Banking: Financial Crisis Inquiry Commission lays blame at correct doors

Charles Prince of Citigroup called the collapse in housing prices "wholly unanticipated." He, the Commission says, along with all those who pumped up the housing market with cheap and ill-advised lending were wrong.

Warren Buffett told the Inquiry "very, very few people could appreciate the bubble...[which was] a mass delusion" He, too, the Commission concluded, was wrong - at least as to the first part of the statement. The Commission does not take issue with the concept of a mass delusion.

It blames the Fed, in particular Alan Greenspan: he told the Inquiry that it was "beyond the ability of regulators to ever see such a sharp decline." The Commission was kind to him and did not point out that, if he had looked to the UK, precisely the same circumstances had happened less than a generation earlier - when Greenspan was supposedly becoming an expert.

But, says the Commission "in fact, there were warning signs. In the decade preceding the collapse there were many signs that housing prices were inflated, that lending practices had spun out of control, that too many home-owners were taking on mortgages and debt they could ill afford and that risks to the financial system were going unchecked. Alarm bells were ringing inside financial institutions, regulatory offices, consumer service organisations, state law enforcement agencies and corporations throughout America as well as in neighbourhoods across the country. Many knowledgeable executives saw trouble and managed to avoid a train wreck."

We could reproduce the whole report: it says almost exactly what we and our colleagues over at ChiefOfficers.Net were saying from 2006 - and are still saying now as some of the signs that were visible then are returning now.

But it's a darned good read. For sure, some dissent - strangely, mostly Democrats. But the bottom line is this: while small voices were trying to warn of impending disaster, the politics of greed, envy and debt were the over-riding factors and those in power had their hands on the throttle just as much as the borrowers and the lenders.

Download the report - free PDF - Commission website

or buy a hard-copy USD9.78 (RRP USD14.99)