US must accept blame for financial crisis: panel
The United States as a nation must accept blame for causing the financial crisis that engulfed the global economy and cost millions of jobs, a US government-appointed panel reported Thursday.
After 18 months spent reviewing millions of pages of documents, interviewing more than 700 witnesses, and holding 19 days of public hearings, the Financial Crisis Inquiry Commission concluded bankers, lawmakers and regulators all contributed to the ethical and professional failings that plunged the world into financial panic.
But, it said, the American public, which over decades had saddled itself with unserviceable debt, was also at fault.
“As a nation, we must also accept responsibility,” the report read. “Collectively, but certainly not unanimously, we acquiesced to or embraced a system, a set of policies and actions, that gave rise to our predicament.”
“This financial crisis was avoidable. The crisis was the result of human action and inaction, not Mother Nature or computer models gone haywire,” the report concluded.
Heaping blame on protagonists on Wall Street and in Washington who “ignored warnings, and failed to question, understand and manage the evolving risks within the system,” the commission, tasked by Congress and President Barack Obama, said “theirs was a big miss, not a stumble.”
The report catalogs, in more than 400 pages, how the mortgage bubble grew, burst and came to infect banks’ balance sheets thanks to the magnifying effect of complex financial derivatives.
“Trillions of dollars in risky mortgages had become embedded throughout the financial system.”
The report concluded big-name banks — from Citigroup to Lehman Brothers — as well as lenders like AIG and Fannie Mae, “acted recklessly, taking on too much risk, with too little capital.”
The panel painted a bleak picture of corporate culture that placed “risk justification” before “risk management” and where bonuses encouraged quick deals for short-term gains, without regard for the consequences.
The report also lambasted the “Federal Reserve’s pivotal failure to stem the flow of toxic mortgages” through its policies of low interest rates and failure to set adequate standards for lending.
Government regulators, they said, “were not at their posts,” instead depending on a misplaced faith that markets would “self-correct” and financial institutions would police themselves.
“We do not accept the view that regulators lacked the power to protect the financial system.”
But the panel’s conclusions were not reached unanimously. The six Democrat-appointed members of the panel endorsed the final text and four Republicans dissented.
That partisan backing is likely to blunt the impact of the report, which comes after US lawmakers have moved to overhaul Wall Street and a host of books and autobiographies have chronicled events in detail.
But its authors said they hoped the study would help people understand how the crisis could have been avoided.
“The greatest tragedy would be to accept the refrain that no one could have seen this coming and thus nothing could have been done. If we accept this notion it will happen again.”