Report on Financial Crisis

The Financial Crisis Inquiry Commission report will be released on Thursday, but the NYTime has an early report. AND WHAT THEY ARE REPORTING MAKES A LOT OF SENSE. Such as:

The 2008 financial crisis was an “avoidable” disaster caused by widespread failures in government regulation, corporate mismanagement and heedless risk-taking by Wall Street, according to the conclusions of a federal inquiry.
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The majority report finds fault with two Fed chairmen: Alan Greenspan, who led the central bank as the housing bubble expanded, and his successor, Ben S. Bernanke, who did not foresee the crisis but played a crucial role in the response. It criticizes Mr. Greenspan for advocating deregulation and cites a “pivotal failure to stem the flow of toxic mortgages” under his leadership as a “prime example” of negligence.
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[T]he report is harsh on regulators. It finds that the Securities and Exchange Commission failed to require big banks to hold more capital to cushion potential losses and halt risky practices, and that the Fed “neglected its mission.”

It says the Office of the Comptroller of the Currency, which regulates some banks, and the Office of Thrift Supervision, which oversees savings and loans, blocked states from curbing abuses because they were “caught up in turf wars.”

Having returned to the banking world and viewing from the inside the regulatory vs. bank's relationship, I'd say the regulators were asleep. But then again, the regulators have tough job. Is it their responsibility to stop banks from engaging in risk business. If the bank want to bankrupt themselves why should the regulators stop them? It's tough. From a personal persecutive, what to do the regulators have to gain personally? Nothing. My hypothesis is that during the period leading up to the crisis, bank management berated regulators about being clueless, a "government worker", knowing nothing about business.

And prior to the crisis, the "chief regulator", Greenspan was a superstar. Now not so much. His mantra like the G.O.P.'s mantra since Reagan was "less regulation". And back in the day, when I was a hugh Reagan fan (and still am), I believed in the mantra and still do to a certain extent. But the need to update and modernize regulation is essential. However, everybody seems to take the approach, that if it ain't broke there isn't a need to fix it. Many regulators at the lower-levels saw the risk on the banks balance sheet, but the banks were making lots of money from taking these risk. It difficult to convince a bank's management to cut back on their profits. Bank management is required to dance until the music stops.

And what did we learn from the financial bubble and crisis in the short-time? A lot. What will we remember from the crisis in five years? Absolutely nothing. Another bubble will be started.