GET THE REPORT
To view the report of the Financial Crisis Inquiry Commission, you can download the report in full or download a section of the report by clicking on the links below. You can also order the Commission’s authorized and official versions of the report by clicking on your preferred option in the box on the right.
- Download Full Report with Dissents (PDF)
- Table of Contents
- Commissioner votes
- Staff list
- Conclusions of the Financial Crisis Inquiry Commission
- Part I: Crisis on the Horizon
- Part II: Setting the Stage
- Part III: The Boom and Bust
- Part IV: The Unraveling
- Part V: The Aftershocks
- Dissenting Views By Keith Hennessey, Douglas Holtz-Eakin, and Bill Thomas
- Dissenting Views By Peter J. Wallison
- Appendix A: Glossary
- Appendix B: List of Hearings and Witnesses
How did it come to pass that in 2008 our nation was forced to choose between two stark and painful alternatives — either risk the collapse of our financial system and economy, or commit trillions of taxpayer dollars to rescue major corporations and our financial markets, as millions of Americans still lost their jobs, their savings, and their homes?
The Commission concluded that this crisis was avoidable. It found widespread failures in financial regulation; dramatic breakdowns in corporate governance; excessive borrowing and risk-taking by households and Wall Street; policy makers who were ill prepared for the crisis; and systemic breaches in accountability and ethics at all levels. Here we present what we found so readers can reach their own conclusions, even as the comprehensive historical record of this crisis continues to be written.
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I have long stated that our current market crash was caused by a lending industry taking advantage of a government deregulation intended to make home ownership available to more Americans. In a classic example of the Law of Unintended Consequences, the deregulation allowed lenders to sell virtually any loan they created regardless of whether or not the borrower was qualified for the loan. This house of cards eventually crashed when original teaser rates re-set and millions of borrowers could no longer afford the loans.
In 2008, Congress created a Commission to investigate the cause of the crash and appointed Sacramentan, Phil Angelides, to head it. In a blistering report that followed 18 months of testimony and fact-gathering, Angelides and his Financial Crisis Inquiry Commission blamed a wide cast of characters for the epic meltdown, including executives of insurance giant AIG and Goldman Sachs and government policymakers like Alan Greenspan, Timothy Geithner and Ben Bernanke. The report said human error created the crisis. The Report blamed mortgage lenders for the flood of risky subprime loans that ignored “a borrower’s ability to pay.” Wall Street investment banks recklessly packaged the loans into toxic securities that exposed the entire financial system to melt down, the report concludes.
The panel held four field hearings, all in communities that were among the hardest hit by the real estate crash: Sacramento, Las Vegas, Bakersfield and Miami. In Sacramento, commissioners heard about the Central Valley’s vulnerability to the housing price bubble. One witness testified that appraisers were pressured by lenders to make inflated appraisals so shaky loans would go through. The final report mentions Sacramento numerous times, noting that housing prices more than doubled in a five-year stretch.
All the while, government watchdogs were asleep. For more than 30 years, lawmakers and presidents bought into the free-market ethic backed by the likes of Greenspan, the former Federal Reserve chairman. “The sentries were not at their posts,” the report said. However, following the release of the report, government officials lost no time in getting to finger-pointing. The crisis commission’s findings were caught up in immediate partisan bickering. While the report was endorsed by the six Democrats on the commission, the four Republicans refused to sign off on its conclusions.
At the press conference introducing the report, Mr. Angelides made no bones about where he stood on this question: This was an avoidable crisis, he said bluntly. As the report puts it, “The crisis was the result of human action and inaction, not of Mother Nature or computer models gone haywire. If only regulators had been willing to regulate; if only Wall Street had done proper due diligence on the mortgages it was securitizing; if only subprime companies had acted more honorably; if only the credit ratings agencies had said no when asked to slap triple-A ratings on subprime junk. If only, if only, if only”.
Now comes the real test of whether our leaders will put back in place the economic regulations necessary to prevent irresponsible lending while not stopping the economic recovery which is just beginning. We need to have a thriving lending system for our nation to continue to grow and prosper. But that lending system owes a duty to us all to act reasonably and responsibly… a duty sadly lacking in causing this market crash.
