Financial crisis ‘avoidable’: inquiry

The U.S. financial meltdown in 2008 was "avoidable," a congressional inquiry reported Thursday, blaming a failure in government regulation and reckless behaviour by Wall Street banks.

The Financial Crisis Inquiry Commission faulted the Bush and Clinton administrations, the current and previous Federal Reserve chairmen, and Treasury Secretary Timothy Geithner for contributing to conditions that led to excessive risk-taking both in mortgage lending and bets made on securities derived from those mortgages.

"The greatest tragedy," it said in a 576-page report, "would be to accept the refrain that no one could have seen this coming and thus nothing could have been done."

"If we accept this notion, it will happen again."

The commission was set up in May 2009 to look into the causes of the meltdown.

Only the six members appointed by the Democrats endorsed its findings. The remaining four Republicans have dissented.

It criticized former Federal Reserve chairman Alan Greenspan for championing financial deregulation.

"A combination of excessive borrowing, risky investments and lack of transparency put the financial system on a collision course with crisis," the report said.

The report criticized the Bush administration's "inconsistent response" to the crisis — a reference to the decision to bail out investment bank Bear Stearns while allowing Lehman Brothers to go insolvent.

But the lion's share of the report's blame falls on three entities: former Fed chair Alan Greenspan, current chair Ben Bernanke, and the Securities and Exchange Commission, the regulator that ultimately failed to make huge banks keep adequate capital on-hand to backstop their loans.

The panel has referred cases of possible criminal wrongdoing to the Justice Department for investigation.

FCIC Chairman Phil Angelides told reporters that the group "fulfilled our obligations and referred matters to the appropriate authorities."