The Financial Crisis Inquiry Commission has spoken:
As this report goes to print, there are more than 26 million Americans who are out of work, cannot find full-time work, or have given up looking for work. About four million families have lost their homes to foreclosure and another four and a half million have slipped into the foreclosure process or are seriously behind on their mortgage payments. Nearly $11 trillion in household wealth has vanished, with retirement accounts and life savings swept away.
Businesses, large and small, have felt the sting of a deep recession. There is much anger about what has transpired, and justifiably so. Many people who abided by all the rules now find themselves out of work and uncertain about their future prospects. The collateral damage of this crisis has been real people and real communities. The impacts of this crisis are likely to be felt for a generation. And the nation faces no easy path to renewed economic strength. [...]
How is your nest-egg doing?
Financial Crisis Inquiry Commission -- January 2011 -- Summary Report (pdf)
Link to the official FCIC site, with a lot more Inquiry details.
Here are their Summary conclusions, with some interesting excerpts, explaining those conclusions.
* We conclude this financial crisis was avoidable.
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.
[...]
Yet there was pervasive permissiveness; little meaningful action was taken to quell the threats in a timely manner.
The prime example is the Federal Reserve’s pivotal failure to stem the flow of toxic mortgages, which it could have done by setting prudent mortgage-lending standards. The Federal Reserve was the one entity empowered to do so and it did not. The record of our examination is replete with evidence of other failures:
-- financial institutions made, bought, and sold mortgage securities they never examined, did not care to examine, or knew to be defective;
-- firms depended on tens of billions of dollars of borrowing that had to be renewed each and every night, secured by subprime mortgage securities;
-- and major firms and investors blindly relied on credit rating agencies as their arbiters of risk.
What else could one expect on a highway where there were neither speed limits nor neatly painted lines?
* We conclude widespread failures in financial regulation and supervision proved devastating to the stability of the nation’s financial markets.
The sentries were not at their posts, in no small part due to the widely accepted faith in the self-correcting nature of the markets and the ability of financial institutions to effectively police themselves. More than 30 years of deregulation and reliance on self-regulation by financial institutions, championed by former Federal Reserve chairman Alan Greenspan and others, supported by successive administrations and Congresses, and actively pushed by the powerful financial industry at every turn, had stripped away key safeguards, which could have helped avoid catastrophe. This approach had opened up gaps in oversight of critical areas with trillions of dollars at risk, such as the shadow banking system and over-the-counter derivatives markets. In addition, the government permitted financial firms to pick their preferred regulators in what became a race to the weakest supervisor.
Yet we do not accept the view that regulators lacked the power to protect the financial system. They had ample power in many arenas and they chose not to use it. [...]
* We conclude dramatic failures of corporate governance and risk management at many systemically important financial institutions were a key cause of this crisis.
[...]
Too many of these institutions acted recklessly, taking on too much risk, with too little capital, and with too much dependence on short-term funding. In many respects, this reflected a fundamental change in these institutions, particularly the large investment banks and bank holding companies, which focused their activities increasingly on risky trading activities that produced hefty profits. They took on enormous exposures in acquiring and supporting subprime lenders and creating, packaging, repackaging, and selling trillions of dollars in mortgage-related securities, including synthetic financial products. [...]
* We conclude a combination of excessive borrowing, risky investments, and lack of transparency put the financial system on a collision course with crisis.
[...]
Within the financial system, the dangers of this debt were magnified because transparency was not required or desired. Massive, short-term borrowing, combined with obligations unseen by others in the market, heightened the chances the system could rapidly unravel.
[...]
Yet, over the past 30-plus years, we permitted the growth of a shadow banking system—opaque and laden with short-term debt—that rivaled the size of the traditional banking system. Key components of the market—for example, the multi-trillion-dollar repo lending market, off-balance- sheet entities, and the use of over-the-counter derivatives—were hidden from view, without the protections we had constructed to prevent financial meltdowns.
* We conclude the government was ill prepared for the crisis, and its inconsistent response added to the uncertainty and panic in the financial markets.
[...]
While there was some awareness of, or at least a debate about, the housing bubble, the record reflects that senior public officials did not recognize that a bursting of the bubble could threaten the entire financial system. Throughout the summer of 2007, both Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson offered public assurances that the turmoil in the subprime mortgage markets would be contained.
* We conclude there was a systemic breakdown in accountability and ethics.
[...]
And the report documents that major financial institutions ineffectively sampled loans they were purchasing to package and sell to investors. They knew a significant percentage of the sampled loans did not meet their own underwriting standards or those of the originators. Nonetheless, they sold those securities to investors. The Commission’s review of many prospectuses provided to investors found that this critical information was not disclosed.
Nice guys, eh? Those "financial institutions" betting on, and over-leveraging OUR Nation's economic future. "No guts, No Glory!" they routinely say on the Street. A motto to live by; a motto to 'crash and burn' by ...
