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Financial Crisis Was Avoidable, Inquiry Finds
New York Times ^ | January 26, 2010 | Sewell Chan

Posted on 01/26/2011 5:40:39 AM PST by La Lydia

WASHINGTON — The 2008 financial crisis was an “avoidable” disaster caused by widespread failures in government regulation, corporate mismanagement and heedless risk-taking by Wall Street, according to the conclusions of a federal inquiry. The commission that investigated the crisis casts a wide net of blame, faulting two administrations, the Federal Reserve and other regulators for permitting a calamitous concoction: shoddy mortgage lending, the excessive packaging and sale of loans to investors and risky bets on securities backed by the loans...

While the panel, the Financial Crisis Inquiry Commission, accuses several financial institutions of greed, ineptitude or both, some of its gravest conclusions concern government failings...

The majority report finds fault with two Fed chairmen: Alan Greenspan, who led the central bank as the housing bubble expanded, and his successor, Ben S. Bernanke, who did not foresee the crisis but played a crucial role in the response. It criticizes Mr. Greenspan for advocating deregulation and cites a “pivotal failure to stem the flow of toxic mortgages” under his leadership as a “prime example” of negligence.

It also criticizes the Bush administration’s “inconsistent response” to the crisis — allowing Lehman Brothers to collapse in September 2008 after earlier bailing out another bank, Bear Stearns...

Democrats also come under fire. The decision in 2000 to shield the exotic financial instruments known as over-the-counter derivatives from regulation, made during the last year of President Bill Clinton’s term, is called “a key turning point ...

Timothy F. Geithner, who was president of the Federal Reserve Bank of New York during the crisis...was not unscathed; the report finds that the New York Fed missed signs of trouble at Citigroup and Lehman, though it did not have the main responsibility for overseeing them....

(Excerpt) Read more at nytimes.com ...


TOPICS: Business/Economy; Politics/Elections
KEYWORDS: 2008financialcrisis; angelides; congress; corruption; cra; dodd; fannie; fanniemae; financialcrisis; frank; freddie; freddiemac; meltdown; philangelides
I think the lion's share of the "credit" for this mess belongs to Congress.
1 posted on 01/26/2011 5:40:42 AM PST by La Lydia
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To: La Lydia

“heedless risk-taking by Wall Street”

Only because they were too big to fail and knew they’d be personally covered.


2 posted on 01/26/2011 5:43:05 AM PST by driftdiver (I could eat it raw, but why do that when I have a fire.)
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To: La Lydia
"..heedless risk-taking by Wall Street"

Which we rewarding them lavishly for taking.

3 posted on 01/26/2011 5:43:19 AM PST by circlecity
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To: La Lydia

I don’t see lax lending standards or Fannie/Freddie mentioned here.


4 posted on 01/26/2011 5:44:06 AM PST by dirtboy
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To: La Lydia

We’ll believe the government is serious about making those responsible pay for their crimes when we see Fast Freddy Raines frog-marched out in handcuffs. He ran Fannie Mae during the Clintoon regime and made off with about 100 million taxpayer bucks.


5 posted on 01/26/2011 5:44:42 AM PST by kittymyrib
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To: dirtboy
"I don’t see lax lending standards or Fannie/Freddie mentioned here."

Fom the article and complete BS!

The report does knock down — at least partly — several early theories for the financial crisis. It says the low interest rates brought about by the Fed after the 2001 recession; Fannie Mae and Freddie Mac, the mortgage finance giants; and the “aggressive homeownership goals” set by the government as part of a “philosophy of opportunity” were not major culprits.

6 posted on 01/26/2011 5:48:27 AM PST by avacado
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To: avacado

What a surprise. And crock of shiite.


7 posted on 01/26/2011 5:50:38 AM PST by dirtboy
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To: La Lydia
The lion's share of the financial collapse was due to decades of Big Government meddling. (Boom or Bust, Thomas Sowell)

The lion's share of the rising cost of healthcare has been due to decades of Big Government meddling. (Code Blue, Edward R. Annis, M.D., former President of the American Medical Association)

Big Government IS always the problem.

