--- /dev/null
+Found 19940 haiku...
+
+On line 4:
+ current financial
+ and economic crisis in
+ the United States." In
+
+On line 4:
+ Commission presents to
+ the President, the Congress,
+ and the American
+
+ people the results
+ of its examination
+ and its conclusions
+
+ as to the causes
+ of the crisis. More than two
+ years after the worst
+
+On line 6:
+ financial crisis,
+ our economy, as well as
+ communities and
+
+On line 6:
+ the after-shocks. Millions
+ of Americans have lost their
+ jobs and their homes, and
+
+On line 6:
+ rebound. This report
+ is intended to provide
+ a historical
+
+ accounting of what
+ brought our financial system
+ and economy to
+
+On line 8:
+ better understand
+ how this calamity came to be.
+ The Commission was
+
+On line 8:
+ as part of the Fraud
+ Enforcement and Recovery
+ Act (Public Law 111-21)
+
+On line 10:
+ by Congress and signed
+ by the President in May
+ This independent,
+
+On line 10:
+ panel was composed
+ of private citizens with
+ experience in
+
+On line 10:
+ banking, and consumer
+ protection. Six members of
+ the Commission were
+
+On line 10:
+ by the Democratic
+ leadership of Congress and
+ four members by the
+
+On line 12:
+ specific topics
+ for inquiry and called for the
+ examination
+
+On line 12:
+ collapse of major
+ financial institutions
+ that failed or would have
+
+On line 12:
+ the government. This
+ report fulfills these mandates.
+ In addition, the
+
+On line 12:
+ was instructed to
+ refer to the attorney
+ general of the
+
+On line 12:
+ any appropriate
+ state attorney general
+ any person that the
+
+ Commission found may
+ have violated the laws
+ of the United States
+
+On line 12:
+ relation to the
+ crisis. Where the Commission
+ found such potential
+
+On line 12:
+ The Commission used
+ the authority it was
+ given to issue
+
+On line 12:
+ and the production
+ of documents, but in the
+ vast majority
+
+On line 14:
+ voluntarily
+ cooperated with this
+ inquiry. In the course
+
+On line 14:
+ millions of pages of
+ documents, interviewed more
+ than witnesses, and
+
+On line 14:
+ of public hearings
+ in New York, Washington, D.C.,
+ and communities
+
+On line 14:
+ the country that were
+ hard hit by the crisis. The
+ Commission also
+
+ drew from a large body
+ of existing work about the
+ crisis developed
+
+On line 14:
+ government agencies,
+ academics, journalists, legal
+ investigators,
+
+On line 16:
+ We have tried in this
+ report to explain in clear,
+ understandable terms
+
+On line 16:
+ complex financial
+ system worked, how the pieces fit
+ together, and how
+
+On line 16:
+ occurred. Doing so
+ required research into broad
+ and sometimes arcane
+
+On line 16:
+ risk management. To
+ bring these subjects out of the
+ realm of the abstract,
+
+On line 16:
+ Financial, Fannie
+ Mae, Goldman Sachs, Lehman Brothers,
+ Merrill Lynch, Moody’s, and
+
+ Wachovia. We looked more
+ generally at the roles
+ and actions of scores
+
+On line 18:
+ We also studied
+ relevant policies put in
+ place by successive
+
+On line 18:
+ And importantly,
+ we examined the roles of
+ policy makers
+
+On line 18:
+ Corporation, the
+ Federal Reserve Board, the
+ Federal Reserve
+
+On line 18:
+ Housing and Urban
+ Development, the Office
+ of the Comptroller
+
+ of the Currency,
+ the Office of Federal
+ Housing Enterprise
+
+On line 18:
+ its successor, the
+ Federal Housing Finance
+ Agency), the Office
+
+On line 18:
+ Supervision, the
+ Securities and Exchange
+ Commission, and the
+
+ Treasury Department.
+ Of course, there is much work the
+ Commission did not
+
+On line 20:
+ it to delve into
+ what caused the crisis. In that
+ sense, the Commission
+
+On line 20:
+ other transportation
+ accidents so that knowledge
+ of the probable
+
+On line 20:
+ can help avoid future
+ accidents. Nor were we tasked
+ with evaluating
+
+ the federal law
+ (the Troubled Asset Relief
+ Program, known as TARP)
+
+On line 20:
+ major financial
+ institutions. That duty
+ was assigned to the
+
+On line 22:
+ General for TARP.
+ This report is not the sole
+ repository of
+
+ what the panel found.
+ A website will host a wealth
+ of information
+
+On line 24:
+ contain a stockpile
+ of materials—including
+ documents and emails,
+
+On line 24:
+ Commission’s public
+ hearings, testimony, and
+ supporting research—that
+
+ can be studied for
+ years to come. Much of what is
+ footnoted in this
+
+On line 24:
+ can be found on the
+ website. In addition, more
+ materials that
+
+ cannot be released
+ yet for various reasons
+ will eventually
+
+On line 24:
+ made public through the
+ National Archives and Records
+ Administration.
+
+On line 26:
+ extraordinary
+ commitment and knowledge of
+ the members of the
+
+ Commission who were
+ accorded the honor of
+ this public service.
+
+On line 26:
+ from the perspectives
+ shared with commissioners by
+ thousands of concerned
+
+On line 26:
+ and emails. And we are
+ grateful to the hundreds of
+ individuals
+
+On line 26:
+ personal accounts
+ in extensive interviews,
+ testimony, and
+
+ discussions with the
+ Commission. We want to thank
+ the Commission staff,
+
+On line 30:
+ particular, Wendy
+ Edelberg, our executive
+ director, for the
+
+ professionalism,
+ passion, and long hours they brought
+ to this mission in
+
+On line 30:
+ report would not have
+ been possible without their
+ extraordinary
+
+ dedication. With
+ this report and our website,
+ the Commission’s work
+
+ comes to a close. We
+ present what we have found in the
+ hope that readers can
+
+On line 32:
+ this report to reach
+ their own conclusions, even as
+ the comprehensive
+
+On line 38:
+ record of this crisis
+ continues to be written.
+ CONCLUSIONS OF THE
+
+On line 40:
+ Commission has been
+ called upon to examine
+ the financial and
+
+ economic crisis
+ that has gripped our country and
+ explain its causes
+
+On line 40:
+ American people.
+ We are keenly aware of the
+ significance of
+
+On line 40:
+ economic damage
+ that America has suffered
+ in the wake of the
+
+On line 42:
+ crisis since the Great
+ Depression. Our task was first
+ to determine what
+
+On line 42:
+ and how it happened
+ so that we could understand
+ why it happened. Here
+
+On line 42:
+ our conclusions. We
+ encourage the American
+ people to join us
+
+On line 42:
+ own assessments based
+ on the evidence gathered
+ in our inquiry. If
+
+On line 42:
+ from history, we
+ are unlikely to fully
+ recover from it.
+
+ Some on Wall Street and
+ in Washington with a stake
+ in the status quo
+
+ may be tempted to
+ wipe from memory the events
+ of this crisis, or
+
+On line 42:
+ unravel myths, and
+ help us understand how the
+ crisis could have been
+
+ avoided. It is an
+ attempt to record history,
+ not to rewrite it,
+
+On line 44:
+ allow it to be
+ rewritten. To help our fellow
+ citizens better
+
+On line 44:
+ conclusions at the
+ end of chapters in Parts III,
+ IV, and V of this
+
+ report. The subject
+ of this report is of no
+ small consequence to
+
+On line 46:
+ nation. The profound
+ events of and were neither bumps
+ in the road nor an
+
+ accentuated
+ dip in the financial and
+ business cycles we
+
+On line 46:
+ come to expect in
+ a free market economic
+ system. This was a
+
+On line 46:
+ financial upheaval,
+ if you will—that wreaked havoc in
+ communities and
+
+ neighborhoods across this
+ country. As this report goes
+ to print, there are more
+
+On line 48:
+ million Americans
+ who are out of work, cannot
+ find full-time work,
+
+On line 48:
+ up looking for work.
+ About four million families
+ have lost their homes to
+
+On line 48:
+ their mortgage payments.
+ Nearly trillion in household
+ wealth has vanished, with
+
+On line 48:
+ and life savings swept
+ away. Businesses, large and small,
+ have felt the sting of
+
+On line 48:
+ recession. There is
+ much anger about what has transpired,
+ and justifiably
+
+ so. Many people who
+ abided by all the rules now
+ find themselves out of
+
+On line 48:
+ about their future prospects.
+ The collateral damage
+ of this crisis has
+
+ been real people
+ and real communities.
+ The impacts of this
+
+On line 48:
+ are likely to be
+ felt for a generation.
+ And the nation faces
+
+On line 50:
+ so many Americans,
+ we began our exploration
+ with our own views and
+
+On line 50:
+ how the world’s strongest
+ financial system came to
+ the brink of collapse.
+
+On line 50:
+ our appointment to
+ this independent panel,
+ much had already been
+
+On line 50:
+ said about the crisis.
+ Yet all of us have been deeply
+ affected by what
+
+ we have learned in the
+ course of our inquiry. We have
+ been at various
+
+ times fascinated,
+ surprised, and even shocked by what
+ we saw, heard, and read.
+
+On line 52:
+ revelation. Much
+ attention over the past two
+ years has been focused
+
+On line 52:
+ the decisions by
+ the federal government
+ to provide massive
+
+On line 52:
+ financial system
+ and rescue large financial
+ institutions that
+
+On line 52:
+ important to fail.
