Financial crisis was avoidable

[Jetboogieman]

Regulators, politicians and bankers were to blame for the 2008 US financial meltdown, a report has claimed.

The US Financial Crisis Inquiry Commission, tasked with establishing the causes of the crisis, said it was "avoidable".

Its report highlighted excessive risk-taking by banks and neglect by financial regulators.

Only the six Democrat members of the 10-strong commission, set up in May 2009, endorsed the report's findings.

"The crisis was the result of human action and inaction, not of Mother Nature or models gone haywire," the report said.

"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."

The damning report criticised the extent of the financial deregulation overseen by the former chairman of the Federal Reserve, Alan Greenspan.

It concluded that the crisis was caused by a number of factors:

• Failures in financial regulation, including the Federal Reserve's failure "to stem the tide of toxic mortgages"
  
• A breakdown in corporate governance that led to "reckless" actions and excessive risk taking by financial institutions
  
• Households taking on too much debt
  
• A lack of understanding of the financial system on behalf of policymakers
  
• Fundamental breaches in accountability and ethics "at all levels".

It added that "collapsing mortgage-lending standards" and the packaging-up of mortgage-related debt as investment vehicles "lit and spread the flame of contagion".

These complex derivatives, which were traded in huge volumes by major investment banks, then "contributed significantly to the crisis".

The commission interviewed over 700 witnesses and held 19 days of public hearings across the US.

BBC News - Financial crisis of 2008 avoidable, says US inquiry

In short. It was everyones fault.

 

[Badmutha]

Without Government Mortgage INC........the crisis would have been completely avoidable.......
.
.
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[Cephus]

Without Government Mortgage INC........the crisis would have been completely avoidable.......

Not at all. The real cause of the crisis was the deregulation of the mortgage industry under Clinton. He allowed banks to become mortgage companies and fly-by-night companies sold tons of bad loans, made to people who simply could not afford the houses and never should have received them. We need to have that industry regulated, this was clear proof.

 

[CriticalThought]

God, how ridiculous.

It took A+B+C+D and so forth to bring about the economic crisis.

Saying that, "Oh if we hadn't done B then the crisis would not have happened" or "C was the main cause" is pointless.

It took every step to get there. It was not one thing. If we hadn't done any one of the steps then we may have avoided it. There was no single or major cause to the economic meltdown. The sum was truly greater than the parts.

 

[Geo Patric]

The real cause of the crisis was the deregulation of the mortgage industry under Clinton. . . . We need to have that industry regulated, this was clear proof.

there we can definately agree. well said.

geo

 

[Grim17]

Not at all. The real cause of the crisis was the deregulation of the mortgage industry under Clinton. He allowed banks to become mortgage companies and fly-by-night companies sold tons of bad loans, made to people who simply could not afford the houses and never should have received them. We need to have that industry regulated, this was clear proof.

Though the left will never admit it, they should have listened to George Bush and the republicans back in 2003 when they sounded the alarm bells and attempted to overhaul those regulations. Instead, people Barney Frank and Maxine Waters insisted that there was no problem what so ever and killed the overhaul attempt in committee. They accused the republicans of playing politics by trying to deny home loans to low income families, and proudly heaped praise on executives like former democratic white house staff member Franklin Raines, who cooked the books at Fannie Mae and was forced to resign... Not before collecting around 90 million in bonuses though.

You live and you learn... Hopefully.

 

[tlmorg02]

Though the left will never admit it, they should have listened to George Bush and the republicans back in 2003 when they sounded the alarm bells and attempted to overhaul those regulations. Instead, people Barney Frank and Maxine Waters insisted that there was no problem what so ever and killed the overhaul attempt in committee. They accused the republicans of playing politics by trying to deny home loans to low income families, and proudly heaped praise on executives like former democratic white house staff member Franklin Raines, who cooked the books at Fannie Mae and was forced to resign... Not before collecting around 90 million in bonuses though.

You live and you learn... Hopefully.

Are you saying Bush wanted more regulation?