8 posted on 01/26/2011 5:52:38 AM PST by steelyourfaith (ObamaCare Death Panels: a Final Solution to the looming Social Security crisis ?)
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To: dirtboy
If you read the actual article, it says, "The report does knock down — at least partly — several early theories for the financial crisis. It says the low interest rates brought about by the Fed after the 2001 recession; Fannie Mae and Freddie Mac, the mortgage finance giants; and the “aggressive homeownership goals” set by the government as part of a “philosophy of opportunity” were not major culprits."

What a load of crap. Covering Barney Frank's behind. And hence the disagreements and dissenting opinions. Also, guess who was the commission chairman? "The report, which was heavily shaped by the commission’s chairman, Phil Angelides..." Very Left wing and very crooked...of course the perfect nominee for this job.

9 posted on 01/26/2011 5:54:09 AM PST by La Lydia
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To: La Lydia

Sure it was avoidable if frand and dodd hadn’t forced the banks to lend to deadbeats.
If the dimrat party hadn’t blocked all of GW Bush’s attempts to reign in Freddie and Fannie.
If the media didn’t jump on the bandwagon of the “redlining” story.
If most of the banks chosen not to participate in this ponzi scheme.

Lots of ifs, but it all lies with the democrat party. They figured a way for force the banks to lend creating the illusion of prosperity while at the same time grabbing more control over the banks operations.

End result was that they won the election in ‘08 and have nationalized the banking and mortgage industry.


10 posted on 01/26/2011 6:01:44 AM PST by Texas resident (Hunkered Down)
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To: La Lydia

BS. Congress didn’t set interest rates.


11 posted on 01/26/2011 6:19:51 AM PST by Palter (If voting made any difference they wouldn't let us do it. ~ Mark Twain)
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To: Texas resident

Re post 10:

What you said.

Pointing the finger at one link in the chain is like the story of the blind men patting the elephant and saying what it looked like on the basis of their local touch.

If one thing had been different, a lot would have been different. The banks were forced to look for outlets for the bum paper that resulted from their forced lending. The mortgage processors like Countrywide sprang up to take advantage; the securitization market and the GSEs helped move the risk along. If any link in the chain had been broken—say some regulator had balked at the underwriting standards... then sales would have fallen off, because the dodgy loans couldn’t be made; the securities would have been better; the housing prices and overbuilding wouldn’t have taken place.

But, the driving force was the government-led push to raise home ownership above it’s natural level, confusing people who own (have built equity) with those who merely rent from the bank (or whoever holds the note), and calling both “owners.”


12 posted on 01/26/2011 6:33:08 AM PST by Pearls Before Swine (/s, in case you need to ask)
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To: La Lydia

Part of the new narrative for the 2012 Obama campaign, i.e., it is still Bush’s fault.


13 posted on 01/26/2011 6:37:58 AM PST by kabar
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To: avacado
and the “aggressive homeownership goals” set by the government as part of a “philosophy of opportunity” were not major culprits. <<

Nope ...not at all....Geeez!
without those “lax lending standards” there would have been very few foreclosures and no need for the sliced, diced and chopped toxic derivatives that poisoned the entire market....but the root cause was the GOVERNMENTS “philosophy of opportunity” to begin with...
the banks were forced to make what they knew were bogus loans and would never have made them had not the government opened the door for them to get rid of them via Fanny and Freddy....GOVERNMENT INTERFERENCE WITH FREE ENTERPRISE ALWAYS RUINS FREE ENTRERPRISE....NO EXCEPTIONS

14 posted on 01/26/2011 6:43:44 AM PST by M-cubed
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To: La Lydia
The mortgage meltdown was caused by:

1. Passage of the Community Re-Investment Act of 1977, requiring lending institutions to increase their risk factors by making loans to those that the government deemed deserving.

2. President Clinton's appointment of Andrew Cuomo to head up Housing and Urban Development (HUD) and his imposition of regulations requiring lending institutions to substantially increase sub-prime lending. Cuomo created regulations which forced the government sponsored mortgage entities, Fannie Mae and Freddie Mac, to step up loans to minorities under the logic of the affordable housing movement–every American should be a homeowner. It turns out affordable housing did not mean inexpensive homes poor people could afford, but instead, easy credit to buy homes they could not afford.
Clinton’s Treasury Secretary, Democrat Robert Rubin, aided by Democrat Lawrence Summers, organized and led the effort to repeal the Depression era Glass Steagall Act, allowing investment banks to use federally insured depositor cash to back millions of mortgages, while easing underwriting standards at the same time. No money down? No problem.
In addition Rubin pushed through the Commodity Futures Modernization Act, which allowed the creation of mortgage back securities, fictitious loans packaged as investments and sold to pension funds. Democrats in the New York State Insurance Regulatory commission allowed AIG to insure mortgage backed securities with an invention known as the Credit Default Swap.

