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Financial Crisis Was 'avoidable', Says Official Us Report

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Do the Republicans support "'deregulation' or lax regulation, greed and recklessness on Wall Street, predatory lending in the mortgage market, unregulated derivatives and a financial system addicted to excessive risk-taking."?

Financial crisis was 'avoidable', says official US reportBankers, regulators, government – even homeowners – all to blame for credit crunch, says Financial Crisis Inquiry Commission

Wall Street bankers, regulators, government officials and even homeowners all share part of the blame for the 2008 financial crisis, according to a scathing US official investigation into the meltdown published today.

The 545-page Financial Crisis Inquiry Commission (FCIC) report reads like a financial thriller in which there are very few heroes. One chapter on the boom and bust fiasco is entitled "The Madness".

The commission concludes that the crisis was avoidable and was caused by:

• Widespread failures in financial regulation, including the Federal Reserve's failure to stem the "tide of toxic mortgages".

• Dramatic breakdowns in corporate governance, with too many firms acting recklessly and taking on too much risk.

• An explosive mix of excessive borrowing and risk by households and Wall Street.

• Policymakers who were ill-prepared for the crisis and lacked a "full understanding of the financial system they oversaw".

• Systemic breaches of accountability and ethics at all levels. Mortgage-holders took out loans they never intended to pay; lenders made loans they knew the borrowers could not afford.

"As this report goes to print, there are 26 million Americans who are out of work ... Nearly $11tn in household wealth has vanished ... The collateral damage of this crisis has been real people and real communities. The impacts of this crisis are likely to be felt for a generation," the report says.

So far, the 2008 financial crisis has led to few prosecutions. The authors interviewed more than 700 witnesses to compile the report and said they had referred potential violations to the appropriate authorities.

While the crisis was years in the making, it was the collapse of the housing bubble that triggered the 2008 collapse. Trillions of dollars in risky, sub-prime mortgages had been embedded in the system. When the housing bubble burst, the impact was magnified by complex financial derivatives based on those loans, whose risks had been woefully underestimated.

Behind the collapse was the rewiring of Wall Street. From 1987 to 2007, the amount of debt held by financial sector soared from $3tn to $36tn (£1.88tn to £22.5tn). Subprime mortgage loans went from 5% of loans in 1994 to 20% in 2006. At the same time, financial services firms constituted an increasingly disproportionate part of the US economy – 27% of all corporate profits in the US compared with 15% in 1980.

The crisis itself was avoidable – the result of "human action and inaction, not of Mother Nature or computer models gone haywire". And in large part it was led by government mismanagement.

The Federal Reserve played a central role in enabling the crisis. It failed in its duty to set more prudent limits. Financial firms "made, bought and sold mortgage securities they never examined". They invested blindly and did not care if the investments were defective. Compensation "too often rewarded the quick deal, the short-term gain" and "encouraged the big bet", the report concludes.

Aggressive expansion left banks unable to manage their own assets – and few escaped blame.

For Citigroup, singled out for heavy criticism, "too big to fail meant too big to manage". Goldman Sachs multiplied the effects of the collapse of sub-prime loans by funding and creating billions of dollars of bets based on the back of the loans. AIG's senior management was ignorant of the terms and risks of the insurer's $79bn derivatives exposure. It was a "costly surprise" to Merrill Lynch's top managers that their $55bn investment in "super-safe" mortgage securities had resulted in billions of dollars in losses.

Top officials, including Alan Greenspan, the former Federal Reserve chairman, were also blamed. The FCIC said the drive towards deregulation over the past 30 years helped to create the conditions for disaster. "What else could one expect on a highway where there were neither speed limits nor painted lines?" asks the report.

Minority report

The FCIC panel failed to reach a majority agreement, with the major report signed off only by its Democrat members.

In a dissenting opinion, Republican members questioned many of the report's conclusions. "The commission's majority used its extensive statutory investigative authority to seek only the facts that supported its initial assumptions – that the crisis was caused by 'deregulation' or lax regulation, greed and recklessness on Wall Street, predatory lending in the mortgage market, unregulated derivatives and a financial system addicted to excessive risk-taking."

http://www.guardian.co.uk/business/2011/jan/27/financial-crisis-avoidable-fcic-report

Edited by Redhat Sly

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Do the Republicans support "'deregulation' or lax regulation, greed and recklessness on Wall Street, predatory lending in the mortgage market, unregulated derivatives and a financial system addicted to excessive risk-taking."?

"Financial Crisis Inquiry Commission" !

That's what I want here!!!

Jeeez that is perfect:

"The commission concludes that the crisis was avoidable and was caused by:

• Widespread failures in financial regulation, including the Federal Reserve's failure to stem the "tide of toxic mortgages".

