In May 2009, the Financial Crisis Inquiry Commission was created to determine the primary factors that drove the economy to collapse, sparking the Great Recession. Their reports will be released in just a few hours to the public. The committee consists of members from both sides of the political aisle, and opinions within the report are divided by party lines.
The New York Times got its hand on the report’s conclusions and reports that the blame touches everyone. At the end of his administration, Bill Clinton shielded derivatives from regulation, and that helped to get this particular financial free-for-all started. The commission concluded that Fannie Mae, Freddie Mac, and the government’s promotion of home ownership starting in 2001 was not a major factor, though some members of the commission disagree in a separate statement.
More blame is laid upon Alan Greenspan, who as Chairman of the Federal Reserve, didn’t curtail the housing bubble and pushed for further deregulation. For the regulation that was still within the government’s powers, the Securities and Exchange Commission is cited for being ineffective.
Though the report documents questionable practices by mortgage lenders and careless betting by banks, one striking finding is its portrayal of incompetence. It quotes Citigroup executives conceding that they paid little attention to mortgage-related risks. Executives at the American International Group were found to have been blind to its $79 billion exposure to credit-default swaps… At Merrill Lynch, managers were surprised when seemingly secure mortgage investments suddenly suffered huge losses.
The Bush administration is criticized in the report for not having a consistent response to the crisis. For example, Lehman Brothers was allowed to collapse while Bear Stearns was bailed out. Uncertainty helped to create panic within the financial industry. Credit-rating agencies were no help, either.
The report’s main conclusion is the financial collapse was avoidable.
Updated June 23, 2016 and originally published January 27, 2011. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.