Inquiry Finds 2008 Financial Crisis Was Avoidable
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Inquiry Finds 2008 Financial Crisis Was Avoidable
- A 2011 federal inquiry concluded that the 2008 financial crisis was an "avoidable" disaster, attributing it to widespread failures in government regulation, corporate mismanagement, and reckless risk-taking on Wall Street.
- The bipartisan Financial Crisis Inquiry Commission (FCIC), led by Chairman Phil Angelides, released its final report on January 27, 2011, after a year-long investigation.
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A federal inquiry in 2011 determined that the financial crisis of 2008, the most severe since the Great Depression, was preventable. The Financial Crisis Inquiry Commission (FCIC) concluded that the crisis stemmed from a combination of widespread failures in financial regulation, significant breakdowns in corporate governance, excessive borrowing and risk-taking by both households and Wall Street, and policymakers who were ill-prepared for the unfolding crisis.
The commission, established on May 20, 2009, investigated the domestic and global causes of the crisis that officially spanned from December 2007 to June 2009. During its investigation, the ten-person bipartisan committee reviewed millions of documents, interviewed over 700 witnesses, and conducted 19 days of public hearings across the country.
The report, released on January 27, 2011, highlighted several key contributing factors. These included the collapse of the U.S. housing market, fueled by risky subprime mortgage lending and the complex financial products built upon these loans. A lack of investor confidence in bank solvency and declining credit availability led to plummeting stock and commodity prices in late 2008 and early 2009. The crisis resulted in approximately 8.7 million jobs lost, with unemployment rising from 5% in 2007 to a high of 10% in October 2009. The Dow Jones Industrial Average fell by 53% between October 2007 and March 2009. The FCIC’s findings emphasized that warning signs were present but ignored, and that a “systemic breaches in accountability and ethics at all levels” contributed to the catastrophe.