Skip to comments.Financial Crisis Was Avoidable, Inquiry Finds
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 administrations 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 Clintons 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 ...
“heedless risk-taking by Wall Street”
Only because they were too big to fail and knew they’d be personally covered.
Which we rewarding them lavishly for taking.
I don’t see lax lending standards or Fannie/Freddie mentioned here.
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.
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.
What a surprise. And crock of shiite.
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.
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 commissions chairman, Phil Angelides..." Very Left wing and very crooked...of course the perfect nominee for this job.
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.
BS. Congress didn’t set interest rates.
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.”
Part of the new narrative for the 2012 Obama campaign, i.e., it is still Bush’s fault.
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
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 movementevery 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.
Clintons 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.
Congress set the rules for Freddie and Fannie. Congress passed the CRA. Congress allowed the lunatics Barney Frank and Chris Dodd exercise “oversight.”
Yes, well summed up.
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.
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.”
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.
the central problem was that short-term interest
rates were pushed to zero.
when ya take all the slack out of a rope, ya got nowhere to go
zero from zero equals ..
Panel finds financial crisis was avoidable (Yes. Yes, You guessed it. Bush’s Fault! and others too).
Excellent post. I am going to steal it for the logic impaired that still want to blame W.
>>I think the lion’s share of the “credit” for this mess belongs to Congress.
Congress deserves much of the blame - but it’s not congress who the Godfather of Subprime bought the ambassadorship to the Netherlands from.
>>it is still Bushs fault.
Is it Bush’s fault that Penny Pritzker’s Chicago family Superior Bank failed in 2001 after its innovations in Subprime lending...
...or that Pritzker is the Secretary of Commerce, today?
>>The mortgage meltdown was caused by:
None of the points you regurgitate mention the fact that Sub-prime leader, Ameriquest/Argent Mortgage, wasn’t a bank, wasn’t under any regulatory supervision, and, as of May 2007 when their executives were still drooling over the possibility of their garbage being eligible for Freddy Fanny coverage sometime in the future... their loans weren’t eligible for coverage by Freddy / Fannie.
Who was the Godfather of Subprime and how did his organization game the system?