+ Those decisions—and the deep
+ emotions surrounding
+
+ them—will be debated
+ long into the future. But
+ our mission was to
+
+ ask and answer this
+ central question: how did it
+ come to pass that in
+
+On line 52:
+ the total collapse
+ of our financial system
+ and economy or
+
+On line 52:
+ and an array of
+ companies, as millions of
+ Americans still lost
+
+ their jobs, their savings,
+ and their homes1 In this report,
+ we detail the events
+
+On line 54:
+ the crisis. But a
+ simple summary, as we
+ see it, is useful
+
+ at the outset. While
+ the vulnerabilities
+ that created the
+
+On line 54:
+ the making, it was
+ the collapse of the housing
+ bubble—fueled by
+
+ low interest rates,
+ easy and available credit, scant
+ regulation, and
+
+ toxic mortgages— that
+ was the spark that ignited
+ a string of events, which
+
+On line 56:
+ fall of Trillions of
+ dollars in risky mortgages had
+ become embedded
+
+On line 56:
+ as mortgage-related
+ securities were packaged,
+ repackaged, and sold to
+
+On line 56:
+ world. When the bubble
+ burst, hundreds of billions of
+ dollars in losses
+
+On line 56:
+ to those mortgages and
+ had borrowed heavily against
+ them. This happened not
+
+On line 56:
+ in the United States
+ but around the world. The losses
+ were magnified by
+
+On line 58:
+ crisis reached seismic
+ proportions in September
+ with the failure of
+
+ Lehman Brothers and the
+ impending collapse of the
+ insurance giant
+
+On line 58:
+ International
+ Group (AIG). Panic fanned by a
+ lack of transparency
+
+On line 58:
+ interconnections
+ among institutions perceived
+ to be "too big to
+
+ fail," caused the credit
+ markets to seize up. Trading
+ ground to a halt. The
+
+On line 58:
+ market plummeted.
+ The economy plunged into
+ a deep recession.
+
+On line 60:
+ financial system
+ we examined bears little
+ resemblance to that
+
+On line 60:
+ generation. The
+ changes in the past three decades alone
+ have been remarkable.
+
+On line 60:
+ markets have become
+ increasingly globalized.
+ Technology has
+
+On line 60:
+ and complexity
+ of financial instruments
+ and transactions. There
+
+On line 60:
+ costs of financing
+ than ever before. And the
+ financial sector
+
+ itself has become
+ a much more dominant force
+ in our economy.
+
+On line 64:
+ the amount of debt held
+ by the financial sector
+ soared from trillion to
+
+On line 66:
+ doubling as a share
+ of gross domestic product.
+ The very nature of
+
+On line 66:
+ to publicly traded
+ corporations taking greater
+ and more diverse kinds
+
+On line 66:
+ risks. By the largest U.S.
+ commercial banks held of the
+ industry’s assets,
+
+On line 66:
+ more than double the
+ level held in On the eve
+ of the crisis in
+
+On line 66:
+ constituted of
+ all corporate profits in
+ the United States, up
+
+On line 66:
+ in Understanding
+ this transformation has been
+ critical to the
+
+On line 68:
+ Now to our major
+ findings and conclusions, which
+ are based on the facts
+
+On line 68:
+ in this report: they
+ are offered with the hope that
+ lessons may be learned to
+
+On line 70:
+ future catastrophe.
+ We conclude this financial
+ crisis was avoidable.
+
+ The crisis was the
+ result of human action
+ and inaction, not
+
+ of Mother Nature
+ or computer models gone
+ haywire. The captains
+
+On line 70:
+ the public stewards
+ of our financial system
+ ignored warnings and
+
+On line 70:
+ evolving risks within
+ a system essential to
+ the well-being of the
+
+On line 72:
+ public. Theirs was a
+ big miss, not a stumble. While
+ the business cycle
+
+On line 72:
+ this magnitude need
+ not have occurred. To paraphrase
+ Shakespeare, the fault lies
+
+ not in the stars, but
+ in us. Despite the expressed
+ view of many on Wall
+
+On line 74:
+ in Washington that
+ the crisis could not have been
+ foreseen or avoided,
+
+On line 74:
+ were warning signs. The
+ tragedy was that they were ignored
+ or discounted. There
+
+On line 74:
+ risky subprime lending
+ and securitization,
+ an unsustainable
+
+On line 74:
+ in household mortgage
+ debt, and exponential growth
+ in financial firms’
+
+On line 74:
+ red flags. Yet there was
+ pervasive permissiveness;
+ little meaningful
+
+On line 76:
+ taken to quell the
+ threats in a timely manner.
+ The prime example
+
+On line 76:
+ failure to stem the
+ flow of toxic mortgages, which
+ it could have done by
+
+On line 78:
+ mortgage-lending standards.
+ The Federal Reserve was
+ the one entity
+
+On line 78:
+ examination
+ is replete with evidence
+ of other failures:
+
+On line 78:
+ bought, and sold mortgage
+ securities they never
+ examined, did not
+
+ care to examine,
+ or knew to be defective;
+ firms depended on
+
+ tens of billions of
+ dollars of borrowing that
+ had to be renewed
+
+ each and every night,
+ secured by subprime mortgage
+ securities; and
+
+On line 78:
+ blindly relied on
+ credit rating agencies as
+ their arbiters of risk.
+
+On line 78:
+ else could one expect
+ on a highway where there were
+ neither speed limits
+
+On line 80:
+ widespread failures in
+ financial regulation
+ and supervision
+
+On line 80:
+ devastating to
+ the stability of the
+ nation’s financial
+
+ markets. The sentries
+ were not at their posts, in no
+ small part due to the
+
+On line 80:
+ self-correcting
+ nature of the markets and
+ the ability of
+
+On line 80:
+ to effectively
+ police themselves. More than years
+ of deregulation
+
+On line 80:
+ former Federal
+ Reserve chairman Alan Greenspan and
+ others, supported
+
+On line 80:
+ by the powerful
+ financial industry at
+ every turn, had stripped
+
+ away key safeguards, which
+ could have helped avoid catastrophe.
+ This approach had opened
+
+ up gaps in oversight
+ of critical areas with
+ trillions of dollars
+
+On line 82:
+ race to the weakest
+ supervisor. Yet we do
+ not accept the view
+
+On line 82:
+ regulators lacked
+ the power to protect the
+ financial system.
+
+On line 84:
+ had ample power
+ in many arenas and they chose
+ not to use it. To
+
+On line 84:
+ three examples: the
+ Securities and Exchange
+ Commission could have
+
+On line 84:
+ more capital and
+ halted risky practices at the
+ big investment banks.
+
+On line 86:
+ Federal Reserve
+ Bank of New York and other
+ regulators could
+
+On line 86:
+ down on Citigroup’s
+ excesses in the run-up to
+ the crisis. They did
+
+On line 86:
+ the runaway mortgage
+ securitization train.
+ They did not. In case
+
+On line 86:
+ the institutions
+ they oversaw as safe and sound
+ even in the face of
+
+On line 86:
+ downgrading them just
+ before their collapse. And where
+ regulators lacked
+
+On line 86:
+ Too often, they lacked
+ the political will—in
+ a political
+
+On line 86:
+ as the fortitude
+ to critically challenge
+ the institutions
+
+On line 88:
+ system occurred in
+ many instances as financial
+ markets evolved. But as
+
+ the report will show,
+ the financial industry
+ itself played a key
+
+ role in weakening
+ regulatory constraints
+ on institutions,
+
+On line 88:
+ and products. It did
+ not surprise the Commission
+ that an industry
+
+On line 88:
+ would exert pressure
+ on policy makers and
+ regulators. From
+
+On line 88:
+ individuals
+ and political action
+ committees in the
+
+On line 88:
+ made more than billion
+ in campaign contributions.
+ What troubled us was
+
+ the extent to which
+ the nation was deprived of
+ the necessary strength
+
+On line 88:
+ independence of
+ the oversight necessary to
+ safeguard financial
+
+On line 90:
+ dramatic failures
+ of corporate governance
+ and risk management
+
+On line 90:
+ institutions were
+ a key cause of this crisis.
+ There was a view that
+
+On line 90:
+ self-preservation
+ inside major financial
+ firms would shield them from
+
+ fatal risk-taking
+ without the need for a steady
+ regulatory
+
+On line 90:
+ argued, would stifle
+ innovation. Too many of
+ these institutions
+
+On line 90:
+ too much risk, with too
+ little capital, and with
+ too much dependence
+
+On line 90:
+ In many respects, this
+ reflected a funda-CONCLUSIONS OF THE
+ FINANCIAL CRISIS
+
+On line 90:
+ these institutions,
+ particularly the large
+ investment banks and
+
+On line 90:
+ lenders and creating,
+ packaging, repackaging, and
+ selling trillions of
+
+On line 92:
+ products. Like Icarus, they
+ never feared flying ever
+ closer to the sun.
+
+On line 94:
+ grew aggressively
+ through poorly executed
+ acquisition and
+
+On line 94:
+ more challenging. The
+ CEO of Citigroup told the
+ Commission that a
+
+On line 94:
+ billion position
+ in highly rated mortgage
+ securities would
+
+ "not in any way have
+ excited my attention,"
+ and the co-head of
+
+On line 94:
+ investment bank said
+ he spent "a small fraction of
+ of his time on those
+
+On line 96:
+ In this instance, too
+ big to fail meant too big to
+ manage. Financial
+
+On line 96:
+ instances. Too often,
+ risk management became risk
+ justification.
+
+On line 98:
+ short-term gain—without
+ proper consideration
+ of long-term consequences.
+
+ Often, those systems
+ encouraged the big bet—where
+ the payoff on the
+
+ upside could be huge
+ and the downside limited.
