Global Crisis Blog

Global Crisis:  Big Mess, Caused by Blunders, Not Mother Nature

By Shlomo Maital

 

Alan Greenspan

The American Federal Commission established to investigate the underlying causes of the global financial collapse, 2007-8, has now reported its findings (this is breaking news, within the past few hours).  Here is what they found:

“The crisis was the result of human action and inaction, not of Mother Nature or computer models gone haywire. The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand and manage evolving risks within a system essential to the well-being of the American public. Theirs was a big miss, not a stumble.”    “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,” the report states.

    The major blame is placed on Fed Chairmen Alan Greenspan, as well as current Fed Chair Ben Bernanke.  Among those blamed:  Government regulators and policy makers; corporate mismanagement; two presidential administrations; two Fed chairmen; greed in several financial institutions; and unnecessary Wall Street risk taking.   The report is from the New York Times, which got a preliminary glimpse at the commission’s findings.

  According to C.B.S.,  “former Fed chairmen Alan Greenspan and his successor, Ben S. Bernanke. Greenspan are singled out for advocating financial deregulation and failing to stem the flow of toxic mortgages.”

  The 10-member commission was not unanimous.  Six members appointed by Democrats agreed with the findings.  Four members appointed by Republicans opposed them.  This is typical of the current fiercely partisan atmosphere in U.S. politics.   Republic minority members will soon issue their own report, blaming – you guessed it – the Democrats.

  The Report does not fail to blame the lobbyists as well. “Lobbying is also blamed, [including] the $2.7 billion spent between 1999 and 2008 by the financial sector on convincing politicians and federal officials to let them have their way.”

   “Overall, the report paints a grim picture of mismanagement, miscalculation and a general lack of will to tackle obvious flaws in the financial system by government officials, industry leaders and regulators.” 

    The 6-4 split in the Commission will effectively neutralize any possible policy changes arising from the Report, since Republicans now control the House of Representatives.