The Financial Crisis Inquiry Report: Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States

This edition is the COMPLETE Official Government Edition, containing 662 pages, officially released to the Public by the US Government. *** Copies of this edition are printed and distributed in the US by SoHo Books *** 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? The Commission concluded that this crisis was avoidable. 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. 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 Financial Crisis Inquiry Commission deliveres the results of its investigation into the causes of the financial and economic crisis. The Commission concluded 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 including too many financial firms acting recklessly and taking on too much risk; -- An explosive mix of excessive borrowing and risk by households and Wall Street that put the financial system on a collision course with crisis; -- Key policy makers ill prepared for the crisis, lacking a full understanding of the financial system they oversaw; -- And systemic breaches in accountability and ethics at all levels. 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 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 said Phil Angelides, Chairman of the Commission. The Commission s report also offers conclusions about specific components of the financial system that contributed significantly to the financial meltdown. Here the Commission concluded that: collapsing mortgage-lending standards and the mortgage securitization pipeline lit and spread the flame of contagion and crisis, over-the-counter derivatives contributed significantly to this crisis, and the failures of credit rating agencies were essential cogs in the wheel of financial destruction. The Commission also examined the role of government sponsored enterprises (GSEs), with Fannie Mae serving as the case study. The Commission found that the GSEs contributed to the crisis but were not a primary cause. They had a deeply flawed business model and suffered from many of the same failures of corporate governance and risk management seen in other financial firms but ultimately followed rather than led Wall Street and other lenders in purchasing subprime and other risky mortgages. The Commission s report, which was delivered to the President and Congress, contains the data and evidence collected in the Commission s inquiry, the conclusions of the Commission based on that inquiry, and accompanying dissents. The Commission s conclusions were drawn from the review of millions of pages of documents, interviews with more than 700 witnesses, and 19 days of public hearings in New York, Washington, D.C., and communities across the country that were hit hard by the crisis.