Jan. 31 2011
The economic financial crisis that left more than 26 million of out work, 4 million without homes and caused $11 trillion in lost household and retirement savings was completely avoidable, said the Financial Crisis Inquiry Commission at GW Jan. 27.
The 10-member commission released its report at GW’s Jack Morton Auditorium after a year of investigation, including interviews with more than 700 witnesses and 19 days of public hearings in New York, Washington, D.C., and communities that were deeply affected by the crisis.
Commission Chairman Phil Angelides, former California state treasurer, told the audience that the nation has endured the “worst economic and financial crisis since the Great Depression.”
“We hope that the American people will read this valuable report, because it is our belief that if we don’t learn from history, we are unlikely to fully recover from it,” he said.
At the event, the panel briefly outlined six major findings from its research, which included a widespread failure in financial regulations, a dramatic breakdown in corporate governance and risk management, and a lack of preparation and consistent action on the part of policymakers.
“This calamity was the result of human action, inaction and misjudgment, not of Mother Nature or computer models gone haywire,” said Mr. Angelides. “The captains of finance and the public stewards of our financial system ignored warnings and importantly failed to question, understand and manage the evolving risk in a financial system that is so essential to the well-being of our country. Theirs was a big miss, not a stumble.”
According to its website, the Financial Crisis Inquiry Commission was created to “examine the causes, domestic and global, of the current financial and economic crisis in the United States” and was composed of private citizens with experience in housing, economics, finance, market regulation, banking and consumer protection. Six members of the commission were appointed by the Democratic leadership of Congress and four by the Republican leadership.
Its members include Bill Thomas, former U.S. representative from California; Bob Graham, former Florida senator; and Douglas Holtz-Eakin, former chief economist of President Bush’s Council of Economic Advisers.
Mr. Graham said the commission concluded the federal government — and specifically the Treasury Department, the Federal Reserve Board and the Federal Reserve Bank of New York — was “ill prepared” for the financial crisis.
“Its inconsistent responses added to the uncertainty and panic we saw during the course of the crisis,” said Mr. Graham. “They were hampered because they did not have a clear grasp of the financial system they were charged with overseeing, particularly as it had evolved in the years before the crisis.”
“This report is not to be viewed as the end of this nation’s examination of this meltdown,” said Mr. Angelides. “In many respects, our financial system is still unchanged from what existed on the eve of its crisis. We believe there is still much to learn, much to investigate and much to fix.”
“This crisis has been of no small consequence to this nation,” he added. “All of us are eager to see signs of recovery, but we cannot forget that this financial upheaval will likely impact our economy for a generation.”
“The Commission’s findings underscore the dire need for the public to truly understand the role — and responsibilities — that corporations have in society,” said Doug Guthrie, dean of GW’s School of Business. “Corporations hold a privileged place in our society. To avoid another financial crisis, we must do a better job of educating students about what that power means so that they can become responsible, ethical leaders.”