• Dramatic breakdowns in corporate governance, with too many firms acting recklessly and taking on too much risk.

• An explosive mix of excessive borrowing and risk by households and Wall Street.

• Policymakers who were ill-prepared for the crisis and lacked a "full understanding of the financial system they oversaw".

• Systemic breaches of accountability and ethics at all levels. Mortgage-holders took out loans they never intended to pay; lenders made loans they knew the borrowers could not afford."

:o

:)

Am I dreaming??? :(

Edited by Tired of Waiting

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"Financial Crisis Inquiry Commission" !

That's what I want here!!!

Jeeez that is perfect:

In the UK we have the FSA being given the power to decide that such as RBS did nothing wrong. Of course if RBS were found to have done anything wrong, the FSA would be to blame for allowing it as their "regulation" must have failed. Therefore the FSA are the last people who should have the power to decide anything as they are not impartial. Full public inquiry into our "crisis" please.

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I think I might release a list of the people not to blame in a small report.

1. Mrs Smith in 99 Wilmslott Terrace who had paid her mortgage off and had meagre savings in the building society. Lived within her means and could not comprehend how poor she seemed compared to her peers.

etc etc

That's not nice. What if a taxidermist looking for rare specimens reads this forum? You have given her name and address. Poor Mrs Smith! :lol:

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Its going to be interesting to see how the MSM handle this. :lol:

Probably with not such a high priority, unfortunately.

Even in this forum this thread is not attracting its deserved attention!!!

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Probably with not such a high priority, unfortunately.

Even in this forum this thread is not attracting its deserved attention!!!

Don't worry Eric Pebble will be along shortly. He's due back any time from walking the streets carrying a billboard with large red writing about liar loans.

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Don't worry Eric Pebble will be along shortly. He's due back any time from walking the streets carrying a billboard with large red writing about liar loans.

:lol:

Eric! Where are you?! Help here, please! (I mean it!)

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In the UK we have the FSA being given the power to decide that such as RBS did nothing wrong. Of course if RBS were found to have done anything wrong, the FSA would be to blame for allowing it as their "regulation" must have failed. Therefore the FSA are the last people who should have the power to decide anything as they are not impartial. Full public inquiry into our "crisis" please.

Yep. It was a farce.

We need a full public inquiry and with a full remit, including the bubble-inflating phase. It was not just a "banking crisis" in 2007. it was a bubble that started to inflate around 10 years ago! And one that was totally obvious since at least 2003!

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However it would appear that globalisation has escape any of the blame which is why a lot of consumers used loans to make up their incomes.

I bet also bet that the search for quick and easy short term profit was neatly overlooked as well.

Although it's nice to see other major points mentioned, the US laying the foundations for saying the debt doesn't exist.

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Scamocracy.

Most if not all those main findings apply equally to the UK banksters and their bag men.

How many have been prosecuted?

ZERO (except for a handful of small time hustlers and conmen)

What's Dave's big plan? To get behind these criminals and move on.

Vive TLes Bullingdon Boys!!

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http://market-ticker.org/akcs-www?post=178427

The FCIC Report: Yet Another Whitewash

Well, it's out.

The "long-awaited" FCIC report has been published, and counts 662 pages.

Our task was first to determine what happened and how it happened so that we could understand why it happened. Here we present our conclusions.

And here the FCIC fails. But we'll get to that.

• We conclude this financial crisis 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.

No. The financial crisis was avoidable, but it was not about the ignoring of warnings by captains of finance. One does not sell "protection" in the form of a credit default swap (CDS) without any capital behind it by accident. That is done with intent - the intent to collect a premium and never pay.

The buyer of such a CDS has one of two purposes. He either intends to conceal a loss that he would otherwise have to mark on his books, or he intends to hold up the taxpayer at a later date when the seller cannot pay. His action is not undertaken due to "inattention" either.

Despite the expressed view of many on Wall Street and in Washington that the crisis could not have been foreseen or avoided, there were warning signs.

The crisis was not only mathematically certain to occur it was foreseen and known to be occurring by the very firms that nearly collapsed. This is now a matter of public record in the form of testimony under oath by Citibank's former Chief Underwriter. Lehman's insolvency was known by Citibank and others weeks before it occurred, as has been disclosed by the bankruptcy investigation. Both industry and government regulators intentionally concealed these facts from the public. It is no longer speculation that "they knew", it is now a documented fact.

The prime example is the Federal Reserve’s pivotal failure to stem the flow of toxic mortgages, which it could have done by setting prudent mortgage-lending standards. The Federal Reserve was the one entity empowered to do so and it did not.

