US financial crisis was 'avoidable'

Congressionally appointed panel investigating financial meltdown in 2008 says crisis could have been avoided.




    A congressionally appointed panel investigating the roots of the US financial crisis in 2008 has said that the meltdown occurred because regulators, politicians and bankers ignored warning signs and failed to manage risks.

    The Financial Crisis Inquiry Commission (FCIC) said in its final report released on Thursday that the crisis could have been avoided.

    Instead, the US fell into the deepest recession since the 1930s, with millions of Americans losing their jobs.

    The former Bush and Clinton administrations, the current and previous Federal Reserve chairmen, and  Timothy Geithner, the treasury secretary, all bear some responsibility for allowing the crisis to happen, the panel said.

    "This financial crisis could have been avoided. Let us be clear. This calamity was the result of human action, inaction and misjudgment, not of mother nature or computer models gone haywire," Phil Angelides, the FCIC chairman, said.

    "The captains of finance and the public stewards of our financial system ignored warnings and importantly failed to question and understand and to manage the evolving risks in a financial system that is so essential to the well being of our country.

    "Theirs was a big miss, not a stumble."

    The report comes six months after congress implemented regulatory legislation to respond to the crisis before the commission was able to conclude its investigation.

    'Systematic' failure

    The report concluded that the crisis was caused by a number of factors, including a dramatic breakdown in corporate governance and risk management, and a government ill-prepared to handle the crisis.

    It also cited the adoption of risky trading and borrowing practices by corporations, and a breach of accountability and ethics.

    The report was highly critical of the amount of financial deregulation overseen by Alan Greenspan, the former chairman of the Federal Reserve.

    John Thompson, a FCIC member, said: "Unquestionably in our minds, there were actions that could have been taken by regulators that would have forestalled or mitigated the impact of this crisis.

    "The Federal Reserve was clearly the steward of lending standards in this country. They chose not to act.

    "The Federal Reserve Bank of NY certainly could have reigned in what was being done in some of the large money centre banks in NY.

    "I mean on and on and on. Regulator after regulator, they either chose not to act or turned a blind eye to what was actually going on.

    "So, it's less about a particular individual than a systematic sense of deregulation and inaction by those who were in power to take action."

    SOURCE: Agencies


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