« The Financial Crisis Inquiry Report » by Phil ANGELIDES …

History of the Commission

The Financial Crisis Inquiry Commission was created to "examine the causes, domestic and global, of the current financial and economic crisis in the United States."

The Commission was established as part of the Fraud Enforcement and Recovery Act (Public Law 111-21) passed by Congress and signed by the President in May 2009.

This independent, 10-member panel was composed of private citizens with experience in areas such as housing, economics, finance, market regulation, banking and consumer protection.

Six members of the Commission were appointed by the Democratic leadership of Congress and four by the Republican leadership.

The Commission’s statutory instructions set out 22 specific topics for inquiry and called for the examination of the collapse of major financial institutions that failed or would have failed if not for exceptional assistance from the government.

Work of the Commission

This work of the Commission was intended to provide a historical accounting of what brought our financial system and economy to a precipice and to help policy makers and the public better understand how it came to be.

The Commission’s statutory instructions set out 22 specific topics for inquiry and called for the examination of the collapse of major financial institutions that failed or would have failed if not for exceptional assistance from the government. The Commission’s report fulfilled these mandates.

In addition, the Commission was instructed to refer to the attorney general of the United States and any appropriate state attorney general any person that the Commission found may have violated the laws of the United States in relation to the crisis. Where the Commission found such potential violations, it referred those matters to the appropriate authorities. The Commission used the authority it was given to issue subpoenas to compel testimony and the production of documents, but in the vast majority of instances, companies and individuals voluntarily cooperated with this inquiry.

In the course of its research and investigation, the Commission reviewed millions of pages of documents, interviewed more than 700 witnesses, and held 19 days of public hearings in New York, Washington, D.C., and communities across the country that were hard hit by the crisis.

The Commission also drew from a large body of existing work about the crisis developed by congressional committees, government agencies, academics, journalists, legal investigators, and many others.

The Commission conducted research into broad and sometimes arcane subjects, such as mortgage lending and securitization, derivatives, corporate governance, and risk management. To bring these subjects out of the realm of the abstract, it conducted case study investigations of specific financial firms—and in many cases specific facets of these institutions—that played pivotal roles.

Those institutions included American International Group (AIG), Bear Stearns, Citigroup, Countrywide Financial, Fannie Mae, Goldman Sachs, Lehman Brothers, Merrill Lynch, Moody’s, and Wachovia. The Commission also looked more generally at the roles and actions of scores of other companies.

The Commission also studied relevant policies put in place by successive Congresses and administrations.

It also examined the roles of policy makers and regulators, including at the Federal Deposit Insurance Corporation, the Federal Reserve, the Federal Reserve Bank of New York, the Department of Housing and Urban Development, the Office of the Comptroller of the Currency, the Office of Federal Housing Enterprise Oversight (and its successor, the Federal Housing Finance Agency), the Office of Thrift Supervision, the Securities and Exchange Commission, and the Treasury Department.

The Commission’s hope is that readers can use its work

to reach their own conclusions,

even as the comprehensive historical record of this crisis

continues to be written.

Conclusions of the Commission

The Commission concluded that this crisis was avoidable—the result of human actions, inactions, and misjudgments. Warnings were ignored.

It found widespread failures in financial regulation; dramatic breakdowns in corporate governance; excessive borrowing and risk-taking by households and Wall Street; policy makers who were ill prepared for the crisis; and systemic breaches in accountability and ethics at all levels.

How did it come to pass that in 2008 our nation was forced to choose between two stark and painful alternatives — either risk the collapse of our financial system and economy, or commit trillions of taxpayer dollars to rescue major corporations and our financial markets, as millions of Americans still lost their jobs, their savings, and their homes ?

Here we present what we found so readers can reach their own conclusions, even as the comprehensive historical record of this crisis continues to be written.

“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.”

GET THE REPORT

To view the report of the Financial Crisis Inquiry Commission, you can download the report in full or download a section of the report by clicking on the links below.

Download Full Report with Dissents (PDF)

Table of Contents

Commissioners

Commissioner votes

Staff list

Preface

Conclusions of the Financial Crisis Inquiry Commission

Part I: Crisis on the Horizon

• oChapter 1: Before Our Very Eyes

Part II: Setting the Stage

• oChapter 2: Shadow Banking
• oChapter 3: Securitization and Derivatives
• oChapter 4: Deregulation Redux
• oChapter 5: Subprime Lending

Part III: The Boom and Bust

• oChapter 6: Credit Expansion and Conclusion
• oChapter 7: The Mortgage Machine and Conclusion
• oChapter 8: The CDO Machine and Conclusion
• oChapter 9: All In and Conclusion
• oChapter 10: The Madness and Conclusion
• oChapter 11: The Bust and Conclusion

Part IV: The Unraveling

• oChapter 12: Early 2007: Spreading subprime Worries and Conclusion
• oChapter 13: Summer 2007: Disruptions in Funding and Conclusion
• oChapter 14: Late 2007 to Early 2008: Billions in Subprime Losses and Conclusion
• oChapter 15: March 2008: The Fall of Bear Stearns and Conclusion
• oChapter 16: March to August 2008: Systemic Risk Concerns and Conclusion
• oChapter 17: September 2008: The Takeover of Fannie Mae and Freddie Mac and Conclusion
• oChapter 18: September 2008: The Bankruptcy of Lehman and Conclusion
• oChapter 19: September 2008: The Bailout of AIG and Conclusion
• oChapter 20: Crisis and Panic and Conclusion

Part V: The Aftershocks

• oChapter 21: The Economic Fallout
• oChapter 22: The Foreclosure Crisis and Conclusion

Dissenting Views By Keith Hennessey, Douglas Holtz-Eakin, and Bill Thomas

Dissenting Views By Peter J. Wallison

Appendix A: Glossary

Appendix B: List of Hearings and Witnesses

Notes

Index