Looking for Blame
Research for Online Investors

by John Dalt

1/26/11

The Financial Crisis Inquiry Commission (FCIC) has completed their report.  It will be released tomorrow.  This commission was charged with investigating and reporting on the ‘cause’ of the financial crisis in 2008.  The ten member commission broke along party lines, six democrats endorsing the final report and the four republicans dissenting.  The report finds fault with the Federal Reserve and Chairman Alan Greenspan for allowing the housing bubble to build on cheap credit.

The Bernank also comes in for criticism for not recognizing the problem, although he is lauded for playing a crucial role in responding to the crisis.  The committee writes that the Bush administration was “inconsistent” in their response.  This is because Lehman Brothers was allowed to fail, which “added to the uncertainty and panic in the financial markets.”

Financial institutions are culpable as their greed to book profits on securitized mortgages overrode sound underwriting standards.  Turbo Tim Geithner was head of the New York Federal Reserve bank during the turbulent time.  The report will say the New York Fed missed signs of trouble at Citigroup and Lehman.

The report shields Fannie Mae, Freddie Mac and Andrew Cuomo.  Mr. Cuomo as head of Housing and Urban Development had brow beat banks and the GSE’s to lower their loan underwriting standards in the late 90’s under President Bill Clinton.  The report does fault Clinton’s Administration, but only for not regulating credit derivatives.

The report will assign much of the blame for the government not regulating enough.  They believed the Securities and Exchange Commission should have required banks to hold more capital in reserve.  They found evidence that the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision blocked states from regulating institutions.

American International Group (AIG) was “blind” to the risk that their company’s $79 billion dollars of Credit Default Swaps (CDS) represented, according to the report.  It the leverage by the five largest banks, measured at 40 to 1.

One of our favorite expose’s on the financial crisis was a short news story done by Fox News.  YouTube has some good videos that expose the short memory of some.

We survived the State of the Union.  Honestly, I didn’t throw anything at the television.  Wasn’t that Oh! Bama’s goal?  Give us some pablum, a few platitudes about how great we were, how the best was in front of us, how we could make it, and how the government was going to help us.  Oh yeah, forget the last one.

He still doesn’t get it, but did anyone think he would really change?  We didn’t have sit through a litany of new programs, but there were still goals and programs for education and renewable energy.  It just all felt like a high school prom.  Everyone was well behaved; the president didn’t single out the Supreme Court for a scolding.  The military brass looked stoic on the mention of how excited the liberals were to put homosexuals and transsexuals in uniform.

I heard she asked for a ride on his airplane.  They broke up at the end of the night when he told her he flew commercial.

To the mailbox:
Not Yogi Bear and Bo-Bo.  How about Mutt and Jeff or Laurel and Hardy?  I think that is a better characterization of incompetence and lunacy!---paid up subscriber R.A.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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