Who’s to Blame for the Financial Crisis? |
The findings of the recently published Financial Crisis Inquiry Commission won’t come as any great surprise to those investors who’ve followed the stories of the financial crisis from the beginning. Succinctly stated, the Commission found – as many individuals have been saying all along – that the crisis could have been averted. The crisis became, simply because those in the know – regulators from the various governmental agencies, and the so-called, “captains of finance” – failed to take heed of the warning signs, if indeed they even recognized them as such. The Commission acknowledges that it wasn’t any one particular event which led to the crisis, but a generalized laissez-faire attitude among all of those entities which share the blame.
According to the Commission, time and again, those government agencies, including the Securities and Exchange Commission, the Comptroller of the Currency, the Office of Thrift Supervision, and the N.Y. Branch of the Federal Reserve Bank – agencies that we continue to place so much stock in – failed to police those sectors in their charge.
Of course, it’s not just the government who is at fault; according to the Commission there is plenty of blame to go around. Consumers and businesses borrowed excessively, simply because they could. Within the financial sector the focus was entirely on profit, risk-be-damned – in fact, as we all know, higher risk is associated with higher profit. So what if, in the quest for higher profits, financial dealings lacked transparency? No one was paying attention, anyway. Well, maybe the credit rating agencies were paying little attention, but they weren’t worried, so why should anyone else?
And when, finally, the roof caved in, the government’s knee-jerk and inconsistent response didn’t imbue confidence in the financial system. A confidence that remains, to this day, shaky at best. Just take a look at the stock markets, or the value of the once all-mighty-dollar, or the economy in general, and you’ll understand.
What will result from the Commission’s findings? Perhaps more or new government regulations, but that’s likely not sufficient to prevent another meltdown. The relevant government agencies have the moral and ethical responsibility to oversee the financial markets, but without a meaningful (i.e. financial) punitive deterrent, some other financial crisis may be inevitable.
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