"The impacts of this crisis are likely to be felt for a generation" ... Millions hurting, Families shaken, Futures foreclosed --
All because of WHY again? per FCIC's Conclusions:
financial crisis was avoidable
failures in financial regulation and supervision
failures of corporate governance and risk management
government was ill prepared for the crisis
systemic breakdown in accountability and ethics
And why does it matter? Why should we care?
Well ...
Nearly $11 trillion in household wealth has vanished, with retirement accounts and life savings swept away.
About four million families have lost their homes to foreclosure and another four and a half million have slipped into the foreclosure process or are seriously behind on their mortgage payments.
The government ultimately committed more than $180 billion because of concerns that AIG’s collapse would trigger cascading losses throughout the global financial system.
And that Bail Out was ONLY the beginning. TARP at one point, had drained away $700 Billion from the Govt Revenues, all because of those little lapses of the Free Marketeers on Wall Street.
These lapses on Wall Street ... They matter -- BIG Time!
If Markets are NOT indeed Self-Correcting, as Greenspan told us at every turn, then maybe the Govt Regulators have to perform this vital Braking function, to reduce Risk -- themselves? The FCIC commission is saying as much.
The hazards of the Investing Road are many. Someone 'responsible' needs to be driving the Bus, that's holding all our nest-eggs, and carrying them to the Future; our pensions, our 401ks, our Home Equity. ... SOMEONE needs to be Watching the Road!
Another reason why the Wild West attitude on Wall Street matters, is because the next 'treasure chest' of the Nation's Wealth that they want to be able to actively manage -- is our Surplus Social Security Retirement Funds -- all 2.6 Trillion Dollars worth of them -- now safely tucked away in the Trust Fund.
THAT is the goal of Paul Ryan's Road Map for America -- to privatize Social Security. To take our Trust Funds, safely invested in Govt T-Bills, and move them into the Stock Market -- where according to this Commission Report: "Nearly $11 trillion in household wealth has vanished" -- virtually overnight.
All due to "failures of corporate governance and risk management" among other non-correcting things.
Now they want OUR Social Security Funds too; to be able to "put that money to work" too. Just trust them.
Yeah Right!
I'll trust them maybe, when they begin to "make good" on the untold damage, they've already done to the Economy, to the country, to the world.
I'll trust them maybe, when they agree to give up the Bush Tax Cuts.
I'll trust them maybe, when they agree to a higher Capital Gains Tax.
I'll trust them maybe, when they agree to meager Transaction Tax on all their lightning-fast trading-bots.
I'll trust them maybe, when they agree to take the speculative hedging, out of Derivatives, and start managing Risk, like Adults, for the long term.
That'll be the Day! The day I trust the Republicans to deliver Social Security into the hands of Wall Street ...
That Day ... like about -- Never!
Yet Mr. Ryan is in a position to make his plans a reality, or at least the next political football -- since he is the new Chairman of the House Budget Committee. That's a role noteworthy in its power.
That's a role, that makes him "empowered and dangerous" as Ms. Bachmann might say.
If Chairman Ryan keeps getting a free ride on the 'Social Security's is Broken' bandwagon rhetoric -- Look out!
Your Social Security retirement dignity might end up going the same way as all those millions of Foreclosed Mortgages. Or so the conclusions of the Financial Crisis Inquiry Commission report should have us seriously wondering.
If you dig into its details, you might walk away with the conclusion -- that the main thing that has changed on Wall Street -- is the calendar. As far as "Accountability" is concerned, that's still a problem in search of a solution:
We do place special responsibility with the public leaders charged with protecting our financial system, those entrusted to run our regulatory agencies, and the chief executives of companies whose failures drove us to crisis. These individuals sought and accepted positions of significant responsibility and obligation. Tone at the top does matter and, in this instance, we were let down. No one said "no."
SOOO, I would argue, that "No one" should be able to get their hands on our Social Security Funds, either -- in spite of the coming ramped-up Austerity rhetoric to do just that.
Some things were never meant to be on Free Market. Some things, are just too precious, to risk them -- to "the whims" of Market Forces.
Uncontrollable "forces" like these, that we just endured:
financial crisis was avoidable
failures in financial regulation and supervision
failures of corporate governance and risk management
government was ill prepared for the crisis
systemic breakdown in accountability and ethics
Why does it matter? Well ... it's OUR Future ... for now anyways.
Remember, as the Commission concluded:
There is much anger about what has transpired, and justifiably so. Many people who abided by all the rules now find themselves out of work and uncertain about their future prospects.
So Next Time ... SOMEONE definitely needs to say NO!
... Let start with Social Security tinkering -- as in HELL NO you can't!
thank you very much, Free Market Privateers. ... But NO Thanks.
This once in a life time chance, of Trusting Wall Street, is definitely more than enough, to have helped us to learn its many painful lessons.
Lessons Learned! Loud and Clear.