+ This was the case up
+
+ and down the line—from
+ the corporate boardroom to
+ the mortgage broker
+
+On line 100:
+ examination
+ revealed stunning instances of
+ governance breakdowns
+
+On line 100:
+ read, among other things,
+ about AIG senior management’s
+ ignorance of the
+
+On line 100:
+ company’s billion
+ derivatives exposure
+ to mortgage-related
+
+On line 100:
+ Fannie Mae’s quest for
+ bigger market share, profits,
+ and bonuses, which led
+
+ it to ramp up its
+ exposure to risky loans and
+ securities as
+
+ the housing market
+ was peaking; and the costly
+ surprise when Merrill
+
+On line 100:
+ that the company
+ held billion in "super-senior"
+ and supposedly
+
+On line 102:
+ securities that
+ resulted in billions of
+ dollars in losses.
+
+On line 104:
+ a combination
+ of excessive borrowing,
+ risky investments, and
+
+ lack of transparency
+ put the financial system
+ on a collision
+
+On line 104:
+ with crisis. Clearly,
+ this vulnerability
+ was related to
+
+On line 104:
+ and regulation,
+ but it is significant
+ enough by itself to
+
+On line 106:
+ our attention here.
+ In the years leading up to
+ the crisis, too many
+
+On line 106:
+ as too many households,
+ borrowed to the hilt, leaving
+ them vulnerable
+
+On line 106:
+ financial distress
+ or ruin if the value
+ of their investments
+
+On line 108:
+ even modestly. For
+ example, as of the five
+ major investment
+
+ banks—Bear Stearns, Goldman Sachs,
+ Lehman Brothers, Merrill Lynch, and
+ Morgan Stanley—were
+
+ operating with
+ extraordinarily thin
+ capital. By one
+
+On line 108:
+ measure, their leverage
+ ratios were as high as to
+ meaning for every
+
+On line 108:
+ in assets, there was
+ only in capital to
+ cover losses. Less
+
+On line 108:
+ a drop in asset
+ values could wipe out a firm.
+ To make matters worse,
+
+On line 108:
+ borrowing had to
+ be renewed each and every
+ day. For example,
+
+On line 108:
+ Stearns had billion in
+ equity and billion in
+ liabilities
+
+On line 108:
+ and was borrowing
+ as much as billion in the
+ overnight market. It was
+
+On line 108:
+ a small business with
+ in equity borrowing
+ million, with of that
+
+ due each and every
+ day. One can’t really ask
+ "What were they thinking1"
+
+ when it seems that too
+ many of them were thinking alike.
+ And the leverage was
+
+On line 110:
+ "window dressing" of
+ financial reports available
+ to the investing
+
+ public. The kings of
+ leverage were Fannie Mae and
+ Freddie Mac, the two
+
+On line 112:
+ the end of Fannie’s
+ and Freddie’s combined leverage
+ ratio, including
+
+On line 114:
+ owned and guaranteed,
+ stood at to But financial
+ firms were not alone in
+
+On line 114:
+ the borrowing spree:
+ from to national mortgage
+ debt almost doubled,
+
+On line 114:
+ the amount of mortgage
+ debt per household rose more than
+ from to even while wages
+
+On line 114:
+ the housing downturn
+ hit, heavily indebted
+ financial firms and
+
+On line 116:
+ institutions was
+ exacerbated by the
+ risky assets they were
+
+On line 116:
+ debt. As the mortgage
+ and real estate markets
+ churned out riskier and
+
+On line 116:
+ securities, many
+ financial institutions
+ loaded up on them.
+
+On line 116:
+ the end of Lehman had
+ amassed billion in commercial
+ and residential
+
+On line 116:
+ securities, which
+ was almost twice what it held
+ just two years before,
+
+ and more than four times
+ its total equity. And
+ again, the risk wasn’t
+
+On line 116:
+ taken on just by
+ the big financial firms, but
+ by families, too.
+
+On line 116:
+ mortgage borrowers
+ in and took out "option ARM"
+ loans, which meant they could
+
+On line 118:
+ make payments so low
+ that their mortgage balances rose
+ every month. Within
+
+On line 118:
+ financial system,
+ the dangers of this debt were
+ magnified because
+
+ transparency was not
+ required or desired. Massive,
+ short-term borrowing,
+
+On line 118:
+ obligations unseen
+ by others in the market,
+ heightened the chances the
+
+On line 118:
+ rapidly unravel.
+ In the early part of the
+ 20th century, we
+
+On line 118:
+ protections—the
+ Federal Reserve as a
+ lender of last resort,
+
+On line 118:
+ deposit insurance,
+ ample regulations—to
+ provide a bulwark
+
+On line 118:
+ had regularly
+ plagued America’s banking
+ system in the 19th
+
+On line 118:
+ over the past 30-plus years,
+ we permitted the growth of
+ a shadow banking
+
+On line 118:
+ and laden with short-term
+ debt—that rivaled the size of
+ the traditional
+
+On line 118:
+ of over-the-counter derivatives—were
+ hidden from view, without the
+ protections we had
+
+On line 118:
+ financial meltdowns.
+ We had a 21st-century
+ financial system
+
+ with 19th-century
+ safeguards. When the housing and
+ mortgage markets cratered,
+
+On line 120:
+ lack of transparency,
+ the extraordinary debt
+ loads, the short-term loans,
+
+On line 120:
+ risky assets all came
+ home to roost. What resulted
+ was panic. We had
+
+On line 122:
+ reaped what we had sown.
+ We conclude the government
+ was ill prepared for
+
+On line 122:
+ response added to the
+ uncertainty and panic
+ in the financial
+
+On line 122:
+ As part of our charge,
+ it was appropriate to
+ review government
+
+On line 122:
+ in response to the
+ developing crisis, not
+ just those policies or
+
+On line 122:
+ it, to determine
+ if any of those responses
+ contributed to or
+
+ exacerbated
+ the crisis. As our report
+ shows, key policy
+
+On line 124:
+ Treasury Department,
+ the Federal Reserve Board,
+ and the Federal
+
+On line 124:
+ Bank of New York—who
+ were best positioned to watch
+ over our markets were
+
+On line 126:
+ ill prepared for the
+ events of and Other agencies
+ were also behind
+
+On line 126:
+ were hampered because
+ they did not have a clear grasp
+ of the financial
+
+On line 126:
+ charged with overseeing,
+ particularly as it
+ had evolved in the years
+
+ leading up to the
+ crisis. This was in no small
+ measure due to the
+
+On line 126:
+ of transparency in
+ key markets. They thought risk had
+ been diversified
+
+ when, in fact, it had
+ been concentrated. Time and
+ again, from the spring of
+
+On line 126:
+ an ad hoc basis
+ with specific programs to
+ put fingers in the
+
+On line 126:
+ comprehensive and
+ strategic plan for containment,
+ because they lacked a
+
+On line 126:
+ interconnections
+ in the financial markets.
+ Some regulators
+
+ have conceded this
+ error. We had allowed the
+ system to race ahead
+
+ of our ability
+ to protect it. While there was
+ some awareness of, or
+
+On line 128:
+ least a debate about,
+ the housing bubble, the record
+ reflects that senior
+
+On line 128:
+ officials did not
+ recognize that a bursting
+ of the bubble could
+
+On line 128:
+ threaten the entire
+ financial system. Throughout
+ the summer of both
+
+ Federal Reserve
+ Chairman Ben Bernanke and Treasury
+ Secretary Henry
+
+On line 128:
+ that the turmoil in
+ the subprime mortgage markets
+ would be contained. When
+
+ Bear Stearns’s hedge funds, which
+ were heavily invested
+ in mortgage-related
+
+On line 128:
+ implications of
+ the collapse. Despite the fact
+ that so many other
+
+ funds were exposed to
+ the same risks as those hedge funds,
+ the Bear Stearns funds were
+
+On line 128:
+ be "relatively
+ unique." Days before the collapse
+ of Bear Stearns in March
+
+On line 130:
+ SEC Chairman Christopher
+ Cox expressed "comfort about the
+ capital cushions"
+
+On line 130:
+ big investment banks.