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Repeal of Glass-Steagall Center-Stage in Angelides Report; Wall Street Apologists go Berserk and Lie
In assigning responsibility for the 2007-08 financial collapse. the Final Report of the Financial Crisis Inquiry Commission (FCIC) places crucial emphasis on banking deregulation, and particularly the erosion and repeal of Franklin Roosevelt’s Glass-Steagall Act.
The Commission’s mandate from Congress did not include making recommendations for resolving the current crisis and preventing a future one, but economist and statesman Lyndon LaRouche has identified the restoration of Glass-Steagall, which was repealed in 1999, as the critical and essential condition for halting the present collapse and beginning to rebuild our economy.
Chapter 2 of Part II of the FCIC report entitled “Setting the Stage,” chronicles the rise of what it calls the “shadow banking system” of investment banks, money-market funds and “hot money,” parallel to the commercial banking system, and shows indisputably how deregulation allowed the shadow banking system to grow and outstrip the regulated banks, to the point of their collapse in 2007-08.
The report cites as pivotal, the 1933 passage of the Glass-Steagall Act, with its establishment of the Federal Deposit Insurance Corporation, intended to protect depositors’ monies, prevent bank panics and to discourage excessive risk-taking in the banking system. But as the shadow banking system grew in the 1970s and 1980s, the commercial banks argued they they had been trapped in a straightjacket since the 1930s by Glass-Steagall, which strictly limited their participation in the speculative securities markets.
The FCIC Report documents the step-by-step drive for deregulation in the 1980s and 1990s—justified by arguments for unlimited competition and “innovation,” typified by the argument put forward by Fed chairman Alan Greenspan, that “unfettered markets create a degree of wealth that fosters a more civilized existence.”
“Beginning in 1987,” the FCIC report states, “the Federal Reserve accommodated a series of requests from the banks to undertake activities forbidden by Glass-Steagall.” The movement continued to dismantle the regulations that restricted depository institutions’ activities in the capital markets. “In 1991, the Treasury Department issued an extensive study calling for the elimination of the old regulatory framework for banks, including removal of all geographic restrictions on banking and repeal of the Glass-Steagall Act.”
Chapter 4 recounts the events of the 1990s, when the parallel banking system was booming, commercial banks were acting more like investment banks, and the largest banks were pressing regulators, state legislators, and Congress to remove almost all remaining regulation, especially that which separated commercial banks from securities firms and insurance companies. In 1998, Citicorp forced the issue of Glass-Steagall repeal, with its merger with Travelers insurance company to form Citigroup; and the next year, Congress compliantly passed the Gramm-Leach-Bliley Act, lifting most of the remaining Glass-Steagall restrictions. The FCIC cites a New York Times report that Citigroup’s Sandy Weill hung a plague in his office with his portrait and the caption, “Shatterer of Glass-Steagall.”
“The biggest bank holding companies became major players in investment banking,” says the Angelides Report. “The strategies of the largest commercial banks and their holding companies came to more resemble the strategies of investment banks.”
And on it went—until it predictably blew up in 2007.
– They Protest Too Much –
Both of the dissenting FCIC reports, coming from the four Republican members of the 10-person commission, singled out the mention of Glass-Steagall, explicitly denying that the repeal of Glass-Steagall was a cause of the crisis.
Peter Wallison, who for years has been the leading Wall Street propagandist for deregulation, accuses the Commission’s majority of only looking for facts to support their assumptions about deregulation, “greed and recklessness on Wall Street,” etc., and he then declares, astoundingly, that: “No significant deregulation of financial institutions occurred in the last 30 years. The repeal of a portion of the Glass-Steagall Act, frequently cited as an example of deregulation, had no role in the financial crisis.”
Wallison’s entire tedious, lying, almost 100-page argument, is that the sole cause of the crisis was the federal government’s housing policy which encouraged poor people to buy houses they couldn’t afford, exemplified by the role of Fannie Mae and Freddie Mac, and the Community Reinvestment Act.
Wallison’s argument was too much for even the other three Republicans on the Commission, who were not so sweeping in their dismissal of the majority’s analysis, but who nonetheless assert that “Neither the Community Reinvestment Act nor removal of the Glass-Steagall firewall was a significant cause.”
These arguments, dismissing the crucial role of the repeal of Glass-Steagall and other financial deregulation, have been repeated incessantly, and lyingly, by Wall Street apologists since the release of the truthful and irrefutable Angelides Report.
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