The Financial Crisis Inquiry commission was created to understand what happened and how it happened. It was designed for people to make their own judgements and assessments based on the evidence discovered in the inquiry.
The main concept is that, If we do not learn from history, we are unlikely to fully recover from it, thus resulting in us making the same mistakes over and over again. Some people on Wall Street and in Washington may try and remove from the ir memories the depression of the past, or may try to suggest that no one could have foreseen or prevented them.
The report attempts to expose the facts, identify responsibility, unravel myths, and help the people understand how the crisis could have been avoided. The report attempts to record history and what happened, not to rewrite it or change the past.
This report makes the point clear that we are not learning from our previous mistakes. As this report was being printed, there were more than 26 million Americans who were jobless, and couldn’t find full-time work, or had given up looking for work. About four million families had lost their homes to foreclosure and another four and a half million had slipped into the foreclosure process or are seriously behind on their mortgage payments. Nearly $11 trillion in household wealth had vanished, with retirement accounts and life savings swept away. Businesses, large and small, had fallen into the sting of a deep recession.
All of the above resulted into people feeling betrayed by the system they had believed in, and thus were very angry about the situation, as they had followed the rules and trusted the authority however still found themselves out of a job, and little prospect for their future. The collateral damage of this crisis has been real people and real communities. The impacts of this crisis are likely to ripple into generations to come. And America faces no easy path to economic strength. The financial Crisis Inquiry is an investigation into how one of the world’s strongest financial system came to the brink of collapse.
The most interesting fact found in the inquiry was that our nation was forced to choose between two stark and painful alternatives, either risk the total collapse of our financial system and economy or inject trillions of taxpayer dollars into the financial system and an array of companies, as millions of Americans still lost their jobs, their savings, and their homes?
The report summarises the onset of the crisis. It clarifies that the vulnerabilities that created the potential for the crisis were years in the making, it was the collapse of the housing bubble fuelled by low interest rates, easy and available credit, scant regulation, and toxic mortgages that was the onset of the depression. Trillions of dollars in risky mortgages had become embedded throughout the financial system, as mortgage-related securities were packaged, repackaged, and sold to investors around the world. When the bubble burst, hundreds of billions of dollars in losses in mortgages and mortgage-related securities shook markets as well as financial institutions that had significant exposures to those mortgages and had borrowed heavily against them. This happened not just in the United States but around the world. The losses were magnified by derivatives such as synthetic securities.
We saw a fall in major companies such as Lehman Brothers, American International Group (AIG). We saw trading hit a all time low, resulting in the stock market plummeting. Thus with it economy plunged into a deep recession.
The financial system examined in the report bears little resemblance to the one before ours. The changes in the past three decades alone have been remarkable. The inquiry commissions report recognizes that financial markets have become increasingly globalized. Technology has transformed the efficiency, speed, and complexity of financial instruments and…