+ It was not until August
+ just weeks before the
+
+On line 130:
+ Mae and Freddie Mac,
+ that the Treasury Department
+ understood the full
+
+On line 130:
+ conditions of those
+ two institutions. And just
+ a month before Lehman’s
+
+On line 130:
+ Bank of New York was
+ still seeking information
+ on the exposures
+
+On line 132:
+ In addition, the
+ government’s inconsistent
+ handling of major
+
+On line 132:
+ rescue Bear Stearns and
+ then to place Fannie Mae and
+ Freddie Mac into
+
+On line 132:
+ Lehman Brothers and then
+ to save AIG—increased uncertainty
+ and panic in the
+
+On line 134:
+ we deeply respect and
+ appreciate the efforts
+ made by Secretary
+
+On line 134:
+ Bernanke, and Timothy
+ Geithner, formerly
+ president of the
+
+On line 134:
+ Bank of New York and
+ now treasury secretary, and
+ so many others who
+
+On line 134:
+ to stabilize our
+ financial system and our
+ economy in the
+
+On line 136:
+ a systemic breakdown
+ in accountability and
+ ethics. The integrity
+
+On line 136:
+ and the public’s trust in
+ those markets are essential
+ to the economic
+
+On line 136:
+ financial system
+ and our economy rely
+ on the notions of
+
+On line 136:
+ In our economy,
+ we expect businesses and
+ individuals
+
+On line 136:
+ pursue profits, at
+ the same time that they produce
+ products and services
+
+On line 138:
+ been the case in past
+ speculative booms and busts—we
+ witnessed an erosion
+
+On line 138:
+ exacerbated
+ the financial crisis. This
+ was not universal,
+
+ but these breaches stretched
+ from the ground level to the
+ corporate suites. They
+
+On line 138:
+ in significant
+ financial consequences but
+ also in damage
+
+On line 138:
+ the trust of investors,
+ businesses, and the public
+ in the financial
+
+On line 140:
+ according to one
+ measure, that the percentage
+ of borrowers who
+
+On line 140:
+ just a matter of
+ months after taking a loan
+ nearly doubled from
+
+On line 140:
+ the summer of to
+ late This data indicates
+ they likely took out
+
+On line 140:
+ the capacity
+ or intention to pay. You
+ will read about mortgage
+
+ brokers who were paid
+ "yield spread premiums" by lenders
+ to put borrowers
+
+ into higher-cost
+ loans so they would get bigger
+ fees, often never
+
+On line 140:
+ mortgage fraud grew 20-fold
+ between and and then more than
+ doubled again between
+
+On line 142:
+ and One study places the
+ losses resulting from fraud
+ on mortgage loans made
+
+On line 144:
+ at billion. Lenders made
+ loans that they knew borrowers
+ could not afford and
+
+On line 144:
+ of the loans they were
+ originating could result
+ in "catastrophic
+
+ consequences." Less than
+ a year later, they noted
+ that certain high-risk
+
+On line 144:
+ result not only
+ in foreclosures but also
+ in "financial and
+
+ reputational
+ catastrophe" for the firm. But
+ they did not stop. And
+
+On line 146:
+ sampled loans they were
+ purchasing to package and
+ sell to investors. They
+
+On line 146:
+ a significant
+ percentage of the sampled
+ loans did not meet their
+
+On line 146:
+ of many prospectuses
+ provided to investors found
+ that this critical
+
+ information was
+ not disclosed. THESE CONCLUSIONS
+ must be viewed in the
+
+On line 148:
+ to pin this crisis
+ on mortal flaws like greed and
+ CONCLUSIONS OF THE
+
+On line 148:
+ COMMISSION xxiii
+ hubris would be simplistic. It
+ was the failure to
+
+On line 150:
+ for human weakness
+ that is relevant to this
+ crisis. Second, we
+
+On line 150:
+ believe the crisis
+ was a result of human
+ mistakes, misjudgments,
+
+On line 150:
+ in systemic failures
+ for which our nation has paid
+ dearly. As you read
+
+ this report, you will
+ see that specific firms and
+ individuals
+
+On line 150:
+ Yet a crisis of
+ this magnitude cannot be
+ the work of a few
+
+ bad actors, and such
+ was not the case here. At the
+ same time, the breadth of
+
+On line 150:
+ is at fault"; many firms
+ and individuals did
+ not participate
+
+On line 152:
+ We do place special
+ responsibility with
+ the public leaders
+
+ charged with protecting
+ our financial system, those
+ entrusted to run
+
+On line 152:
+ chief executives
+ of companies whose failures
+ drove us to crisis.
+
+On line 152:
+ of significant
+ responsibility and
+ obligation. Tone at
+
+ the top does matter
+ and, in this instance, we were
+ let down. No one said
+
+On line 152:
+ must also accept
+ responsibility for
+ what we permitted
+
+On line 154:
+ unanimously, we
+ acquiesced to or embraced
+ a system, a set
+
+On line 160:
+ and actions, that gave
+ rise to our present predicament. THIS
+ REPORT DESCRIBES THE
+
+On line 160:
+ and the system that
+ propelled our nation toward
+ crisis. The complex
+
+ machinery of our
+ financial markets has many
+ essential gears—some
+
+On line 160:
+ a critical role
+ as the crisis developed
+ and deepened. Here we
+
+On line 160:
+ our conclusions about
+ specific components of
+ the system that we
+
+ believe contributed
+ significantly to the
+ financial meltdown.
+
+On line 162:
+ pipeline lit and spread
+ the flame of contagion and
+ crisis. When housing
+
+ prices fell and mortgage
+ borrowers defaulted, the
+ lights began to dim
+
+On line 164:
+ toxic mortgages from
+ neighborhoods across America
+ to investors around the
+
+ globe. Many mortgage lenders
+ set the bar so low that lenders
+ simply took eager
+
+On line 166:
+ disregard for a
+ borrower’s ability to
+ pay. Nearly one-quarter
+
+On line 166:
+ made in the first half
+ of were interest-only loans.
+ During the same year,
+
+On line 166:
+ originated by
+ Countrywide and Washington
+ Mutual had low-
+
+On line 168:
+ lending, including
+ predatory and fraudulent
+ practices, became more
+
+On line 168:
+ Federal Reserve
+ and other regulators
+ and authorities
+
+ heard warnings from many
+ quarters. Yet the Federal
+ Reserve neglected
+
+On line 168:
+ mission "to ensure
+ the safety and soundness of
+ the nation’s banking
+
+On line 168:
+ financial system
+ and to protect the credit
+ rights of consumers." It
+
+On line 168:
+ build the retaining
+ wall before it was too late.
+ And the Office of
+
+On line 168:
+ the Office of Thrift
+ Supervision, caught up in
+ turf wars, preempted
+
+ state regulators
+ from reining in abuses. While
+ many of these mortgages
+
+ were kept on banks’ books,
+ the bigger money came from
+ global investors who
+
+On line 170:
+ cash into newly
+ created mortgage-related
+ securities. It
+
+On line 170:
+ regulators alike
+ that risk had been conquered: the
+ investors held highly
+
+On line 170:
+ they thought were sure to
+ perform; the banks thought they had
+ taken the riskiest
+
+On line 170:
+ firms making profits
+ and borrowing costs reduced.
+ But each step in the
+
+On line 170:
+ on the next step to
+ keep demand going. From the
+ speculators who
+
+ flipped houses to the
+ mortgage brokers who scouted
+ the loans, to the lenders
+
+On line 170:
+ firms that created
+ the mortgage-backed securities,
+ collateralized
+
+On line 170:
+ obligations (CDOs), CDOs
+ squared, and synthetic CDOs: no
+ one in this pipeline
+
+ of toxic mortgages
+ had enough skin in the game. They
+ all believed they could
+
+ off-load their risks on
+ a moment’s notice to the
+ next person in line.
+
+On line 170:
+ wrong. When borrowers
+ stopped making mortgage payments,
+ the losses—amplified
+
+On line 170:
+ through the pipeline. As
+ it turned out, these losses were
+ concentrated in
+
+On line 172:
+ millions of mortgages
+ so efficiently has proven
+ to be difficult
+
+On line 172:
+ erected barriers
+ to modifying mortgages
+ so families can
+
+On line 174:
+ housing market and
+ financial institutions.
+ We conclude over-the-counter
+
+On line 174:
+ The enactment of
+ legislation in to ban
+ the regulation
+
+On line 174:
+ the federal and
+ state governments of over-the-counter
+ (OTC) derivatives
+
+ was a key turning
+ point in the march toward the
+ financial crisis.
+
+On line 176:
+ to corporations,
+ to farmers, and to investors,
+ derivatives have
+
+ been used to hedge against,
+ or speculate on, changes in
+ prices, rates, or indices
+
+ or even on events such
+ as the potential defaults
+ on debts. Yet, without
+
+On line 176:
+ rapidly spiraled out
+ of control and out of sight,
+ growing to trillion
+
+On line 176:
+ and collateral
+ requirements; speculation;
+ interconnections
+
+On line 178:
+ in this market. OTC
+ derivatives contributed
+ to the crisis in
+
+On line 178:
+ sold to investors to
+ protect against the default or
+ decline in value
+
+ of mortgage-related
+ securities backed by risky
+ loans. Companies sold
+
+On line 178:
+ tune of billion, in
+ AIG’s case—to investors in these
+ newfangled mortgage
+
+On line 178:
+ to launch and expand
+ the market and, in turn, to
+ further fuel the
+
+On line 180:
+ were essential to
+ the creation of synthetic
+ CDOs. These synthetic
+
+On line 180:
+ on the performance
+ of real mortgage-related
+ securities. They
+
+On line 180:
+ multiple bets on
+ the same securities and
+ helped spread them throughout
+
+On line 182:
+ system. Goldman Sachs
+ alone packaged and sold billion
+ in synthetic CDOs
+
+On line 182:
+ July CONCLUSIONS
+ OF THE FINANCIAL CRISIS
+ INQUIRY COMMISSION
+
+On line 184:
+ to May Synthetic
+ CDOs created by Goldman
+ referenced more than
+
+On line 186:
+ securities, and
+ of them were referenced at
+ least twice. This is apart
+
+On line 188:
+ in synthetic CDOs
+ created by other firms.
+ Finally, when the
+
+On line 188:
+ and crisis followed,
+ derivatives were in the
+ center of the storm.
+
+On line 188:
+ not been required to
+ put aside capital reserves
+ as a cushion for
+
+ the protection it
+ was selling, was bailed out when
+ it could not meet its
+
+On line 188:
+ committed more than
+ billion because of concerns
+ that AIG’s collapse would
+
+ trigger cascading
+ losses throughout the global
+ financial system.
+
+On line 188:
+ the existence of
+ millions of derivatives
+ contracts of all types
+
+On line 188:
+ panic, helping to
+ precipitate government
+ assistance to those
+
+On line 190:
+ conclude the failures
+ of credit rating agencies
+ were essential cogs
+
+On line 190:
+ wheel of financial
+ destruction. The three credit
+ rating agencies were
+
+On line 190:
+ of the financial
+ meltdown. The mortgage-related
+ securities at
+
+On line 190:
+ heart of the crisis
+ could not have been marketed
+ and sold without their
+
+On line 190:
+ regulatory
+ capital standards were hinged
+ on them. This crisis
+
+ could not have happened
+ without the rating agencies.