 

[Wiseone]

Though the left will never admit it, they should have listened to George Bush and the republicans back in 2003 when they sounded the alarm bells and attempted to overhaul those regulations. Instead, people Barney Frank and Maxine Waters insisted that there was no problem what so ever and killed the overhaul attempt in committee. They accused the republicans of playing politics by trying to deny home loans to low income families, and proudly heaped praise on executives like former democratic white house staff member Franklin Raines, who cooked the books at Fannie Mae and was forced to resign... Not before collecting around 90 million in bonuses though.

You live and you learn... Hopefully.

In 2003, the Republicans controlled every branch of government...

Its always the same with these reports, "They don't fall into what I already know therefore they are wrong!"

 

[justabubba]

this was foreseeable and foreseen

recall the many articles about the too-big-to-fail banks prior to the meltdown

this was on the horizon for anyone who was interested enough to see it

 

[Hicup]

The phrase "mortgage bubble" entered into the nations everyday langauge sometime in early 2000 if memory serves. Whenever you hear the words "bubble" run from that financial vehicle as fast as you can.

Everyone that knew anything, knew it was going to pop. What spread the greed is that everyone (As is usually the case) thought that they still had time for one more swap..


Tim-

 

[Deuce]

God, how ridiculous.

It took A+B+C+D and so forth to bring about the economic crisis.

Saying that, "Oh if we hadn't done B then the crisis would not have happened" or "C was the main cause" is pointless.

It took every step to get there. It was not one thing. If we hadn't done any one of the steps then we may have avoided it. There was no single or major cause to the economic meltdown. The sum was truly greater than the parts.

In aviation we call it the "accident chain." There's never just one single cause of a major accident. Several things just line up, any of which could have prevented the whole situation, but didn't.

 

[Grim17]

Are you saying Bush wanted more regulation?

Yes, and there's an article in the news that proves it... Not a article from the Washington Times, the Wall Street Journal or some right wing internet news site, but an article from the business section of The New York Times, dated 9/11/2003. Here are a few key excerpts:

New Agency Proposed to Oversee Freddie Mac and Fannie Mae
By STEPHEN LABATON
Published: September 11, 2003

. .WASHINGTON, Sept. 10— 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.

...

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.

...

After the hearing, Representative Michael G. Oxley, chairman of the Financial Services Committee, and Senator Richard Shelby, chairman of the Senate Banking Committee, announced their intention to draft legislation based on the administration's proposal. Industry executives said Congress could complete action on legislation before leaving for recess in the fall.

...

Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

''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. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

''I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,'' Mr. Watt said.

Seeing is believing...

In 2003, the Republicans controlled every branch of government...

Its always the same with these reports, "They don't fall into what I already know therefore they are wrong!"

It's true, the republicans did control both houses of congress in 2003 when the Senate held those hearings, and again in 2005 when a senate bill was written and proposed, but again went nowhere. But the reason both financial reform attempts never made it to the senate floor and instead died in committee, isn't because of the republicans, it's because of the democrats.

Both in 2003 and 2005, the attempts at regulatory reform had absolutely no support from senate democrats, and that's the reason both overhaul attempts died in committee. It same reason that the democrats Cap & Trade bill, which was actually passed by congress nearly 2 years ago, never reached the senate floor and has been declared dead in the water... Without a super majority of 60 seats in the senate, the party in control must have at least some support from the minority party before they can bring a bill to the full senate for debate. If the minority party is united in opposition to a proposal, they will use the filibuster to prevent any proposed legislation from ever being voted on.

That's precisely why cap & trade, along with both the 2003 and 2005 attempts to overhaul the mortgage lending industry by the Bush administration and republicans on capitol hill, never reached the floor of the senate.

If you want to see some video from those hearings and committee debates, showing the democrats dismissing the problem and opposing any reform, I would be glad to post a few clips.

 

[Juiposa]

Everything is avoidable.
In this case restrictions on the money hungry corporations would've helped.

 

[Hicup]

Everything is avoidable.
In this case restrictions on the money hungry corporations would've helped.

Let me ask you something. Wouldn't it be a great move for the corporations of a communist nation to maximize profits? How would you go about doing that as leader of a communist nation, sparky?


