Financial Crisis Part II

“As a scholar of the Great Depression, I honestly believe that September and October of 2008 was the worst financial crisis in global history, including the Great Depression”
— Ben Bernanke, Federal Reserve Chair, November 2009

The report by the Financial Crisis Inquiry was released today. Looks like I was pretty close. The major conclusions:

  • The financial crisis was avoidable
  • Widespread failures in financial regulation and supervision proved devastating to the stability of the nation”™s financial markets
  • Dramatic 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 its inconsistent response added to the uncertainty and panic in the financial markets
  • There 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 signiicantly to this crisis
  • The failures of credit rating agencies were essential cogs in the wheel of financial destruction

The pdf of the report’s conclusions can be found here.

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