+ Their ratings helped the
+
+On line 190:
+ market soar and their
+ downgrades through and wreaked havoc
+ across markets and firms.
+
+ In our report, you
+ will read about the breakdowns at
+ Moody’s, examined by
+
+On line 192:
+ This compares with six
+ private-sector companies
+ in the United States
+
+On line 192:
+ early In alone, Moody’s
+ put its triple-A stamp of approval
+ on mortgage-related
+
+On line 192:
+ were disastrous: of
+ the mortgage securities
+ rated triple-A that year
+
+ ultimately were
+ downgraded. You will also
+ read about the forces at
+
+On line 194:
+ behind the breakdowns
+ at Moody’s, including the flawed
+ computer models,
+
+On line 194:
+ from financial firms
+ that paid for the ratings, the
+ relentless drive for
+
+ market share, the lack
+ of resources to do the job
+ despite record profits,
+
+ and the absence of
+ meaningful public oversight.
+ And you will see that
+
+ without the active
+ participation of the
+ rating agencies, the
+
+On line 194:
+ for mortgage-related
+ securities could not have
+ been what it became.
+
+On line 200:
+ ARE MANY COMPETING
+ VIEWS as to the causes of
+ this crisis. In this
+
+On line 200:
+ the Commission has
+ endeavored to address key
+ questions posed to us.
+
+On line 200:
+ availability and
+ excess liquidity, the
+ role of Fannie Mae
+
+ and Freddie Mac (the
+ GSEs), and government housing
+ policy. First, as
+
+On line 200:
+ in our report, we
+ outline monetary policies
+ and capital flows
+
+On line 200:
+ years leading up to
+ the crisis. Low interest
+ rates, widely available
+
+On line 200:
+ international
+ investors seeking to put their
+ money in real
+
+On line 202:
+ a credit bubble.
+ Those conditions created
+ increased risks, which should
+
+ have been recognized
+ by market participants,
+ policy makers,
+
+On line 202:
+ liquidity did
+ not need to cause a crisis.
+ It was the failures
+
+On line 202:
+ in excesses in
+ the mortgage and financial
+ markets—that were the
+
+ principal causes
+ of this crisis. Indeed, the
+ availability of
+
+On line 204:
+ directions. Second,
+ we examined the role of
+ the GSEs, with Fannie
+
+On line 204:
+ government-sponsored
+ enterprises had a deeply
+ flawed business model
+
+On line 204:
+ corporations with
+ the implicit backing of
+ and subsidies from
+
+On line 206:
+ mortgage exposure
+ and market position were
+ significant. In
+
+On line 208:
+ and they decided
+ to ramp up their purchase and
+ guarantee of risky
+
+On line 208:
+ just as the housing
+ market was peaking. They used
+ their political
+
+On line 208:
+ for decades to ward off
+ effective regulation
+ and oversight—spending
+
+On line 210:
+ on lobbying from
+ to They suffered from many of
+ the same failures of
+
+On line 210:
+ management as the
+ Commission discovered in
+ other financial
+
+On line 212:
+ the third quarter of
+ the Treasury Department had
+ provided billion
+
+On line 214:
+ We conclude that these
+ two entities contributed
+ to the crisis, but
+
+On line 214:
+ maintained their value
+ throughout the crisis and did
+ not contribute to
+
+ the significant
+ financial firm losses that
+ were central to the
+
+ financial crisis.
+ The GSEs participated
+ in the expansion
+
+On line 216:
+ subprime and other
+ risky mortgages, but they followed
+ rather than led Wall Street
+
+On line 216:
+ other lenders in the
+ rush for fool’s gold. They purchased
+ the highest rated
+
+On line 216:
+ added helium to
+ the housing balloon, but their
+ purchases never
+
+On line 216:
+ majority of
+ the market. Those purchases
+ represented of
+
+On line 218:
+ non-GSE subprime mortgage-backed
+ securities in with the
+ share rising to in
+
+On line 218:
+ loans and related
+ securities in order
+ to meet stock market
+
+On line 218:
+ regain market share,
+ and to ensure generous
+ compensation for
+
+ their executives
+ and employees—justifying
+ their activities
+
+On line 218:
+ the broad and sustained
+ public policy support
+ for homeownership.
+
+On line 220:
+ of the loans purchased
+ or guaranteed by Fannie
+ and Freddie. While they
+
+On line 220:
+ substantial losses,
+ delinquency rates for GSE loans
+ were substantially
+
+On line 220:
+ securitized by
+ other financial firms. For
+ example, data
+
+On line 220:
+ Commission for a
+ subset of borrowers with
+ similar credit
+
+On line 220:
+ below 660—show that by
+ the end of GSE mortgages were
+ far less likely to
+
+On line 222:
+ non-GSE securitized
+ mortgages: versus We also
+ studied at length how
+
+On line 222:
+ Development’s (HUD’s)
+ affordable housing goals for
+ the GSEs affected
+
+On line 222:
+ CONCLUSIONS OF THE
+ FINANCIAL CRISIS INQUIRY
+ COMMISSION xxvii risky
+
+On line 222:
+ on the evidence
+ and interviews with dozens of
+ individuals
+
+On line 222:
+ this subject area, we
+ determined these goals only
+ contributed marginally
+
+On line 224:
+ Fannie’s and Freddie’s
+ participation in those
+ mortgages. Finally,
+
+On line 224:
+ the matter of whether
+ government housing policies
+ were a primary
+
+On line 224:
+ for decades, government
+ policy has encouraged
+ homeownership through
+
+On line 224:
+ programs, and mandates.
+ These policies were put in place
+ and promoted by
+
+On line 224:
+ and Congresses—indeed,
+ both Presidents Bill Clinton
+ and George W. Bush set
+
+On line 226:
+ homeownership. In
+ conducting our inquiry, we
+ took a careful look
+
+On line 226:
+ noted above, and the
+ Community Reinvestment
+ Act (CRA). The CRA was
+
+On line 226:
+ enacted in to
+ combat "redlining" by banks—the
+ practice of denying
+
+On line 226:
+ individuals
+ and businesses in certain
+ neighborhoods without
+
+On line 226:
+ The CRA requires banks
+ and savings and loans to lend,
+ invest, and provide
+
+On line 228:
+ the CRA was not a
+ significant factor in
+ subprime lending or
+
+On line 228:
+ subprime lenders were not
+ subject to the CRA. Research
+ indicates only
+
+On line 228:
+ of high-cost loans—a
+ proxy for subprime loans—had any
+ connection to the
+
+ law. Loans made by CRA-regulated
+ lenders in the neighborhoods in
+ which they were required
+
+On line 228:
+ were half as likely
+ to default as similar
+ loans made in the same
+
+On line 228:
+ by independent
+ mortgage originators not
+ subject to the law.
+
+On line 230:
+ this respect: As a
+ nation, we set aggressive
+ homeownership goals
+
+On line 230:
+ extend credit to
+ families previously
+ denied access to
+
+On line 230:
+ the philosophy
+ of opportunity was
+ being matched by the
+
+On line 230:
+ ground. Witness again the
+ failure of the Federal
+ Reserve and other
+
+On line 230:
+ irresponsible
+ lending. Homeownership peaked
+ in the spring of and
+
+On line 230:
+ began to decline.
+ From that point on, the talk of
+ opportunity
+
+On line 230:
+ tragically at
+ odds with the reality
+ of a financial
+
+On line 236:
+ disaster in the
+ making. WHEN THIS COMMISSION
+ began its work months
+
+On line 236:
+ some imagined that the
+ events of and their consequences
+ would be well behind
+
+ us by the time we
+ issued this report. Yet more
+ than two years after
+
+On line 236:
+ an unprecedented
+ manner in our financial
+ markets, our country
+
+On line 236:
+ aftereffects of
+ the calamity. Our financial
+ system is, in many
+
+ respects, still unchanged
+ from what existed on the
+ eve of the crisis.
+
+On line 236:
+ in the wake of the
+ crisis, the U.S. financial
+ sector is now more
+
+On line 236:
+ While we have not been
+ charged with making policy
+ recommendations,
+
+ the very purpose of
+ our report has been to take
+ stock of what happened
+
+On line 236:
+ we can plot a new
+ course. In our inquiry, we found
+ dramatic breakdowns
+
+On line 236:
+ profound lapses in
+ regulatory oversight,
+ and near fatal flaws
+
+On line 238:
+ series of choices
+ and actions led us toward
+ a catastrophe for
+
+On line 238:
+ we were ill prepared.
+ These are serious matters
+ that must be addressed
+
+On line 238:
+ to restore faith in
+ our financial markets, to
+ avoid the next crisis,
+
+On line 238:
+ rebuild a system
+ of capital that provides
+ the foundation for
+
+On line 240:
+ shared prosperity.