The Federal Reserve, by its own publications, knew that the economy was adding 10, 20, even 30% of GDP in debt on a annual basis. This is not "unsustainable", it is fraud and an abuse of the currency power granted by The Constitution to Congress.

But Congress knew this too. This publication is not secret. Congress has the power - then and now - to put a stop to it. But Congress decided not to. Not then, not now.

This crisis was not a couple of years in the making. The roots of it go back to the 1980s, when Continental Illinois was bailed out. At that time the FDIC did an unlawful thing - it decided to bail out bondholders, which it has no statutory authority to do. The deposit insurance fund exists to bail out depositors. But having exceeded its authority and gotten away with it, the standard was set for The FDIC to make sure that no large institution would be allowed to actually lead to loss by its bondholders.

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;

Those are not failures, they're fraudulent activities. The institutions that made, bought and sold those securities represented to buyers and writers of swaps against them that they had specific qualities.

They LIED, as is now being shown and documented in the myriad lawsuits, along with FCIC testimony.

They took on enormous exposures in acquiring and supporting subprime lenders and creating, packaging, repackaging, and selling trillions of dollars in mortgage-related securities, including synthetic financial products. Like Icarus, they never feared flying ever closer to the sun.

Unsecured lending beyond your capital is a naked short on the currency. Since no bank has the authority to issue currency, such an action is an act of counterfeiting.

Writing a swap you have no ability to pay on, as happened at AIG, is the writing of paper worth nothing in exchange for money. If the party you sell it to actually expects to collect, you defrauded him. If he does not really intend to collect and used the paper he bought at under-market rates as a ruse, he defrauded whoever is relying on his assertion that his position is protected. Either way, someone committed a crime.

Where are the cops?

Our examination revealed stunning instances of governance breakdowns and irresponsibility. You will read, among other things, about AIG senior management’s ignorance of the terms and risks of the company’s $79 billion derivatives exposure to mortgage-related securities;

Who cares what their exposure was? The real scandal is that they had $79 billion in exposure with effectively zero capital behind that position. That is, they sold $79 billion in exposure with no ability to pay. Yes, the government was complicit in allowing this by exempting these transactions from insurance regulations through the CFMA. But that doesn't change the essential element of the deception - if the buyer knew the swaps were worthless, he committed fraud. If he didn't know they were worthless and truly believed AIG had the capital to pay when it did not, then AIG committed fraud.

You cannot sell something you have no ability to deliver and not have someone who committed fraud somewhere in that transaction.

Either the transaction was a sham or the buyer was scammed. Pick one.

In the years leading up to the crisis, too many financial institutions, as well as too many households, borrowed to the hilt, leaving them vulnerable to financial distress or ruin if the value of their investments declined even modestly.

So when are we going to force this bad debt out of the system?

Oh that's never, right? There's nothing - literally nothing - in this report that demand that occur.

The reason is that doing so bankrupts all the institutions that were responsible. Yet without defaulting this debt and clearing it there is no way to get out of the crisis, only to pile more fraud upon the existing fraud.

Housing values have fallen by $7 trillion, if you believe the reported numbers from various sources. How much does the Z1 claim housing mortgage debt has fallen by, systemically? $504 billion.

Where's the other $6.5 trillion?

Sure, some of it was "equity" that is now gone. But not all of it. The rest - most of it - is unbacked credit and constitutes a continuing naked short on the currency of The United States. It also constitutes massive systemic risk, in that should it be forced into the open (and it will eventually be so-forced by the market) it exceeds the total capitalization of the ten largest financial institutions in the United States by several times over.

The crisis is not over and the leverage has not come out. At all.

The fraud that led to this has not been exposed and referred for prosecution. At all.

The FCIC not only failed to do what it was charged to do, it did so with intent. The word "fraud" is peppered through the report, appearing dozens of times. Yet nowhere do we see recommendations for prosecution.

Fraud is a crime.

We cannot resolve what's broken in the economy without forcing the bad and un-payable debt into the open. I'm well-aware that doing so will cause a major sell-off in the markets and reduction in GDP.

But this outcome cannot be avoided. We can only choose to take the damage now, or have it continue to compound.

Dennigers take on this.

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The FCIC panel failed to reach a majority agreement, with the major report signed off only by its Democrat members.

In a dissenting opinion, Republican members questioned many of the report's conclusions. "The commission's majority used its extensive statutory investigative authority to seek only the facts that supported its initial assumptions – that the crisis was caused by 'deregulation' or lax regulation, greed and recklessness on Wall Street, predatory lending in the mortgage market, unregulated derivatives and a financial system addicted to excessive risk-taking."

So what did the Republican members believe was the cause? The evil communist sky pixies, or the unionised cobbler gnomes?

