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Financial Crisis Inquiry Commission Slams Greenspan, Bernanke, Geithner, Paulson, Summers, SEC, Rating Agencies and Big Banks for Causing Crisis

George Washington's picture




 

Washington’s Blog

The Financial Crisis Inquiry Commission is releasing its report Thursday.

The New York Times has a preview of the report, which shows that the Commission will slam the right people for causing the financial crisis.

Barry Ritholtz gives a good summary of the Times' article:

The many causal factors highlighted in the FCIC report:

 

• Alan Greenspan’s
malfeasance — his refusal to perform his regulatory duties because he
did not believe in them — allowed the credit bubble to expand, driving
housing prices to dangerously unsustainable levels; Greenspan’s
advocacy for financial deregulation was a “pivotal failure to stem the
flow of toxic mortgages” and “the prime example” of government
negligence;

 

• Ben S. Bernanke failed to foresee the crisis;

 

• The Bush administration’s
“inconsistent response” — saving Bear, but allowing Lehman to crater —
“added to the uncertainty and panic in the financial markets.”

 

• Bush Treasury secretary Henry M. Paulson Jr. wrongly predicted in 2007 that subprime meltdown would be contained.

 

• The Clinton White House, including then Treasury Secretary Lawrence Summers,
made a crucial error in “shielding over-the-counter derivatives from
regulation [CFMA]. This was “a key turning point in the march toward
the financial crisis.”

 

• Then NY Fed President, now Treasury secretary Timothy F. Geithner failed
to “clamp down on excesses by Citigroup in the lead-up to the crisis;”
Further, a month before Lehman’s collapse, Geithner was still in the
dark about Lehman’s derivative exposure;

 

• Low interest rates brought about by the Fed after the 2001 recession “created increased risks” but were not chiefly to blame, according to the FCIC (I place some more weight on Ultra-low rates than they do);

 

• The financial sector spent $2.7 billion on lobbying
from 1999 to 2008, while individuals and committees affiliated with
the industry made more than $1 billion in campaign contributions. The
impact of which an incestuous relationship between bankers and
regulators, Congress and bankers, and classic regulatory capture by the
industry.

 

• The credit-rating agencies “cogs in the wheel of financial destruction.”

 

• The Securities and Exchange Commission allowed the 5 biggest banks to ramp up their leverage, hold insufficient capital, and engage in risky practices.

 

• Leverage at the nation’s five largest investment banks was wildly excessive: They kept only $1 in capital to cover losses for about every $40 in assets;

 

• The Office of the Comptroller of the Currency along with the Office of Thrift Supervision, “federally pre-empted” (blocked) state regulators from reining in lending abuses;

 

• The report documents “questionable practices by mortgage lenders and careless betting by banks;”

 

• The report portrays the “bumbling incompetence among corporate chieftains” as to the risk and operations of their own firms:

-Citigroup executives admitting that they paid little attention to the risks associated with mortgage securities.
-AIG executives were blind to its $79 billion exposure to credit default swaps;
-Merrill Lynch top managers were surprised when mortgage investments suddenly resulted in billions of dollars in losses;

I certainly agree with all of these points.

It should be noted that leading banking analyst Chris Whalen - who I greatly respect - agrees with FCIC Commissioner Peter Wallison (co-director
of the American Enterprise Institute's program on financial policy
studies) that Freddie and Fannie were a leading cause for the crisis.
This is the minority view of the FCIC.

Many people - including me -
have criticized the FCIC for seeming to sidestep the massive fraud
which was a core cause of the crisis. However, the Commission has indicated that it will make criminal referrals. We'll have to wait and see if the referrals are for big or small fish.

 

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Wed, 01/26/2011 - 21:14 | 907993 Nikki
Nikki's picture

Any Chinese, Latinos, African Americans in this pile of crooks ?.. How is it that it is 90% yahoods responsible ?.. Coincidence or conspiracy ???

Wed, 01/26/2011 - 19:47 | 907726 Hephasteus
Hephasteus's picture

Bad boys bad boys what ya gonna do?

What ya gonna do when fucking corrupt midgets come for you?

Wed, 01/26/2011 - 10:19 | 905848 Whatta
Whatta's picture

I think we should reward and give bonuses to all those named-names. And maybe keep them in high ranking positions. Gee, that would be a swell way to treat them. Maybe give them a puppy too.

Wed, 01/26/2011 - 09:43 | 905773 David99
David99's picture

Have all of these jokers hanged or not yet??

Wed, 01/26/2011 - 09:55 | 905801 SwingForce
SwingForce's picture

Of course they haven't been prosecuted, not with Andrew Cuomo as Attorney General, now Governor of NY.