Tim-

 

[Juiposa]

Let me ask you something. Wouldn't it be a great move for the corporations of a communist nation to maximize profits? How would you go about doing that as leader of a communist nation, sparky?


Tim-

What corporations?

 

[Hicup]

What corporations?

Don't be naive..


Tim-

 

[Juiposa]

Don't be naive..


Tim-

What I meant by that is that there are no corporations in a Communist society. Everything is owned by the state and the people.

 

[Hicup]

What I meant by that is that there are no corporations in a Communist society. Everything is owned by the state and the people.

Yes, and this is exactly what I suspected. You're an idiot..


Tim-

 

[Juiposa]

Yes, and this is exactly what I suspected. You're an idiot..


Tim-

Because I don't have the same beliefs as you? You're the idiot my friend. Biased idiot.

 

[Hicup]

Because I don't have the same beliefs as you? You're the idiot my friend. Biased idiot.

No! it's because you are a self labeld communist, yet you have no real understanding of what that really means. That's why you're an idiot..


Tim-

 

[Juiposa]

No! it's because you are a self labeld communist, yet you have no real understanding of what that really means. That's why you're an idiot..


Tim-

I have a full understanding of what it means. Again, you are biased, your are making blatant assumptions. I love communist ideals. If you have a problem with that you can kindly go (insert whatever first comes to mind.)

 

[justabubba]

Let me ask you something. Wouldn't it be a great move for the corporations of a communist nation to maximize profits? How would you go about doing that as leader of a communist nation, sparky?


Tim-

isn't this what we are seeing in communist china today?
their economy is rapidly growing while ours is ... well not so much

 

[Wiseone]

Let me ask you something. Wouldn't it be a great move for the corporations of a communist nation to maximize profits? How would you go about doing that as leader of a communist nation, sparky?


Tim-

What corporations?

Don't be naive..


Tim-

What I meant by that is that there are no corporations in a Communist society. Everything is owned by the state and the people.

While they wouldn't be called corportations they would still exist and semi independant groups correct? That is to say instead of several airlines for example there would be one "People's airline" which would be run by experts and those qualified and knowledgeable enough to run the airline industry, under the direction of the government.

So I guess to rephrase his question, would it be a good idea for those parts of the government which were former industries to seek to maximize their profits OR for the government as a whole, ie including all industries and former corporations, to maximize their profits?

 

[imagep]

God, how ridiculous.

It took A+B+C+D and so forth to bring about the economic crisis.

Saying that, "Oh if we hadn't done B then the crisis would not have happened" or "C was the main cause" is pointless.

It took every step to get there. It was not one thing. If we hadn't done any one of the steps then we may have avoided it. There was no single or major cause to the economic meltdown. The sum was truly greater than the parts.

Thats a good point. The causes of the origional mild recession in late 2007 were different than the causes of the Sept-Nov 09 banking crises, they compounded themselves to form the perfect storm. The auto manufacturer crises was something different also, but it compounded the severity of the situation. Without any one issue, the situation would have been more managable, we wouldn't even have been talking about it now. But with quite a few problems all peaking over a one and a half year period they compounded each other.

The crises was most definately avoidable, but to have avoided it, we would have had to have delt with all the issues, going back many years, not just one issue on one particular day.

 

[Cephus]

Though the left will never admit it, they should have listened to George Bush and the republicans back in 2003 when they sounded the alarm bells and attempted to overhaul those regulations. Instead, people Barney Frank and Maxine Waters insisted that there was no problem what so ever and killed the overhaul attempt in committee. They accused the republicans of playing politics by trying to deny home loans to low income families, and proudly heaped praise on executives like former democratic white house staff member Franklin Raines, who cooked the books at Fannie Mae and was forced to resign... Not before collecting around 90 million in bonuses though.

You live and you learn... Hopefully.

True, but it isn't like GWB re-regulated the industry when he had a chance, even when economists warned him what might be coming. He wanted to keep riding the Clinton wave of financial success, artificial though it was. There's more than enough blame for both sides.