The Federal Reserve was one of the government institutions singled out by the FCIC as being responsible for the financial crisis. Image: CC skpy/Flickr
When the Financial Crisis Inquiry Commission report was issued Wednesday, partisan bickering was the big story. The FCIC report concluded that the financial crisis was ultimately the federal government’s fault, and it could have been avoided. The FCIC report was endorsed by six Democratic members of the commission, while the four Republicans disagreed with its conclusions and published their own.
FCIC report cites failure of government oversight
The FCIC was established in 2009 to determine the causes of the 2008 financial crisis and hold those responsible accountable. The commission’s report said the financial catastrophe that led to the Great Recession was the climax of three decades of financial deregulation. The commission implicates a long list of players, especially the Federal Reserve and Treasury Department. These institutions are charged with failing to reign in the financial malfeasance that pushed the nation to the brink of a depression. The FCIC report cites a litany of familiar terms such as toxic subprime mortgages, mortgage-backed securities, collateralized debt obligations and excessive, unsustainable leverage.
Partisan sideshows defeat purpose of FCIC report
While the FCIC report is the commission’s majority opinion, three Republican members released a minority report saying the FCIC’s conclusions are simply a list of what went wrong, not an examination of the root causes. The minority report focuses not on financial regulatory failures, but on market forces, which created a credit bubble that burst. Another report by the fourth Republican blames the government for promoting home ownership as the American dream. Republicans on the commission also accused Democratic members of keeping them in the dark about key decisions and ignoring their recommendations. Rep Darrell Issa, R-Calif., the new chairman of the House Oversight and Government Reform Committee, has launched an investigation of the FCIC, citing overspending, partisanship and conflicts of interest.
Business as usual on Wall Street
Despite the political theater in Washington inspired by the FCIC report, Wall Street went about its business as usual. Financial analysts don’t expect the markets to react to either the commission’s findings or the controversy. Wall Street banks, which got away scot-free when they were bailed out by hundreds of billions of dollars from the Federal Reserve, are once again swimming in money. This week the stock market has been flirting with 12,000, the level it had reached before the U.S. economy nearly collapsed.
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