Wed, 01/26/2011 - 09:59 | 905812 pan0p
pan0p's picture

Not with a public that believes all they have to do is bubble in a multiple choice option "prosecute" before returning to the sports arena or bingo hall.

Wed, 01/26/2011 - 09:49 | 905794 pan0p
pan0p's picture

Is Starbucks still in business?

Are people still investing "in the market?"

Wed, 01/26/2011 - 09:07 | 905704 Miss Expectations
Miss Expectations's picture

In conclusion, we don't believe it's possible that any of this was accidental.

Wed, 01/26/2011 - 09:48 | 905789 Bob
Bob's picture

Now, they can't go there!  It would be too "political."

Very good point, Miss.  They just throw out the data and then the corporate media stages the dog and pony debate that puts the public to sleep while the banksters keep that money machine churning.

Wed, 01/26/2011 - 12:24 | 906255 11b40
11b40's picture

Right! Plenty of blame to go around, but zip in the way of punishment.

How about if we offer them some tax breaks as an incentive to be better corporate stewards in the future?

Wed, 01/26/2011 - 09:05 | 905699 orangedrinkandchips
orangedrinkandchips's picture

I agree with Greenspan and Bernake for sure. I abhor Timmy to no end. However, I have to be fair and ax "how the fuck would Timmy know Dick-head Fuld was levered to the hilt?

 

Wait, that's right....probably during a bong session in Timmy's basement, Fuld should have told him they were levered 33 to 1. Why not?

 

And why he was at it...have Fuld make that announcement to the entire world...see what happens!

There is no way Tim would have known they were that screwed....

 

In the game of go fish...you are not going to broadcast what you have!

other than that... summed up in one word.....DUH! (aka....NO SHIT!)

Wed, 01/26/2011 - 08:55 | 905688 pan0p
pan0p's picture

Is this the dog part or the pony part?

Wed, 01/26/2011 - 08:51 | 905683 ft.knox.gold
ft.knox.gold's picture

so the gov't won't blame itself for forcing banks to lend to folks with no money, In the in in the name of ah-um minorities.

Wed, 01/26/2011 - 09:05 | 905701 pan0p
pan0p's picture

So the sheep won't blame themselves for their slide into absolute material debauchery? Admittedly such an understanding would require some sort of critical thinking faculty...

Wed, 01/26/2011 - 09:07 | 905705 pan0p
pan0p's picture

For, what other purpose does a "constitution" (as we understand them since 1789) serve than to keep a central bank in power?

Constitutions and democratic elections serve only one purpose: To justify the rule of a pernicious and mendacious minority over the rest of the people.

Cue the social sciences...

Wed, 01/26/2011 - 09:13 | 905714 Bob
Bob's picture

 

Constitutions and democratic elections serve only one purpose: To justify the rule of a pernicious and mendacious minority over the rest of the people.

 

Assuming we're responding to the same article, you're referring to the bankster oligarchy?

Wed, 01/26/2011 - 09:37 | 905752 pan0p
pan0p's picture

That's right.

Wed, 01/26/2011 - 08:51 | 905682 David99
David99's picture
They all are 100 times bigger criminals than Guatemala detainees, please hang them asap
Wed, 01/26/2011 - 09:37 | 905751 cossack55
cossack55's picture

There are detainees in Guatemala?  Gold smugglers, no doubt.

Wed, 01/26/2011 - 08:49 | 905679 David99
David99's picture

When will ZH let me know that they all are hanged till death??

Wed, 01/26/2011 - 08:47 | 905671 David99
David99's picture

My cup of tea is getting cold, can't have it till all of them are hanged asap

Wed, 01/26/2011 - 08:46 | 905669 JW n FL
JW n FL's picture

the God like quant... with his magic copulas'...

and POOF! the world ends...

the risk soup was a lil spicey, huh?

Wed, 01/26/2011 - 08:57 | 905692 Salinger
Salinger's picture

check out the about us section of fusionIQ and you will see that Barry is a quant wannabe

and as for the point in the above summary, kind of ironic given that he is part of the financial sector as a small time money manager in the order of Doug Kass who promotes his funds via his blog

 

The financial sector spent $2.7 billion on lobbying from 1999 to 2008, while individuals and committees affiliated with the industry made more than $1 billion in campaign contributions. The impact of which an incestuous relationship between bankers and regulators, Congress and bankers, and classic regulatory capture by the industry.

Wed, 01/26/2011 - 08:43 | 905662 David99
David99's picture

Hanging is the only solution now please do it asap before I can have a cup of tea

Wed, 01/26/2011 - 08:41 | 905655 David99
David99's picture

I can't have my food till they all are not hanged

Wed, 01/26/2011 - 08:39 | 905653 David99
David99's picture

Have all them hanged till death or not yet??

