Financial Report





- US Financial Crisis Inquiry Commission -



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- Report on the Causes of the Financial and Economic Crisis in the United States -



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  • "this report describes the events and the system - that propelled the USA toward crisis !!!!!!!!!!!!!!!!!!!!!!!!"

 

 

 

 

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  • "collapsing mortgage-lending standards - and the mortgage securitization pipeline !!!!!!!!!!!!!!!!!!"

 

 

 

 

 

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  • "lit and spread the flame - of contagion and crisis !!!!!!!!!!!!!!!!!!"

 

 

 

 

 

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  • "when mortgage borrowers - defaulted !!!!!!!!!!!!!!!!!!"

 

 

 

 

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  • "the financial markets - were in crisis !!!!!!!!!!!!!!!!!!!!!!!!"

 

 

 

 

 

 

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  • "over-the-counter derivatives - contributed significantly to this crisis !!!!!!!!!!!!"

 

 

 

 

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  • "the enactment of legislation in 2000 - was a key turning point !!!!!!!!!!!!"

 

 

 

 

 

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  • "in the march toward - the financial crisis !!!!!!!!!!!!!!!!!!"

 

 

 

 

 

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  • "the failures of credit rating agencies were essential cogs - in the wheel of financial destruction !!!!!!!!!!!!"

 

 

 

 

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  • "the credit rating agencies were key enablers - of the financial meltdown !!!!!!!!!!!!"

 

 

 

 

 

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  • "from 2000 to 2007, Moody’s rated 45,000 mortgage-related securities - as triple-A !"

 

 

 

 

 

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  • "the financial system is - in many respects !!!!!!!!!!!!"

 

 

 

 

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  • "still unchanged from what existed - on the eve of the crisis !!!!!!!!!!!!!!!!!!"

 

 

 

 

 

 

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  • "when the FED cut interest rates early in the new century - and mortgage rates fell !"

 

 

 

 

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  • "there were mortgage-lending instruments - and the financing techniques !"

 

 

 

 

 

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  • "that turned mortgages into investments - called securities !"

 

 

 

 

 

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  • "bond salesmen earned bonuses - packaging and selling new kinds of loans !"

 

 

 

 

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  • "offered by new kinds of lenders - into new kinds of investment products !"

 

 

 

 

 

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  • "that possessed complex - and hidden risks !!!!!!!!!!!!!!!!!!"

 

 

 

 

 

 

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  • "when subprime and other risky mortgages - began to default !!!!!!!!!!!!!!!!!!"

 

 

 

 

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  • "the market for complex investment securities - abruptly failed !!!!!!!!!!!!!!!!!!!!!!!!"

 

 

 

 

 

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  • "when the contagion spread - investors panicked !!!!!!!!!!!!!!!!!!"

 

 

 

 

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  • "and the danger inherent in the whole system - became manifest !!!!!!!!!!!!!!!!!!!!!!!!"

 

 

 

 

 

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  • "financial markets teetered - on the edge !!!!!!!!!!!!!!!!!!"

 

 

 

 

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  • "and financial institutions were left bankrupt - or dependent on the taxpayers for survival !!!!!!!!!!!!!!!!!!"

 

 

 

 

 

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  • "their new activities - were very risky !!!!!!!!!!!!!!!!!!!!!!!!"

 

 

 



 

 

 

 

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  • Paul Volcker:  "it was kind of - a free ride !"

 

 

 

 

 

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  • "an investment bank - bundled loans from a bank !"

 

 

 

 

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  • "or other lender - into securities !"

 

 

 

 

 

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  • "and sold them - to investors !"

 

 

 

 

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  • "by moving loans off their books, the banks reduced the amount of capital - they were required to hold as protection against losses !"

 

 

 

 

 

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  • "this complexity transformed the credit rating agencies - into key players in the process !"

 

 

 

 

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  • "positioned between the issuers - and the investors of securities !"

 

 

 

 

 

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  • "they paid fees - to obtain the desired ratings !"

 

 

 

 

 

 

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  • "derivatives were financial contracts - whose prices are determined by, or "derived"  !"

 

 

 

 

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  • "from the value of some underlying asset - rate, index, or event !"

 

 

 

 

 

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  • "they were instruments for speculating on changes in prices - interest rates, and the like !"

 

 

 

 

 

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  • "the derivatives markets were organized as exchanges - or as over-the-counter markets, OTC !"

 

 

 

 

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  • "the OTC market was neither centralized - nor regulated !"

 

 




 

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  • Warren Buffett:  "they accentuated enormously - the leverage in the system !"

 

 

 

 

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  • "derivatives are - very dangerous stuff !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!"

 

 

 

 

 

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  • "difficult for market participants - regulators - auditors - and investors to understand !!!!!!!!!!!!!!!!!!!!!!!!"

 

 

 

 

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  • "I don’t think I could manage - a complex derivatives book !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!"

 

 

 

 

 

 

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  • "synthetic CDOs were complex paper transactions - involving credit default swaps !"

 

 

 

 

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  • "synthetic CDOs contained no actual tranches of mortgage-backed securities - or even tranches of other CDOs !"

 

 

 

 

 

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  • "instead, they simply referenced - these mortgage securities !"

 

 

 

 

 

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  • "and thus were bets - on whether borrowers would pay their mortgages !"

 

 

 

 

 

 

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  • "the CDO machine would not have worked - without rating agencies !"

 

 

 

 

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  • "to estimate the probability of default - Moody’s relied almost exclusively on its own ratings !"

 

 

 

 

 

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  • "at no time did the agencies "look through" the securities - to the underlying subprime mortgages !"

 

 

 

 

 

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  • Gary Witt, Moody’s team managing director:  "the underlying collateral !"

 

 

 

 

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  • "just completely disintegrated - below us !!!!!!!!!!!!!!!!!!!!!!!!"

 

 

 

 

 

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  • "we didn’t react - and we should have !!!!!!!!!!!!!!!!!!"

 

 

 

 

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  • "we had to be looking for a problem - and we weren’t looking !!!!!!!!!!!!!!!!!!"

 

 

 

 

 

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  • "in plainer English, Moody’s didn’t have - a good model !!!!!!!!!!!!!!!!!!"

 

 

 

 

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  • "so they made - them up !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!"

 

 

 

 

 

 

 

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  • the manager Lloyd Blankfein:  "we were going to bed - every night !!!!!!"

 

 

 

 

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  • "with more risk than any manager - should want to have !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!"

 

 

 

 

 

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  • "either for the business - or for the system as a whole !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!"

 

 

 

 

 

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  • "financial risks !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!"

 

 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

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US Financial Crisis Inquiry Commission: LINK ¤ US FINANCIAL CRISIS COMMISSION
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US Financial Crisis Inquiry Commission - Wikipedia EN: LINK ¤ FCIC

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