+ The greatest tragedy would be to
+ accept the refrain
+
+On line 240:
+ no one could have seen
+ this coming and thus nothing
+ could have been done. If
+
+On line 242:
+ this notion, it will
+ happen again. This report should
+ not be viewed as the
+
+ end of the nation’s
+ examination of this
+ crisis. There is still
+
+On line 244:
+ is our collective
+ responsibility. It
+ falls to us to make
+
+On line 261:
+ we want different
+ results. PART I Crisis on
+ the Horizon BEFORE
+
+On line 263:
+ examining the
+ worst financial meltdown since
+ the Great Depression,
+
+On line 263:
+ Financial Crisis
+ Inquiry Commission reviewed
+ millions of pages of
+
+On line 265:
+ people from all walks
+ of life—to find out how and
+ why it happened. In
+
+On line 265:
+ public officials
+ testified that they had been
+ blindsided by the
+
+ crisis, describing
+ it as a dramatic and
+ mystifying turn
+
+ of events. Even among those
+ who worried that the housing
+ bubble might burst, few—if
+
+On line 267:
+ the magnitude of
+ the crisis that would ensue.
+ Charles Prince, the former
+
+On line 267:
+ chief executive
+ officer of Citigroup
+ Inc., called the collapse
+
+On line 267:
+ housing prices "wholly
+ unanticipated."1 Warren
+ Buffett, the chairman
+
+On line 267:
+ of Berkshire Hathaway
+ Inc., which until was the largest
+ single shareholder
+
+On line 267:
+ Moody’s Corporation,
+ told the Commission that "very,
+ very few people could
+
+On line 267:
+ the bubble," which he
+ called a "mass delusion" shared by
+ million Americans."2
+
+On line 267:
+ the chairman and chief
+ executive officer
+ of Goldman Sachs Group,
+
+On line 269:
+ likened the financial
+ crisis to a hurricane.3
+ Regulators echoed
+
+On line 269:
+ similar refrain.
+ Ben Bernanke, the chairman of the
+ Federal Reserve
+
+On line 269:
+ told the Commission
+ a "perfect storm" had occurred
+ that regulators
+
+On line 269:
+ when asked about whether the
+ Fed’s lack of aggressiveness
+ in regulating
+
+On line 269:
+ market during the
+ housing boom was a failure,
+ Bernanke responded, "It
+
+On line 269:
+ indeed. I think it
+ was the most severe failure
+ of the Fed in this
+
+On line 269:
+ episode."4 Alan Greenspan, the Fed
+ chairman during the two decades
+ leading up to the
+
+On line 269:
+ Commission that it
+ was beyond the ability
+ of regulators
+
+On line 271:
+ cannot identify
+ the timing of a crisis,
+ or anticipate
+
+ exactly where it
+ will be located or how
+ large the losses and
+
+ spillovers will be."5 In fact,
+ there were warning signs. In the
+ decade preceding the
+
+On line 273:
+ there were many signs that
+ house prices were inflated, that
+ lending practices had
+
+ spun out of control,
+ that too many homeowners were
+ taking on mortgages
+
+ and debt they could ill
+ afford, and that risks to the
+ financial system
+
+On line 273:
+ were clanging inside
+ financial institutions,
+ regulatory
+
+On line 273:
+ organizations,
+ state law enforcement agencies,
+ and corporations
+
+ throughout America,
+ as well as in neighborhoods
+ across the country. Many
+
+On line 273:
+ to avoid the train wreck.
+ While countless Americans joined
+ in the financial
+
+On line 273:
+ others were shouting
+ to government officials
+ in Washington and
+
+On line 273:
+ to what would become
+ a human disaster, not
+ just an economic
+
+On line 275:
+ "Everybody in the
+ whole world knew that the mortgage
+ bubble was there," said
+
+On line 275:
+ the former chairman
+ of the Securities and
+ Exchange Commission
+
+On line 275:
+ President George H.
+ W. Bush. "I mean, it wasn’t
+ hidden. You cannot
+
+On line 275:
+ at any of this and
+ say that the regulators
+ did their job. This was
+
+On line 275:
+ some hidden problem.
+ It wasn’t out on Mars or
+ Pluto or somewhere.
+
+On line 275:
+ It was right here. You
+ can’t make trillions of dollars’
+ worth of mortgages and
+
+On line 277:
+ notice."6 Paul McCulley, a
+ managing director at
+ PIMCO, one of the
+
+On line 277:
+ money management
+ firms, told the Commission that
+ he and his colleagues
+
+On line 277:
+ to get worried about
+ "serious signs of bubbles"
+ in they therefore sent
+
+On line 279:
+ cities to do what he
+ called "old-fashioned shoe-leather research,"
+ talking to real
+
+On line 279:
+ brokers, and local
+ investors about the housing and
+ mortgage markets. They
+
+On line 279:
+ outright degradation
+ of underwriting standards,"
+ McCulley asserted, and
+
+On line 279:
+ shared what they had learned
+ when they got back home to the
+ company’s Newport
+
+On line 279:
+ when our group came back,
+ they reported what they saw,
+ and we adjusted
+
+On line 281:
+ those who remembered
+ the savings and loan crisis,
+ knew that age-old rules of
+
+On line 281:
+ cast aside. Arnold Cattani,
+ the chairman of Bakersfield,
+ California–based
+
+On line 281:
+ the Commission that
+ he grew uncomfortable with
+ the "pure lunacy"
+
+On line 281:
+ saw in the local
+ home-building market, fueled
+ by "voracious" Wall
+
+On line 281:
+ investment banks; he
+ thus opted out of certain
+ kinds of investments
+
+On line 283:
+ vice chairman and chief
+ executive officer
+ of Service 1st Bank
+
+ of Nevada, told the
+ FCIC that the desire for a
+ "high and quick return"
+
+ blinded people to
+ fiscal realities. "You
+ may recall Tommy
+
+ Lee Jones in Men in
+ Black, where he holds a device
+ in the air, and with
+
+On line 283:
+ bright flash wipes clean the
+ memories of everyone
+ who has witnessed an
+
+On line 285:
+ event," he said.9 Unlike
+ so many other bubbles—tulip bulbs
+ in Holland in the
+
+On line 285:
+ South Sea stocks in the
+ 1700s, Internet stocks in the
+ late 1990s—this one involved
+
+On line 285:
+ the economy: the
+ family home. Homes are the
+ foundation upon
+
+On line 285:
+ economic structures
+ rest. Children usually go
+ to schools linked to their
+
+On line 285:
+ addresses; local
+ governments decide how much
+ money they can spend
+
+ on roads, firehouses,
+ and public safety based on
+ how much property
+
+ tax revenue they have;
+ house prices are tied to consumer
+ spending. Downturns in
+
+On line 289:
+ cause ripple effects
+ almost everywhere. When the
+ Federal Reserve
+
+On line 289:
+ mortgage rates fell, home
+ refinancing surged, climbing
+ from billion in to
+
+On line 289:
+ allowing people
+ to withdraw equity built
+ up over previous
+
+ decades and to consume
+ more, despite stagnant wages. Home
+ sales volume started
+
+On line 289:
+ and average home
+ prices nationwide climbed, rising
+ in eight years by one
+
+On line 289:
+ measure and hitting
+ a national high of in
+ early Home prices in
+
+On line 289:
+ skyrocketed: prices
+ increased nearly two and one-half
+ times in Sacramento,
+
+On line 289:
+ example, in just
+ five years,12 and shot up by about
+ the same percentage
+
+On line 289:
+ Prices about doubled in
+ more than metropolitan
+ areas, including
+
+On line 289:
+ Poughkeepsie, San Diego,
+ and West Palm Beach.13 Housing starts
+ nationwide climbed from
+
+On line 291:
+ reached a record in the
+ spring of although it wouldn’t
+ rise an inch further
+
+On line 291:
+ machine kept churning
+ for another three years. By
+ refinancing their
+
+On line 293:
+ equity between
+ and including billion in
+ alone, more than seven
+
+On line 293:
+ speculators and
+ potential homeowners stood
+ in line outside new
+
+On line 293:
+ for a chance to buy
+ houses before the ground had
+ even been broken. By
+
+On line 293:
+ the first half of more
+ than one out of every ten
+ home sales was to an
+
+On line 293:
+ or someone buying
+ a second home.15 Bigger was
+ better, and even the
+
+On line 293:
+ ballooned in size; the
+ floor area of an average
+ new home grew by to
+
+On line 295:
+ decade from to Money
+ washed through the economy like
+ water rushing through
+
+On line 297:
+ Low interest rates
+ and then foreign capital
+ helped fuel the boom.
+
+On line 297:
+ real estate agents,
+ loan brokers, and appraisers
+ profited on Main
+
+ Street, while investment
+ bankers and traders on Wall Street moved
+ even higher on the
+
+ American earnings
+ pyramid and the share prices of
+ the most aggressive
+
+On line 297:
+ firms reached all-time
+ highs.16 Homeowners pulled cash out
+ of their homes to send
+
+ their kids to college,
+ pay medical bills, install
+ designer kitchens with
+
+On line 297:
+ vacations, or launch
+ new businesses. They also
+ paid off credit cards,
+
+On line 297:
+ as personal debt
+ rose nationally. Survey
+ evidence shows that
+
+On line 297:
+ homeowners pulled out
+ cash to buy a vehicle
+ and over spent the cash
+
+On line 297:
+ tax payments, clothing,
+ gifts, and living expenses.17
+ Renters used new forms of
+
+On line 297:
+ homes and to move to
+ suburban subdivisions,
+ erect-ing swing sets in
+
+On line 299:
+ backyards and enrolling
+ their children in local schools.
+ In an interview
+
+On line 299:
+ the longtime CEO of
+ Countrywide Financial—a lender
+ brought down by its risky
+
+On line 301:
+ rush" mentality
+ overtook the country during
+ these years, and that he
+
+On line 301:
+ swept up in it as
+ well: "Housing prices were rising
+ so rapidly—at a rate
+
+On line 301:
+ that I’d never seen
+ in my years in the business—that
+ people, regular
+
+ people, average
+ people got caught up in the
+ mania of buying
+
+ a house, and flipping
+ it, making money. It was
+ happening. They buy
+
+On line 303:
+ house, make and talk at
+ a cocktail party about it.
