Ethical breaches
The damning report criticised the extent of the financial deregulation overseen by the former chairman of the Federal Reserve, Alan Greenspan.
It concluded that the crisis was caused by a number of factors:
- Failures in financial regulation, including the Federal Reserve’s failure “to stem the tide of toxic mortgages”
- A breakdown in corporate governance that led to “reckless” actions and excessive risk taking by financial institutions
- Households taking on too much debt
- A lack of understanding of the financial system on behalf of policymakers
- Fundamental breaches in accountability and ethics “at all levels”.
It added that “collapsing mortgage-lending standards” and the packaging-up of mortgage-related debt into investment vehicles “lit and spread the flame of contagion”.
These complex derivatives, which were traded in huge volumes by major investment banks, then “contributed significantly to the crisis” when the mortgages they were based on defaulted.
The report also highlighted the failures of the credit ratings agencies in recognising the risks involved in these and other products.
“The greatest tragedy would be to accept the refrain that no one could have seen this coming and thus nothing could have been done.”
Phil Agelides, U.S. Financial Crisis Inquiry Commission
http://www.bbc.co.uk/news/business-12297002
Plus, A BBC Video Report:
“Who is to Blame for the Crisis?”
http://www.bbc.co.uk/news/science-environment-12295710
Who is regulating the Regulators?
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