I should have mentioned this week, back when I relayed Felix Salmon’s description of the massive mortgage bond fraud intertwined with the general fraud in the mortgage lending industry, that most of what we know about that comes from the FCIC. They subpoenaed and acquired the documents from Clayton Holdings, the third-party due diligence firm, showing that the top banks knew that substantial numbers of the mortgages in the pools they were about to securitize, about half, were faulty and not consistent with underwriting standards. You can see all the evidence from Clayton Holdings on the FCIC’s website.

The FCIC has taken a lot of grief over the past year. They saw some staff changes, and the Congress went ahead and passed financial reform before they even completed their work. Pitched as a modern-day Pecora Commission, they have not been able to grab a similar spotlight, and have basically hovered in the background of the financial crisis. But just their evidence from Clayton is incredibly valuable. And William D. Cohan believes there is more to come.

I predict that not only will the commission’s report — and accompanying documents — reveal numerous causes of the crisis that others have overlooked, but also that it will have a significant impact on the regulations that still must be written by the Securities and Exchange Commission and the Treasury as part of the implementation on the Dodd-Frank financial reform law. In fact, the inquiry commission may have already played an essential role in beginning to bring fraudsters to justice.

A much-derided federal panel has produced clear evidence that investment banks kept secret from their clients the shaky nature of many mortgage-backed securities [...] did Wall Street throw all those mortgages back into the pond as being too risky for securities they were going to sell to clients? Of course not — many were packaged right into their product.

In fact, the banks probably weren’t disappointed at all by the shaky status of many of these loans: in part because they could use the information that some of the mortgages were rotten to get a discount from the mortgage originators on the price paid for the entire portfolio. The people who should have been concerned were the investors who bought the securities from the Wall Street firms. But the amazing revelation of the Sacramento hearing was that the investment banks did not pass this very valuable information on to their customers.

This is a giant piece of the puzzle in understanding the financial crisis, and the FCIC ferreted it out. This has finally started to roll in the media, from Salmon’s take to stories from Gretchen Morgenson and what I highlighted this morning from Eliot Spitzer. And they’re talking about criminal fraud, not just civil penalties.

Maybe what the FCIC will release will offer nothing new. But just what they’ve already provided is an enormous contribution.