Preview: Financial Crisis Inquiry Commission Report

[ProSense]

Preview: Financial Crisis Inquiry Commission Report

by CalculatedRisk

The Financial Crisis Inquiry Commission report will be released on Thursday, but Sewell Chan at the NY Times has some excerpts: Financial Crisis Was Avoidable, Inquiry Finds

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 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.

...

(T)he report is harsh on regulators. It finds that the Securities and Exchange Commission failed to require big banks to hold more capital to cushion potential losses and halt risky practices, and that the Fed “neglected its mission.”

It says the Office of the Comptroller of the Currency, which regulates some banks, and the Office of Thrift Supervision, which oversees savings and loans, blocked states from curbing abuses because they were “caught up in turf wars.”

When the Financial Crisis Inquiry Commission was announced, I was skeptical if they'd be willing to address the willful lack of regulatory supervision and the role of Wall Street in the crisis.

These excerpts give me hope - there is much more in Chan's article - now I'm definitely looking forward to reading the report! Barry Ritholtz is happy too.

Ritholtz offers more highlights of the findings.

[xchrom]

1. both parties were up to their necks in it -- and remain that way --

http://www.nytimes.com/2011/01/26/business/economy/26inquiry.html?_r=1&adxnnl=1&smid=tw-nytimesbusiness&adxnnlx=1296054400-17DHLQA5iIQzHi7lx6PIMg

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 in the march toward the financial crisis.”

Timothy F. Geithner, who was president of the Federal Reserve Bank of New York during the crisis and is now the Treasury secretary, 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.

[DCBob]

7. What was there to stop the Bush admin from unshielding the o-t-c derivatives?

Especially when it should have been obvious by anyone monitoring the situation objectively that a huge risk was building.

[Supersedeas]

2. no doubt Andrea Mitchell will make this the central topic of discussion on her show

[Kurovski]

3. Good one.

:rofl:

[ProSense]

4. About the FCIC

About the Commission

In the wake of the most significant financial crisis since the Great Depression, the President signed into law on May 20, 2009, the Fraud Enforcement and Recovery Act of 2009, creating the Financial Crisis Inquiry Commission. The Commission was established to "examine the causes, domestic and global, of the current financial and economic crisis in the United States."

The 10 members of the bi-partisan Commission, prominent private citizens with significant experience in banking, market regulation, taxation, finance, economics, housing, and consumer protection, were appointed by Congress on July 15, 2009. The Chair, Phil Angelides, and Vice Chair, Bill Thomas, were selected jointly by the House and Senate Majority and Minority Leadership.

The FCIC is charged with conducting a comprehensive examination of 22 specific and substantive areas of inquiry related to the financial crisis. These include:

<...>

In its work, the Commission is authorized to hold hearings; issue subpoenas either for witness testimony or documents; and refer to the Attorney General or the appropriate state Attorney General any person who may have violated U.S. law in relation to the financial crisis.

On November 17, 2010 the Commission resolved, by majority vote, to deliver its report in January 2011, rather than on December 15, 2010. The Commission will conclude its operations by February 13, 2011, as prescribed.

[DCBob]

5. If there is one person to blame then its Greenspan..

He ignored all the warning signs.

[girl gone mad]

6. In many ways...

the report is a http://www.nakedcapitalism.com/2011/01/fcic-insiders-say-report-gives-wall-street-a-free-pass-simply-sought-to-validate-conventional-wisdom-about-crisis.html">whitewash.