Bank of America agreed in September to pay $425 million to the Treasury Department in compensation for toxic-asset insurance."

But other members of the panel say the investigation yielded few results.

B of A repaid Tarp mainly to escape executive compensation restrictions and to remain competitive with peers — not over fears of the House oversight investigation.

"There never really was much there there," Rep. Darrell Issa, the top GOP panel member, said last week.

The five hearings included testimony from eight witnesses, including Federal Reserve Board Chairman Ben Bernanke and former Treasury secretary Henry Paulson.

Overall, observers remain unimpressed by congressional efforts to understand how financial markets imploded so dramatically in 2007 and 2008.

The crisis inquiry commission, which was formed this summer, has met publicly just once and was still hiring staff members this week. It is expected to announce soon that it will meet again publicly next month.

The House Financial Services Committee, led by Rep. Barney Frank, has been particularly active and held hearings this year ranging from the government response on foreclosures to resolution authority, derivatives and oversight of the Tarp and Securities and Exchange Commission.

But Keefe Bruyette's Gardner said many of those hearings were held with reform legislation in mind — not to seek an understanding of what happened to cause the financial collapse.

"Those hearings were more on regulatory restructuring and what the future should look like and did not spend enough time looking back and examining what in fact happened," he said.

This has fueled a general sense that Congress has not used its time wisely.

"If you think about how much weighty stuff they have to deal with and the limited amount of time to gather information to make very important decisions, it seems the time could have been better spent," said Robin Lumsdaine, a professor at American University's Kogod School of Business.

Observers said Congress could have spent more time on such questions as whether insurance companies should be federally regulated, how systemic risk should be defined and whether loose monetary policy contributed to the crisis.

Several also said Congress should have spent more time understanding the role Fannie Mae and Freddie Mac played in fueling the crisis, but past votes on GSE issues could be uncomfortable for some lawmakers.

"Examining what went on at the GSEs would be really messy," said Gardner. "A hearing on that could lead to lots of members' having their votes reexamined and criticized."

This collective decision not to figure out what went wrong may have made enacting regulatory reform legislation tougher.

The House did narrowly pass a reform bill last week but was forced to water down several key provisions to gain a majority. The Senate's bill remains stalled and will not be voted on until next year.

"If the systemic failure that took place could be explained properly and everyone understood why and how it happened, the legislation is far more palatable," said Alan Rubin, the director of federal government relations at Buchanan Ingersoll & Rooney.

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