Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Financial Crisis Inquiry Commission report
Old 12-28-2011, 10:41 AM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Chuckanut's Avatar
 
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 17,169
Financial Crisis Inquiry Commission report

The Financial Crisis Inquiry Commission spent over a year looking into the causes of the financial crisis that has hurt our nation and the world.

You can find their report here:

Get the Report : Financial Crisis Inquiry Commission

You can find their conclusions here:

http://fcic.law.stanford.edu/report/conclusionsA

A few quotes:

We conclude widespread failures in financial regulation and supervision proved devastating to the stability of the nation’s financial markets.

We conclude dramatic failures of corporate governance and risk management at many systemically important financial institutions were a key cause of this crisis.

We conclude a combination of excessive borrowing, risky investments, and lack of transparency put the financial system on a collision course with crisis.

We conclude the government was ill prepared for the crisis, and its inconsistent response added to the uncertainty and panic in the financial markets.

We conclude there was a systemic breakdown in accountability and ethics.

************************************************** **********
__________________
Comparison is the thief of joy

The worst decisions are usually made in times of anger and impatience.
Chuckanut is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-28-2011, 12:59 PM   #2
Full time employment: Posting here.
Coolius's Avatar
 
Join Date: May 2010
Posts: 862
They should have added:

We conclude that sheer greed and stupidity of commercial and government agencies, encouraged by the gross ineptitude of governments in the US and Europe is the underlying reason for the crises.
Coolius is offline   Reply With Quote
Old 12-28-2011, 05:38 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,263
Quote:
Originally Posted by Coolius View Post
They should have added:

We conclude that sheer greed and stupidity of commercial and government agencies, encouraged by the gross ineptitude of governments in the US and Europe is the underlying reason for the crises.
Interesting observation. As I was reading the OP it struck me that there was no mention of the government's policy forcing financial institutions to make loans to people who normally would not have qualified for mortgages in the name of expanding home ownership which IMHO planted the seeds of the crisis. I guess there wasn't a mirror in the room they were writing the report in.
pb4uski is offline   Reply With Quote
Old 12-29-2011, 12:56 PM   #4
Thinks s/he gets paid by the post
 
Join Date: Jan 2004
Posts: 2,049
Quote:
Originally Posted by pb4uski View Post
Interesting observation. As I was reading the OP it struck me that there was no mention of the government's policy forcing financial institutions to make loans to people who normally would not have qualified for mortgages in the name of expanding home ownership which IMHO planted the seeds of the crisis. I guess there wasn't a mirror in the room they were writing the report in.
That's because there's no proof that this policy (the CRA) had any significant effect on the crisis.

The Commission addressed this claim in the report.
eridanus is offline   Reply With Quote
Old 12-29-2011, 04:30 PM   #5
Recycles dryer sheets
justplainbll's Avatar
 
Join Date: Sep 2011
Location: Easten Long Island
Posts: 414
Quote:
Originally Posted by pb4uski View Post
Interesting observation. As I was reading the OP it struck me that there was no mention of the government's policy forcing financial institutions to make loans to people who normally would not have qualified for mortgages in the name of expanding home ownership which IMHO planted the seeds of the crisis. I guess there wasn't a mirror in the room they were writing the report in.
Whether it be home mortagages or personal loans, my dad who started out as a repo man in the 1930s and wound up working for Chase, told me as early as 1978 that the banks were being coerced into making loans to 'unqualified' borrowers.
justplainbll is offline   Reply With Quote
Old 12-29-2011, 07:34 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,263
Quote:
Originally Posted by eridanus View Post
That's because there's no proof that this policy (the CRA) had any significant effect on the crisis.

The Commission addressed this claim in the report.
What "proof" would you expect? Did loans written with 80% LTV and <30% PITI/income fail or was it the more risky loans?
pb4uski is offline   Reply With Quote
Old 12-29-2011, 08:41 PM   #7
Thinks s/he gets paid by the post
 
Join Date: Jan 2004
Posts: 2,049
Quote:
Originally Posted by pb4uski View Post
What "proof" would you expect? Did loans written with 80% LTV and <30% PITI/income fail or was it the more risky loans?
CRA loans had a lower default rate than other subprime loans. The other subprime loans (>90%) were made by lenders that weren't under the purview of the CRA. In other words, it was market share that drove these loans rather than the CRA.

This is discussed in the report mentioned in the OP.

A better target for your ire might be the decision to not regulate CDSs or maybe the government policy (SEC) to allow excessive leveraging by those same banks that were bundling CDSs.
eridanus is offline   Reply With Quote
Old 12-30-2011, 05:56 AM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 11,317
Quote:
Originally Posted by eridanus View Post
CRA loans had a lower default rate than other subprime loans. The other subprime loans (>90%) were made by lenders that weren't under the purview of the CRA. In other words, it was market share that drove these loans rather than the CRA.

This is discussed in the report mentioned in the OP.
This is the aspect that those who want to put the lion's share of the blame on Government fail to address. Absent the real abuse marginal loans based on CRA would not have precipitated a bubble or a crisis. They may or may not have been good policy but they didn't cause the crisis.

