A toxic mix of greed, mistakes and recklessness

From The International Herald Tribune:

"By one measure, for about every $40 in assets, the five largest U.S. investment banks had only $1 in capital to cover losses, meaning that a 3 percent drop in asset values could have wiped out the firms."

A toxic mix of greed, mistakes and recklessness

WASHINGTON — The 2008 financial crisis was an ''avoidable'' disaster caused by widespread failures in regulation, corporate mismanagement and heedless risk-taking by Wall Street, according to the conclusions of a U.S. government inquiry.

The commission that investigated the crisis casts a wide net of blame, faulting two U.S. presidential administrations, the Federal Reserve and other regulators for permitting a calamitous concoction: shoddy mortgage lending, the excessive packaging and sale of loans to investors and risky bets on securities backed by the loans.

''The greatest tragedy would be to accept the refrain that no one could have seen this coming and thus nothing could have been done,'' the panel wrote in the report's conclusions, which were read by The New York Times, of which the International Herald Tribune is the global edition. ''If we accept this notion, it will happen again.''

While the panel, the Financial Crisis Inquiry Commission, accuses several financial institutions of greed, ineptitude or both, some of its gravest conclusions concern government failings, with embarrassing implications for both parties. But the panel was itself divided along partisan lines, which could blunt the effect of its findings.

Many of the conclusions have been widely described, but the synthesis of interviews, documents and testimony, along with its government imprimatur, give the report, which will be released Thursday as a 576-page book, a conclusive sweep and authority.

http://www.nytimes.com/2011/01/26/business/economy/26inquiry.html

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