+ Housing suddenly
+
+ went from being part
+ of the American dream to
+ house my family
+
+ to settle down—it
+ became a commodity.
+ That was a change in
+
+On line 305:
+ the culture. It was
+ sudden, unexpected."18 On
+ the surface, it looked
+
+On line 305:
+ into investments
+ called securities, which kept
+ cash flowing from Wall
+
+ Street into the U.S.
+ housing market—were tools that had
+ worked well for many years.
+
+On line 307:
+ going wrong. Like a
+ science fiction movie in which
+ ordinary household
+
+On line 307:
+ were being transformed.
+ The time-tested 30-year fixed-rate mortgage,
+ with a down payment,
+
+On line 307:
+ of style. There was a
+ burgeoning global demand
+ for residential
+
+On line 307:
+ securities that
+ offered seemingly solid
+ and secure returns.
+
+On line 307:
+ around the world clamored
+ to purchase securities
+ built on American
+
+On line 309:
+ estate, seemingly
+ one of the safest bets in the
+ world. Wall Street labored
+
+On line 309:
+ demand. Bond salesmen
+ earned multi-million-dollar
+ bonuses packaging
+
+ and selling new kinds
+ of loans, offered by new kinds
+ of lenders, into new
+
+ kinds of investment
+ products that were deemed safe but
+ possessed complex and
+
+On line 309:
+ changes—these financial
+ innovations, they said, had
+ lowered borrowing
+
+On line 309:
+ consumers and moved risks
+ away from the biggest and most
+ systemically
+
+On line 309:
+ in ways that were not
+ understood by either the
+ captains of finance
+
+On line 309:
+ the system’s public
+ stewards. In fact, some of the
+ largest institutions
+
+On line 309:
+ on what would prove to
+ be debilitating risks.
+ Trillions of dollars
+
+ had been wagered on
+ the belief that housing prices
+ would always rise and
+
+ that borrowers would
+ seldom default on mortgages,
+ even as their debt grew.
+
+On line 309:
+ loans had been bundled
+ into investment products
+ in ways that seemed to
+
+On line 309:
+ worlds—high-yield, risk-free—but
+ instead, in many cases, would
+ prove to be high-risk
+
+ and yield-free. All this
+ financial creativity
+ was a lot "like cheap
+
+On line 311:
+ Mayo, a managing
+ director and financial
+ services analyst
+
+On line 311:
+ repackaged to sell at
+ a premium," he told the
+ Commission. "It might
+
+ taste good for a while,
+ but then you get headaches later
+ and you have no idea
+
+On line 313:
+ really inside."19
+ The securitization
+ machine began to
+
+On line 313:
+ these once-rare mortgage
+ products with their strange-sounding
+ names: Alt-A, subprime, I-O
+
+On line 313:
+ low-doc, no-doc, or
+ ninja (no income, no job,
+ no assets) loans; 2–28s
+
+On line 313:
+ piggyback second
+ mortgages; payment-option or
+ pick-a-pay adjustable
+
+On line 313:
+ variants on adjustable-rate
+ mortgages, called "exploding" ARMs,
+ featured low monthly
+
+On line 313:
+ at first, but payments
+ could suddenly double or
+ triple, if borrowers
+
+On line 313:
+ of different kinds
+ of mortgages available on the
+ market, confounding
+
+On line 313:
+ examine the fine
+ print, baffling conscientious
+ borrowers who tried
+
+ to puzzle out their
+ implications, and opening
+ the door for those who
+
+On line 315:
+ in on the action.
+ Many people chose poorly. Some
+ people wanted to
+
+ live beyond their means,
+ and by mid-2005, nearly one-quarter
+ of all borrowers
+
+On line 315:
+ them to defer the
+ payment of principal.20 Some
+ borrowers opted
+
+On line 315:
+ nontraditional
+ mortgages because that was the
+ only way they could
+
+On line 315:
+ foothold in areas such
+ as the sky-high California
+ housing market.21 Some
+
+On line 315:
+ and Georgia became
+ a particular target
+ for investors who used
+
+On line 315:
+ to acquire real
+ estate.22 Some were misled by
+ salespeople who came
+
+On line 315:
+ homes and persuaded
+ them to sign loan documents
+ on their kitchen tables.
+
+On line 315:
+ mortgage brokers who
+ earned more money placing them
+ in risky loans than in
+
+ safe ones.23 With these loans,
+ buyers were able to bid up
+ the prices of houses
+
+On line 315:
+ if they didn’t have
+ enough income to qualify
+ for traditional
+
+On line 317:
+ these exotic loans
+ had existed in the past,
+ used by high-income,
+
+On line 317:
+ secure people as
+ a cash-management tool. Some
+ had been targeted
+
+On line 317:
+ they refinanced. But
+ the instruments began to
+ deluge the larger
+
+On line 317:
+ and The changed occurred
+ "almost overnight," Faith Schwartz, then an
+ executive at
+
+On line 317:
+ lender Option One and
+ later the executive
+ director of Hope
+
+On line 317:
+ "I would suggest most
+ every lender in the country
+ is in it, one way
+
+On line 319:
+ a lot of people
+ really understood the
+ potential hazards
+
+ of these new loans. They
+ were new, they were different,
+ and the consequences
+
+ were uncertain. But
+ it soon became apparent
+ that what had looked like
+
+On line 319:
+ the United States climbed
+ from trillion in to trillion
+ in The mortgage debt
+
+On line 319:
+ American households
+ rose almost as much in the
+ six years from to as
+
+ it had over the course
+ of the country’s more than 200-year
+ history. The amount
+
+On line 319:
+ per household rose from
+ in to in With a simple
+ flourish of a pen
+
+ on paper, millions
+ of Americans traded away
+ decades of equity
+
+ tucked away in their homes.
+ Under the radar, the lending
+ and the financial
+
+On line 321:
+ mutated. In the
+ past, lenders had avoided making
+ unsound loans because
+
+ they would be stuck with
+ them in their loan portfolios.
+ But because of the
+
+On line 321:
+ clear anymore who the
+ lender was. The mortgages would be
+ packaged, sliced, repackaged,
+
+On line 321:
+ securities to
+ an assortment of hungry
+ investors. Now even the
+
+On line 323:
+ find a buyer. More
+ loan sales meant higher profits
+ for everyone in
+
+On line 323:
+ that were expanding
+ mortgage originations. He
+ crisscrossed the nation,
+
+On line 325:
+ originators a
+ year in auditoriums
+ and classrooms. is clients
+
+ included many of
+ the largest lenders—Countrywide, Ameriquest, and Ditech among
+ them. Most of their new
+
+ hires were young, with no
+ mortgage experience, fresh
+ out of school and with
+
+On line 327:
+ "flipping burgers," he
+ told the FCIC. Given the right
+ training, however,
+
+On line 329:
+ could "easily" earn
+ millions.26 "I was a sales and
+ marketing trainer
+
+ in terms of helping
+ people to know how to sell
+ these products to, in
+
+On line 329:
+ and unsuspecting
+ borrowers," he said. He taught
+ them the new playbook:
+
+On line 329:
+ to be concerned about
+ the quality of the loan,
+ whether it was suitable
+
+ for the borrower
+ or whether the loan performed. In
+ fact, you were in a
+
+On line 329:
+ encouraged not to
+ worry about those macro issues."
+ He added, "I knew that
+
+ the risk was being
+ shunted off. I knew that we
+ could be writing crap.
+
+On line 329:
+ in the end it was
+ like a game of musical
+ chairs. Volume might go
+
+ down but we were not
+ going to be hurt."27 On Wall
+ Street, where many of these
+
+On line 331:
+ were packaged into
+ securities and sold to
+ investors around the globe,
+
+ a new term was coined:
+ IBGYBG, "I’ll be gone, you’ll
+ be gone."28 It referred
+
+ to deals that brought in
+ big fees up front while risking
+ much larger losses
+
+On line 331:
+ the future. And, for
+ a long time, IBGYBG worked
+ at every level.
+
+On line 333:
+ entered the pipeline
+ soon after borrowers signed
+ the documents and
+
+ picked up their keys. Loans
+ were put into packages and
+ sold off in bulk to
+
+On line 333:
+ banks such as Merrill
+ Lynch, Bear Stearns, and Lehman Brothers,
+ and commercial banks
+
+ and thrifts such as Citibank,
+ Wells Fargo, and Washington
+ Mutual. The firms
+
+On line 333:
+ mostly be stamped with
+ triple-A ratings by the credit
+ rating agencies, and
+
+On line 333:
+ riskier portions of
+ these securities—which would then
+ be sold to other
+
+On line 333:
+ would also receive
+ the coveted triple-A ratings
+ that investors believed
+
+ attested to their
+ quality and safety. Some
+ investors would buy an
+
+ invention from the
+ 1990s called a credit default
+ swap (CDS) to protect
+
+On line 333:
+ For every buyer
+ of a credit default swap,
+ there was a seller:
+
+ as these investors made
+ opposing bets, the layers
+ of entanglement
+
+On line 335:
+ The instruments grew
+ more and more complex; CDOs were
+ constructed out of
+
+On line 335:
+ creating CDOs squared.
+ When firms ran out of real
+ product, they started
+
+On line 335:
+ but just of bets on
+ other mortgage products. Each
+ new permutation
+
+On line 335:
+ to extract more fees
+ and trading profits. And each
+ new layer brought in
+
+On line 335:
+ investors wagering
+ on the mortgage market—even well
+ after the market
+
+ had started to turn.
