Financial Crisis report highlights transparency needs


The U.S. financial collapse in 2008 was avoidable and predictable, according to a report by a commission created to investigate the crisis. The report, generated by the Financial Crisis Inquiry Commission, is the subject of a House Financial Services hearing on Wednesday. That hearing will be live streamed on Sunlight Live, our award-winning multimedia platform combining data, live blogging, social networking and video streaming.

Among the report's key findings were that the collapse was a failure of:
  • government regulation and supervision, 
  • corporate governance
  • government preparation to deal with such a crisis
  • excess risk by banking institutions
  • loss of accountability and ethics by lenders
In citing influence as a factor, the report describes the financial industry itself as playing "a key role in weakening regulatory constraints on institutions, markets, and products." According to the report, investigators were not surprised "that an industry of such wealth and power would exert pressure on policy makers and regulators. From 1998 to 2008, the financial sector expended $2.7 billion in reported federal lobbying expenses; individuals and political action committees in the sector made more than $1 billion in campaign contributions."
Another area of concern was the lack of transparency of the banking system. The report describes "the growth of a shadow banking system—opaque and laden with short- term debt—that rivaled the size of the traditional banking system. Key components of the market … were hidden from view, without the protections we had constructed to prevent financial meltdowns."
Tune in at 10 a.m. Wednesday at to hear FCIC commissioners testify about their findings to the House Financial Services Committee.