Quote:
A better target for your ire might be the decision to not regulate CDSs or maybe the government policy (SEC) to allow excessive leveraging by those same banks that were bundling CDSs.
If you want to blame Government here is the real problem - a failure to reign in insanity.
__________________
Idleness is fatal only to the mediocre -- Albert Camus
donheff is offline   Reply With Quote
Old 12-30-2011, 08:48 AM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
kcowan's Avatar
 
Join Date: Jul 2006
Location: Pacific latitude 20/49
Posts: 7,677
Send a message via Skype™ to kcowan
Once they broke the link between mortgage granting and mortgage servicing, they created the loophole that enabled unscrupulous mortgage brokers/underwriters to make easy money.
__________________
For the fun of it...Keith
kcowan is offline   Reply With Quote
Old 12-30-2011, 09:33 AM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Chuckanut's Avatar
 
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 17,169
Let's not forget the repeal of Glass-Steagal which opened commercial banking up to the risks of investment banking. As far as I know, Joe and Jill Average did not lobby for that. Guess who did?
__________________
Comparison is the thief of joy

The worst decisions are usually made in times of anger and impatience.
Chuckanut is offline   Reply With Quote
Old 12-31-2011, 01:06 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Location: Lawn chair in Texas
Posts: 14,183
I don't need know stinkin' commission.

Cause: The music stopped...
__________________
Have Funds, Will Retire

...not doing anything of true substance...
HFWR is offline   Reply With Quote
Old 12-31-2011, 02:36 PM   #12
Thinks s/he gets paid by the post
obgyn65's Avatar
 
Join Date: Sep 2010
Location: midwestern city
Posts: 4,061
Where were the auditors, especially PwC, E&Y, etc. ? Aren't they paid to to report on risk ?
Quote:
Originally Posted by Chuckanut View Post
We conclude dramatic failures of corporate governance and risk management at many systemically important financial institutions were a key cause of this crisis.
__________________
Very conservative with investments. Not ER'd yet, 48 years old. Please do not take anything I write or imply as legal, financial or medical advice directed to you. Contact your own financial advisor, healthcare provider, or attorney for financial, medical and legal advice.
obgyn65 is offline   Reply With Quote
Old 12-31-2011, 03:37 PM   #13
Thinks s/he gets paid by the post
 
Join Date: Jan 2004
Posts: 2,049
Quote:
Originally Posted by obgyn65 View Post
Where were the auditors, especially PwC, E&Y, etc. ? Aren't they paid to to report on risk ?
Evidently, they're paid to not report on risk as well.
eridanus is offline   Reply With Quote
Old 01-06-2012, 02:27 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,483
Quote:
Originally Posted by obgyn65 View Post
Where were the auditors, especially PwC, E&Y, etc. ? Aren't they paid to to report on risk ?
Probably the auditors were the same folks who used to work at Arthur Andersen before the Enron debacle.........I am sure the other Big 6 firms eagerly snapped them up.........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline   Reply With Quote
Old 01-06-2012, 02:41 PM   #15
Recycles dryer sheets
l2ridehd's Avatar
 
Join Date: Sep 2011
Location: PWC VA
Posts: 144
There is certainly enough blame to go around. Banks that made high risk loans, government that pushed that policy, greed by everyone on both sides, government(S) that keep over spending with borrowed money, people who want more and more while paying less and less, import and export rules, lack of oversight and reporting on most of it, failure to act on issues, terrorism impact on economy, and probably a few others I failed to mention.
l2ridehd is offline   Reply With Quote
Old 01-06-2012, 02:56 PM   #16
Administrator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,581
Quote:
Originally Posted by l2ridehd View Post
There is certainly enough blame to go around. Banks that made high risk loans, government that pushed that policy, greed by everyone on both sides, government(S) that keep over spending with borrowed money, people who want more and more while paying less and less, import and export rules, lack of oversight and reporting on most of it, failure to act on issues, terrorism impact on economy, and probably a few others I failed to mention.
You forgot global warming and acid rain. Or was it the commission?
MichaelB is online now   Reply With Quote
Old 01-06-2012, 06:04 PM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Brat's Avatar
 
Join Date: Feb 2004
Location: Portland, Oregon
Posts: 7,108
I don't think risk is on the list for auditors.. they look at accuracy of numbers reported. The FDIC auditors are supposed to evaluate risk in banks under their jurisdiction. Many bad actors were not under any-one's jurisdiction or had weak supervision by state agencies.
__________________
Duck bjorn.
Brat is offline   Reply With Quote
Old 01-06-2012, 08:39 PM   #18
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,263
Quote:
Originally Posted by obgyn65 View Post
Where were the auditors, especially PwC, E&Y, etc. ? Aren't they paid to to report on risk ?
No, they are not paid to report on risk. They are paid to report in whether the financial statements are fairly stated in accordance with generally accepted accounting principles.

If a client is taking imprudent risk, there is absolutely nothing that the auditor can do as long as the client is accounting and disclosing properly.

As an example, Corzine's imprudent decisions to load up on European debt investments - as long as MF Global properly reported their holdings and disclosed concentration of credit risk there is nothing an auditor can do about it.
pb4uski is offline   Reply With Quote
Old 01-06-2012, 09:28 PM   #19
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Brat's Avatar
 
Join Date: Feb 2004
Location: Portland, Oregon
Posts: 7,108
pb4uaki is spot on.
__________________
Duck bjorn.
Brat is offline   Reply With Quote
Reply

Tags
financial crisis report


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Society of Actuaries Whitepaper on Drawing Down Retirement Financial Savings chinaco FIRE and Money 5 10-14-2011 04:32 AM
GAO Report on Retirement Income Purron FIRE and Money 5 07-17-2011 02:27 PM

» Quick Links

 
All times are GMT -6. The time now is 04:52 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.