3. The Justice Department allowed the laws of the government to be used by the combined legal efforts of both itself under Reno and Gorelick, and community activist organizations like ACORN to sue lenders for not making sufficient risky loans to the groups that the government defined as needing home ownership.

4. Misuse of government funding and corruption of Fannie Mae and Freddie Mac by top Clinton Cronies, Raines, Johnson, Gorelick, and Rubin that essentially enabled a government backed organization to enter the mortgage marked with federal money to compete with private banking.
Regulatory oversight had changed dramatically to accommodate the Federal home loan mortgage activity designed to enable sub par loans to be made.

In an effort to reverse the activist activities of government backed entities and its own regulatory people, The New York Times reported in September of 2003:
“The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago. Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

But Democrats defeated this legislation. Rep. Barney Frank and his supporters said this that is found in the Congressional Record: ”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee.

15 posted on 01/26/2011 6:53:43 AM PST by PeaRidge
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To: Palter

Congress set the rules for Freddie and Fannie. Congress passed the CRA. Congress allowed the lunatics Barney Frank and Chris Dodd exercise “oversight.”


16 posted on 01/26/2011 6:54:02 AM PST by La Lydia
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To: PeaRidge

Yes, well summed up.


17 posted on 01/26/2011 6:54:39 AM PST by La Lydia
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To: La Lydia

Whoa there, partner.

That is a little bit of rational thought about who spends the money.

We don’t want the sheeple to start thinking about things.


18 posted on 01/26/2011 7:40:58 AM PST by Dryman ("FREE THE LONG FORM!")
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To: La Lydia

If you read the actual article, it says, “The report does knock down — at least partly — several early theories for the financial crisis. It says the low interest rates brought about by the Fed after the 2001 recession; Fannie Mae and Freddie Mac, the mortgage finance giants; and the “aggressive homeownership goals” set by the government as part of a “philosophy of opportunity” were not major culprits.”


No one tells the truth in government anymore. It is all lies and spin in the name of “experts”. This reminds me of the 911 Commission report where NO ONE demanded to make public what was in Sandy Berger’s pants.

We still don’t know who was involved in the electronic financial attack that swung the election to Obama... That was a coordinated attack on our economy.


19 posted on 01/26/2011 7:53:16 AM PST by SaraJohnson
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To: La Lydia
Now we need a counter-investigation by a non-Congressional panel into the involvement of Congress (specifically Doddering and Mother Franker) to come up with the *actual* causes of the melt-down, which can be summed up perfectly using the single word "fascism".


Frowning takes 68 muscles.
Smiling takes 6.
Pulling this trigger takes 2.
I'm lazy.

20 posted on 01/26/2011 8:32:06 AM PST by The Comedian (Obama is just the cherry on top of the $hit sundae of fraud the democrats have become.)
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To: La Lydia

the central problem was that short-term interest
rates were pushed to zero.


21 posted on 01/26/2011 8:46:43 AM PST by Talf
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To: Talf

when ya take all the slack out of a rope, ya got nowhere to go

zero from zero equals ..

ap thread

Panel finds financial crisis was avoidable (Yes. Yes, You guessed it. Bush’s Fault! and others too).
http://www.freerepublic.com/focus/f-news/2664199/posts


22 posted on 01/27/2011 9:23:57 AM PST by NormsRevenge (Semper Fi ... Godspeed .. Monthly Donor Onboard .. Obama: Epic Fail or Bust!!!)
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To: La Lydia

Well DUH.


23 posted on 01/27/2011 9:34:06 AM PST by mad_as_he$$ (V for Vendetta.)
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To: PeaRidge

Excellent post. I am going to steal it for the logic impaired that still want to blame W.


24 posted on 01/27/2011 9:36:11 AM PST by mad_as_he$$ (V for Vendetta.)
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