They wanted a strong reform action that will guarantee that the psychology and ethics that led to the current betrayal is completely disgraced and placed outside the American system forever. It is critical that those in the sector who were responsible for the meltdown are publically identified and punished. There must be significant retribution with large sums recovered for the people who innocently suffered. The public consequences to those that caused the situation must be adequate to prevent any thoughts of ever returning to similar behavior.An important first step to this goal was the formation of a non-government investigative commission, the Financial Crisis Inquiry Commission (FCIC) .
The task, as described in the preface of the report was:
Our task was first to determine what happened and how it happened so that we could understand why it happened. Here we present our conclusions. We encourage the American people to join us in making their own assessments based on the evidence gathered in our inquiry.In addition they were directed to identify any violations of Federal or State laws and turn them over for the appropriate legal action. Although no names are given in the report the commission head Phil Angelides said in a TV interview that they had turned several instance over for investigation of illegal actions.
In my opinion it is a through report, well written, and easy to understand. We now have an extensive document that can serve as a check on the Dodd-Frank Bill (aka Financial Reform Bill). The report. is extremely damaging to the entire financial system that allowed the failure and shows the inadequacy of the Dodd-Frank bill.
Three important points we should never forget:
This mismanagement has been very expensive to the country. Nearly 11 trillion dollars in household wealth has vanished, with retirement accounts and life savings swept away.You can obtain a full copy from the FCIC. I recommend you download it for a full understanding of what needs to be done. I will list the leading conclusions and two interesting quotes. The report has a full discussion of each conclusion.. They are very damaging to the entire sector and call for a serious review of the companies and institutions which we have given power over our financial system
The additional power we have foolishly given the financial sector caused a shift from productive investments to non-productive financial activities. On the eve of the crisis in 2006, financial sector profits constituted 27% of all corporate profits in the United States; In 1980 it was 15%. Understanding this transformation has been critical to the Commission’s analysis.
Industry testimony has claimed the event was unpredictable. These reports, as well as many other analyses completely disagree.
Here are the conclusions:
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. Theirs was a big miss, not a stumbleDramatic failures of corporate governance and risk management at many systemically important financial institutions were a key cause of this crisis.
A combination of excessive borrowing, risky investments, and lack of transparency put the financial system on a collision course with crisis.
The government was ill prepared for the crisis, and it’s inconsistent
response added to the uncertainty and panic in the financial markets.
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 downThere was a systemic breakdown in accountability and ethics
Collapsing mortgage-lending standards and the mortgage securitization
pipeline lit and spread the flame of contagion and crisis
Over-the-counter derivatives contributed significantly to this crisis.
The failures of credit rating agencies were essential cogs in the wheel of financial destruction.
The current Dodd-Frank bill does not come close to providing the required fixes. The FCIC has identified the causes. Our political leaders now have ample information to be sure that the heavily lobbied Dodd-Frank bill is corrected and rigorously implemented.
The regulators are being heavily lobbied. The citizens need to see a comprehensive checklist of the causes identified in this report versus the response in the Dodd-Frank bill.
For this to really happen will require extreme citizen pressure.