The 10-member Financial Crisis Inquiry Commission's final report, released on Thursday, was endorsed only by its six Democratic members, undermining its impact as the post-crisis Dodd-Frank law banking reforms are being implemented.
In the fight between pro-reform Democrats and anti-reform Republicans, the report and its accompanying dissents provide fodder for both sides, while highlighting partisan fault lines that today pervade political Washington, from financial regulation, to health care, to addressing the budget deficit.
A competing minority report from three Republican commission members, also released on Thursday, largely exonerates Greenspan, saying, "U.S. monetary policy may have contributed to the credit bubble but did not cause it."
Another report, from the commission's fourth Republican, focuses mostly on U.S. housing policy in explaining the origins of the crisis that rocked global markets and dragged the economy into a deep recession.
The unveiling of the three reports produced by the commission's warring members was seen by financial markets as a non-event. "The market is not really going to react -- the market already has a very good idea of what happened," said Matt McCormick, portfolio manager at Bahl & Gaynor Investment Counsel Inc in Cincinnati, which owns bank shares.The mountain of interview notes and internal documents obtained by the panel, however, contained some revel
'Worst financial crisis' For instance, Federal Reserve Chairman Ben Bernanke told the panel that the crisis put 12 of the 13 most important U.S. financial firms at risk of failure within a period of a week or two, and that it surpassed in severity even the Great Depression, a period in which he is a noted expert.
"As a scholar of the Great Depression, I honestly believe that September and October of 2008 was the worst financial crisis in global history, including the Great Depression," said Bernanke in a November 2009 interview with the commission.
"If you look at the firms that came under pressure in that period ... only one ... was not at serious risk of failure."
It was not disclosed which of the 13 top financial institutions Bernanke thought was not at risk of failure. Bernanke did say that Goldman Sachs was not immune.
"Even Goldman Sachs, we thought there was a real chance that they would go under," he said.
In another revelation, the main report says Goldman Sachs capitalized on the government's bailout of American International Group to get even more payments from the beleaguered insurer, including $2.9 billion from proprietary trades Goldman placed for its own profit.
The FCIC says that beyond the $14 billion in AIG bailout funds that Goldman distributed to clients, Goldman received an additional $3.4 billion from AIG related to credit default swaps; that the bulk of that was made possible by the AIG bailout; and that Goldman kept $2.9 billion for its own books.
The crisis that peaked in the fall 2008 pushed some of the most storied financial firms to the brink of collapse. Some, such as AIG, were bailed out by the government; others, such as Lehman Brothers were not and vanished under a tide of toxic real estate debt that engulfed markets around the world.
Not Pecora The commission was set up by Congress in May 2009. The hope was that its work would rip the lid off the crisis in the comprehensive way that the Pecora Commission did in the 1930s during the Great Depression, but it was widely seen as falling well short of that.
The panel was not meant to make recommendations. Internal partisan infighting prevented the commission even from crafting a consensus account of the crisis. Instead, the three competing reports came out simultaneously.
All three documents generally agree that the crisis was not, as some bankers have tried to portray it, some sort of unavoidable natural phenomenon that came out of nowhere.
"We conclude this financial crisis was avoidable. The crisis was the result of human action and inaction, not Mother Nature or computer models gone haywire," said the majority report of the six Democrats.
"The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand and manage evolving risks within a system essential to the wellbeing of the American public," it said.
"The prime example is the Federal Reserve's pivotal failure to stem the flow of toxic mortgages, which it could have done by setting prudent mortgage lending standards. The Federal Reserve was the one entity empowered to do so and it did not."
Through a spokeswoman, Greenspan declined to comment.
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