+ So by the time the process was
+ complete, a mortgage
+
+On line 335:
+ in south Florida
+ might become part of dozens of
+ securities owned
+
+On line 335:
+ Treasury Secretary
+ Timothy Geithner,
+ the president of
+
+On line 335:
+ crisis, described the
+ resulting product as "cooked
+ spaghetti" that became
+
+ hard to "untangle."29
+ Ralph Cioffi spent several
+ years creating CDOs
+
+On line 337:
+ and a couple of
+ more years on the repurchase
+ or "repo" desk, which
+
+On line 337:
+ responsible for
+ borrowing money every
+ night to finance Bear
+
+On line 337:
+ Cioffi created
+ a hedge fund within Bear Stearns
+ with a minimum
+
+On line 337:
+ money—up to borrowed
+ for every from investors—to buy
+ CDOs. Cioffi’s first fund
+
+On line 337:
+ for investors in and
+ in 2005—after the annual
+ management fee and
+
+On line 337:
+ profit for Cioffi
+ and his Bear Stearns team—and grew
+ to almost billion
+
+On line 337:
+ of In the fall of
+ he created another,
+ more aggressive fund.
+
+On line 337:
+ This one would shoot for
+ leverage of up to to By
+ the end of the two
+
+On line 337:
+ in securities
+ issued by CDOs centered on
+ housing. As a CDO
+
+On line 339:
+ mortgage-related CDOs
+ for other investors. Cioffi’s
+ investors and others
+
+On line 341:
+ high-yielding mortgage
+ securities. That, in turn,
+ required high-yielding
+
+On line 341:
+ borrowers, urging
+ them to buy or refinance
+ homes. Direct-mail
+
+On line 341:
+ people’s mailboxes.30
+ Dancing figures, depicting
+ happy homeowners,
+
+On line 341:
+ hook with calls from loan
+ officers offering the
+ latest loan products:
+
+ One percent loan! (But
+ only for the first year.) No
+ money down! (Leaving
+
+On line 341:
+ if home prices fell.) No
+ income documentation
+ needed! (Mortgages soon
+
+On line 341:
+ industry itself.)
+ Borrowers answered the call,
+ many believing that
+
+ with ever-rising prices,
+ housing was the investment
+ that couldn’t lose. In
+
+On line 343:
+ four intermingled
+ issues came into play that
+ made it difficult
+
+ to acknowledge the
+ looming threats. First, efforts to
+ boost homeownership
+
+On line 343:
+ broad political
+ support—from Presidents Bill
+ Clinton and George W.
+
+ Bush and successive
+ Congresses—even though in
+ reality the
+
+On line 343:
+ the spring of Second,
+ the real estate boom was
+ generating a
+
+On line 343:
+ of cash on Wall Street
+ and creating a lot of
+ jobs in the housing
+
+On line 343:
+ believed that even if
+ the housing market tanked, the
+ broader financial
+
+On line 345:
+ would hold up. As the
+ mortgage market began its
+ transformation in
+
+ the late 1990s, consumer
+ advocates and front-line
+ local government
+
+On line 345:
+ among the first to spot
+ the changes: homeowners began
+ streaming into their
+
+ offices to seek help
+ in dealing with mortgages they
+ could not afford to
+
+On line 345:
+ began raising the
+ issue with the Federal
+ Reserve and other
+
+On line 345:
+ general counsel
+ and policy director
+ of the Greenlining
+
+On line 345:
+ California-based
+ nonprofit housing group, told
+ the Commission that
+
+On line 345:
+ he began meeting
+ with Greenspan at least once a year
+ starting in each time
+
+On line 345:
+ to him the growth of
+ predatory lending practices
+ and discussing with him
+
+On line 347:
+ economic problems
+ they were creating.32 One of
+ the first places to see
+
+On line 347:
+ an entire market
+ was Cleveland, Ohio. From to home
+ prices in Cleveland rose
+
+On line 349:
+ median of to
+ while home prices nationally
+ rose about in those same
+
+On line 349:
+ years; at the same time,
+ the city’s unemployment rate,
+ ranging rom in to
+
+On line 351:
+ more or less tracked the
+ broader U.S. pattern. James Rokakis,
+ the longtime county
+
+On line 351:
+ of Cuyahoga County,
+ where Cleveland is located,
+ told the Commission
+
+On line 351:
+ the region’s housing
+ market was juiced by "flipping
+ on mega-steroids," with rings
+
+On line 351:
+ appraisers, and loan
+ originators earning fees
+ on each transaction
+
+On line 353:
+ Street. City officials
+ began to hear reports that
+ these activities
+
+On line 353:
+ propelled by new kinds
+ of nontraditional loans
+ that enabled investors
+
+On line 353:
+ buy properties with
+ little or no money down
+ and gave homeowners
+
+On line 353:
+ to refinance their
+ houses, regardless of whether
+ they could afford to
+
+On line 353:
+ the loans. Foreclosures
+ shot up in Cuyahoga County
+ from a year in to
+
+On line 353:
+ a year in Rokakis and
+ other public officials
+ watched as families
+
+ who had lived for years
+ in modest residences lost
+ their homes. After they
+
+On line 353:
+ were ultimately
+ abandoned, vandalized, and then
+ stripped bare, as scavengers
+
+On line 355:
+ siding to sell for
+ scrap. "Securitization
+ was one of the most
+
+ brilliant financial
+ innovations of the 20th
+ century," Rokakis told
+
+On line 355:
+ Commission. "It freed
+ up a lot of capital.
+ If it had been done
+
+ responsibly, it
+ would have been a wondrous thing
+ because nothing is
+
+On line 357:
+ nothing safer, than the
+ American mortgage market.
+ It worked for years. But
+
+On line 359:
+ scam it."34 Officials
+ in Cleveland and other Ohio
+ cities reached out to the
+
+On line 359:
+ for help. They asked the
+ Federal Reserve, the one
+ entity with the
+
+On line 359:
+ risky lending practices
+ by all mortgage lenders, to use
+ the power it had
+
+On line 359:
+ in under the Home
+ Ownership and Equity
+ Protection Act (HOEPA)
+
+On line 359:
+ new mortgage lending
+ rules. In March Fed Governor
+ Edward Gramlich, an
+
+On line 359:
+ access to credit
+ but only with safeguards in
+ place, attended a
+
+ conference on the
+ topic in Cleveland. He spoke
+ about the Fed’s power
+
+On line 359:
+ HOEPA, declared some of
+ the lending practices to be
+ "clearly illegal,"
+
+On line 363:
+ enforcement measures."35
+ Looking back, Rokakis remarked to
+ the Commission, "I
+
+ naively believed they’d
+ go back and tell Mr. Greenspan and
+ presto, we’d have some new
+
+On line 363:
+ rules. I thought it would
+ result in action being
+ taken. It was kind
+
+On line 365:
+ Cleveland was looking
+ for help from the federal
+ government, other
+
+On line 365:
+ around the country were
+ doing the same. John Taylor,
+ the president of
+
+On line 365:
+ of community
+ leaders from Nevada, Michigan,
+ Maryland, Delaware,
+
+On line 365:
+ New Jersey, and Ohio,
+ went to the Office of Thrift
+ Supervision (OTS),
+
+On line 365:
+ loan institutions,
+ asking the agency to crack
+ down on what they called
+
+On line 367:
+ believed were putting both
+ borrowers and lenders at risk.37
+ The California
+
+On line 367:
+ group based in Northern
+ California, also begged
+ regulators to
+
+On line 367:
+ officials told the
+ Commission. The nonprofit
+ group had reviewed the
+
+On line 367:
+ and discovered that
+ many individuals were
+ being placed into
+
+ high-cost loans when
+ they qualified for better
+ mortgages and that many
+
+ had been misled about
+ the terms of their loans.38 There were
+ government reports,
+
+On line 371:
+ Treasury Department
+ issued a joint report on
+ predatory lending
+
+On line 371:
+ that made a number
+ of recommendations for
+ reducing the risks
+
+On line 371:
+ to borrowers.39 In
+ December the Federal
+ Reserve Board used the
+
+ HOEPA law to amend some
+ regulations; among the changes
+ were new rules aimed at
+
+On line 371:
+ refinancings over
+ a short period of time,
+ if they were not in
+
+ the borrower’s best
+ interest.40 As it would turn
+ out, those rules covered
+
+On line 371:
+ only of subprime
+ loans. FDIC Chairman Sheila C. Bair,
+ then an assistant
+
+ treasury secretary
+ in the administration
+ of President George
+
+On line 371:
+ Bush, characterized
+ the action to the FCIC as
+ addressing only
+
+On line 371:
+ a "narrow range of
+ predatory lending issues."41
+ In Gramlich noted
+
+On line 371:
+ "increasing reports
+ of abusive, unethical
+ and in some cases,
+
+On line 373:
+ lending practices."42 Bair
+ told the Commission that this
+ was when "really
+
+On line 373:
+ on traditional
+ banks to follow suit.43 She said
+ that she and Gramlich
+
+ considered seeking
+ rules to rein in the growth of
+ these kinds of loans, but
+
+ Gramlich told her that
+ he thought the Fed, despite its
+ broad powers in this
+
+ area, would not support
+ the effort. Instead, they sought
+ voluntary rules for
+
+On line 375:
+ but that effort fell
+ by the wayside as well.44 In
+ an environment
+
+On line 375:
+ standards declined. The
+ companies issuing these
+ loans made profits that
+
+On line 377:
+ rose sharply. In the top
projects / crisishaiku.git / commitdiff