Wed, 01/26/2011 - 08:38 | 905651 David99
David99's picture

I am not intrested to see all these jokers for a second

 

Please hang them asap

Wed, 01/26/2011 - 08:41 | 905658 cossack55
cossack55's picture

Go long hemp.

Wed, 01/26/2011 - 08:37 | 905647 David99
David99's picture

Hang them today not tomorrow please

 

Hang them till death right now

Wed, 01/26/2011 - 08:36 | 905644 whoopsing
whoopsing's picture

What will the sheeple think when they hear this? Refund for a defective product.....Um,this gov't thingy ain't workin' as advertised.we want our money back

Wed, 01/26/2011 - 08:42 | 905633 Salinger
Salinger's picture

Barry Ritholtz gives a good summary of the Times' article:

 

Geroge, if we wanted to read Ritholtz we would go to his sorry excuse for a blog, you can do much better than quoting that wall street insider... what next are you going to link to Cramer?

some ZH references to the Great Barry Ritholtz

ZeroHedge - On Jumping Sharks With Barry Ritholtz

ZeroHedge - Some Afternoon Confusion

Wed, 01/26/2011 - 09:51 | 905797 Hedgetard55
Hedgetard55's picture

+55

 

Barry jumped the shark when his book came out and suddenly it was "all about Barry", his book, his tv appearances, etc. Then a bunch of left wing kooks began to dominate the comments section and drove the good thinkers away, and Barry's leftist tendencies began to appear in his own comments and excoriation of conservative commenters. I left and have not looked back.

Wed, 01/26/2011 - 08:25 | 905626 Mercury
Mercury's picture

What about Freddie and Fannie?  Remember them?  In fact, they might also consider addressing how that whole national housing policy thing has been working out...

Wed, 01/26/2011 - 08:29 | 905630 cossack55
cossack55's picture

They would have to contact Frankie "steal all the mofo's &*$@" Raines on his private island in the Pacific.

Wed, 01/26/2011 - 08:22 | 905620 whoopsing
whoopsing's picture

So,is any of this new's? 

Wed, 01/26/2011 - 08:36 | 905643 Bob
Bob's picture

It can't become "news" until it's released by a "bipartison commission," because the corporate media doesn't do investigative financial journalism.

Wed, 01/26/2011 - 08:27 | 905628 cossack55
cossack55's picture

No.

Wed, 01/26/2011 - 08:17 | 905614 satansanus
satansanus's picture

Prosecute them to the fullest extent of the law. This was the most destructive american event in history on capital basis.

Death Penalty trials for many of these people living like kings off the suffering of innocents

Wed, 01/26/2011 - 08:15 | 905611 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

Hang 'em from the highest tree ... or telephone polls along I-95 would do.

Wed, 01/26/2011 - 07:10 | 905574 MarketFox
MarketFox's picture

What about "accountability" for $Trillions lost ?

The message became clearer when Blankfein was invited to the big Chinese meeting. And do note that the President's speech spoke nothing about "financial justice"...now that he himself is a member/prostitute of the club....as indicated by Farber....

 

 

Wed, 01/26/2011 - 08:19 | 905616 cossack55
cossack55's picture

I think you have financial justice confused with social justice.  Using bankers math, the two justices cancel each other out, thus one is left with social financing (thats when society finances the TBTF)......oh, wait, thats  what is happ.......someones at the door.

Wed, 01/26/2011 - 08:33 | 905638 Bob
Bob's picture

+100

Wed, 01/26/2011 - 03:39 | 905491 A_MacLaren
A_MacLaren's picture

Where is the dismantelling of Glass-Steagall on this list?

Too offensive to the Banksters to include it? 

Talk about regulatory and oversight capture...

Wed, 01/26/2011 - 10:34 | 905879 Triggernometry
Triggernometry's picture

+12000

Wed, 01/26/2011 - 08:16 | 905613 cossack55
cossack55's picture

No one remembers that.  They also don't remember uptick rules and FASB 157.

Wed, 01/26/2011 - 09:11 | 905711 Pee Wee
Pee Wee's picture

Both are symptoms of regulatory collusion and magic accounting standards which to this second mask the fraud from top to bottom... hence left out.

Lies recommended instead of reality.

Wed, 01/26/2011 - 02:47 | 905444 williambanzai7
williambanzai7's picture

Gee wiz, how do they dream this stuff up?

Wed, 01/26/2011 - 03:25 | 905479 A_MacLaren
A_MacLaren's picture

Dreams? More like The Power of Nightmares

Wed, 01/26/2011 - 09:37 | 905756 bonddude
bonddude's picture

Larry king interviews Hillary about small town banking fraud.

http://www.xtranormal.com/watch/8290775/

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