Blame the system. The Financial Crisis Commission has come out with its report, and you can read the conclusions here. It makes fascinating reading.
It says something about the polarized condition of the US that the commission actually offers three views of the crisis — one from Democrats and two dissenting views by Republicans on the panel, which was created by Congress. Still, the findings are important.
It found that Government regulators from two administrations, as well as former Federal Reserve Chair Alan Greenspan and current Fed Chairman Ben Bernanke, all missed opportunities to help prevent the crisis. Mortgage lenders, Wall Street and a shadow banking system knowingly engaged in risky lending. They engaged in excessive borrowing while leveraging debt to dangerously high levels. Contributing to this was a systemic breakdown in ethics. So who is to blame? The buck stops everywhere.
The crisis, it says, was avoidable. "The crisis was the result of human action and inaction, not of Mother Nature or computer models gone haywire. The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand, and manage evolving risks within a system essential to the well-being of the American public. Theirs was a big miss, not a stumble. While the business cycle cannot be repealed, a crisis of this magnitude need not have occurred. To paraphrase Shakespeare, the fault lies not in the stars, but in us … The record of our examination is replete with evidence of other failures: financial institutions made, bought, and sold mortgage securities they never examined, did not care to examine, or knew to be defective; firms depended on tens of billions of dollars of borrowing that had to be renewed each and every night, secured by subprime mortgage securities; and major firms and investors blindly relied on credit rating agencies as their arbiters of risk. What else could one expect on a highway where there were neither speed limits nor neatly painted lines?"
The report makes it clear that the financial crisis was caused by a dysfunctional system guiding American markets. The question now is whether the bankers who nearly destroyed the world's financial system will be prosecuted.
Don't hold your breath.
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