Financial Report
- US Financial Crisis Inquiry Commission -
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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 !!!!!!!!!!!!!!!!!!"
- "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 !"
- "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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