On January 27, the Financial Crisis Inquiry Commission released its final report on the causes of the financial and economic crisis. Six of the ten members of the bipartisan commission voted to adopt the commission’s report. The report concluded that the financial crisis was avoidable. It also concluded that widespread failures in financial regulation and supervision proved devastating to financial market stability, and that the government was both ill-prepared for the crisis and responded inconsistently to the crisis. The report further concluded that other significant contributing factors to the crisis included (1) failures of corporate governance and risk management at many large financial institutions; (2) excessive borrowing, risky investments, and lack of transparency; (3) a systemic breakdown in accountability and ethics; (4) mortgage lending standards and mortgage securitization; (5) over-the-counter derivatives; and (6) failures by credit rating agencies.
The commission consists of private citizens with extensive experience in banking, consumer protection, economics, finance, housing, or market regulation. The commission was created in 2009 pursuant to federal legislation. The four members who did not adopt the report filed two dissents, criticizing some aspects of the majority’s approach and highlighting other causes such as the international nature of the credit bubble and government housing policy.
