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.