The last word and testament of the Financial Crisis Inquiry Commission, set up to clarifying the causes of the 2007-08 meltdown, is out today. (Download it here; or, if you prefer your 500-page reports in handy book form, buy it here.) After a year-and-a half’s work, including 700 interviews, 19 days of public hearings, and millions of pages of documents reviewed, the panel concluded that the crisis was avoidable, and that there’s plenty of blame to go around, starting with the financial industry, government (de)regulators, and the Fed. (Actually, make that the 6 Democrats on the 10-member panel; the four Republicans declined to endorse the majority position on account of its being–big surprise here–too hard on the banks; in fact, they didn’t even agree among themselves, producing two dissents, both included in the final doc.)
From the intro:
“The crisis was the result of human action and inaction, not of Mother Nature or computer models gone haywire. The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand, and manage evolving risks within a system essential to the well-being of the American public. Theirs was a big miss, not a stumble. While the business cycle cannot be repealed, a crisis of this magnitude need not have occurred. To paraphrase Shakespeare, the fault lies not in the stars, but in us.”
Despite the expressed view of many on Wall Street and in Washington that the crisis could not have been foreseen or avoided, there were warning signs. The tragedy was that they were ignored or discounted. There was an explosion in risky subprime lending and securitization, an unsustainable rise in housing prices, widespread reports of egregious and predatory lending practices, dramatic increases in household mortgage debt, and exponential growth in financial firms’ trading activities, unregulated derivatives, and short-term “repo” lending markets, among many other red flags. Yet there was pervasive permissiveness; little meaningful action was taken to quell the threats in a timely manner.”
And here’s what else:
It’s hard to know what, really, to make of all this. Like it or not, the panel’s partisan split hurt its credibility in a big way, even if the majority narrative is 100 percent accurate. No doubt it adds to our understanding of what happened, but even in the best case the report was never going have much practical impact, since financial reform has already passed. Onto the shelf it goes.
This post first appeared at the site of our partners, the Progressive Book Club.
by JULIAN BROOKES
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