What hope is there for reform when the outcomes of these reports depend almost completely on ideology?

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So what did the Republican members believe was the cause? The evil communist sky pixies, or the unionised cobbler gnomes?

What hope is there for reform when the outcomes of these reports depend almost completely on ideology?

It's a good question that of course won't be asked.

Edit to add:

Obviously apart from on a forum where no republican on the commission will answer.

Edited by interestrateripoff

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So what did the Republican members believe was the cause?

Big goverement.

But note that when the time came for the 'market' to work it's magic and wipe out the bad debts those same Repubicans fell over themselves to make sure that 'big government' was on hand to bail them all out.

So where then were all the free market ideologues when their moment of glory came, when their mighty market was about to strike a decisive blow for the libertarian values they claim to hold so dear?

On their f*cking knees begging for government money. :lol::lol::lol:

What a pathetic spectacle they truly are. Men without a shred of integrity or intellectual honesty of any kind.

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OK everyone....

This is EXACTLY what a GREAT film has portrayed - soon coming here to the UK - Next month I think....

It was ALL a MASSIVE, MASSIVE FRAUD.

See here - http://www.sonyclassics.com/insidejob/#

Read all about it...

VERY good review here - http://www.slantmagazine.com/film/review/inside-job/5062

+ see this - http://en.wikipedia.org/wiki/Inside_Job_(film)

Edited by eric pebble

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• Systemic breaches of accountability and ethics at all levels. Mortgage-holders took out loans they never intended to pay; lenders made loans they knew the borrowers could not afford."[/b]

:o

:)

Am I dreaming??? :(

:rolleyes::rolleyes::rolleyes::rolleyes: No, you're not dreaming.... :rolleyes:

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:lol:

Eric! Where are you?! Help here, please! (I mean it!)

:blink::blink::unsure::unsure:

Sigh!... I don't think I've ever come across a clearer case of -- --

Horse bolted years ago, dead and buried long ago, remains of old, old barn door swinging in the wind.....

Good lyrics for a song, hey?

Edited by eric pebble

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This report and the brake away ones are huge in implication. Yes to us they are not a suprise, but now out in the public saying it wasn't forces beyond our control, but a headlong rush into financial disaster because of heads in sand and allowed pure greed. What should have been mentioned is glass steigal of course.

Although each report puts ultimate blame in different places, they do seem in agreement about what went on.

This needs shouting from the rooftops. It is our redemption! We were right all along!

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:blink::blink::unsure::unsure:

Sigh!... I don't think I've ever come across a clearer case of -- --

Horse bolted years ago, dead and buried long ago, remains of old, old barn door swinging in the wind.....

(...)

I know that we've been saying that for years. I know that. But this is an official report from a US public inquiry! Confirming what we've been saying for years! (And they will be much more influential than us!) It is important!

Look, Topher Bear put it very well here:

This report and the brake away ones are huge in implication. Yes to us they are not a surprise, but now out in the public saying it wasn't forces beyond our control, but a headlong rush into financial disaster because of heads in sand and allowed pure greed. What should have been mentioned is glass steigal of course.

Although each report puts ultimate blame in different places, they do seem in agreement about what went on.

This needs shouting from the rooftops. It is our redemption! We were right all along!

+ 1

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So what did the Republican members believe was the cause? The evil communist sky pixies, or the unionised cobbler gnomes?

What hope is there for reform when the outcomes of these reports depend almost completely on ideology?

+ 1

It was a typical bubble, with sitting governments (Bush and Brown) enjoying the easy ride, regardless of their ideology. The root cause is that voters will never vote for party poopers / bubble prickers.

By the way, that was the main reason behind the need for independent central banks. Though they didn't work in this case because in America housing costs were not part of the inflation index, and the Fed decided to be very narrow on their remit. Now they admit the need for broader "macro prudential" supervision. :rolleyes: Here, luckily, housing costs were part of the inflation index (RPI), but unfortunately Brown (or was it Balls???) removed it in Dec 2003, to prevent the BoE from raising IRates in 2004 (a pre-electoral year...). Criminal. Treason.

That is why we need a full public inquiry on this crisis.

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Big goverement.

But note that when the time came for the 'market' to work it's magic and wipe out the bad debts those same Repubicans fell over themselves to make sure that 'big government' was on hand to bail them all out.

So where then were all the free market ideologues when their moment of glory came, when their mighty market was about to strike a decisive blow for the libertarian values they claim to hold so dear?

On their f*cking knees begging for government money. :lol::lol::lol:

What a pathetic spectacle they truly are. Men without a shred of integrity or intellectual honesty of any kind.

Very well put indeed.

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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