Financial Crisis Report Issued

The US Financial Crisis Inquiry Commission [FCIC] was established in 2009 to diagnose our recent economic and financial crisis — dubbed the “Great Recession”.

The Financial Crisis Inquiry Commission was created to “examine the causes, domestic and global, of the current financial and economic crisis in the United States.” The Commission was established as part of the Fraud Enforcement and Recovery Act (Public Law 111-21) passed by Congress and signed by the President in May 2009.

Last week, the FCIC published the report [PDF, 662pp.] of its findings.  The report includes not only the findings of the FCIC as a whole, based on 15 days of public hearings, interviews with 700+ individuals, and the review of many documents, but also two dissenting reports from some members of the FCIC.

I have just started reading the report, but the New York Times has a summary article.  That article, and the first pages of the report itself, make it clear that there is plenty of blame to go around.

The report examined the risky mortgage loans that helped build the housing bubble; the packaging of those loans into exotic securities that were sold to investors; and the heedless placement of giant bets on those investments.

Enabling those developments, the panel found, were a bias toward deregulation by government officials, and mismanagement by financiers who failed to perceive the risks.

This makes sense.  Although the financial system is an extremely complex web of interconnections, it is really not very likely that one participant, or even a few, could cause the near-collapse of the whole thing.  I’ve written here before about some the financial factors that may have contributed to the crisis (in “Formulas for Disaster”, parts 1, 2, 3, and 4, and the sequel), and will post another note when I’ve had time to go over the report.

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