Global Financial Crisis was avoidable: congre


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28-01-2011 08:25 AM


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28-01-2011 08:25 AM



28-01-2011 09:00 AM

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Global Financial Crisis was avoidable: congre -

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A US government report has found the global financial crisis could have been avoided. It blamed a
breakdown in accountability and ethics for the meltdown. Republicans disagree with its conclusions
so it's unclear if the report will have much impact.

PETER CAVE: The first US government report into the causes of the financial crisis has found it was
avoidable but financial firms and government regulators missed the warning signs.

The commission blamed the meltdown on a breakdown in accountability and ethics that stretched from
the living room to the boardroom.

But with Republicans on the panel disagreeing with its conclusions it's unclear what impact the
report will have.

North America correspondent Jane Cowan reports.

JANE COWAN: The meltdown caused financial upheaval that's put millions of Americans out of work,
decimated retirement savings and foreclosed on family homes.

But the chairman of a panel appointed by the US government Phil Angelides says none of it had to

PHIL ANGELIDES: None of what happened was an act of God. The greatest tragedy would be to accept
the idea that no-one could have seen this crisis coming and thus nothing could have been done. If
we accept this notion it will happen again.

JANE COWAN: The commission says there was a dramatic failure of corporate governance with what
commissioner Brooksley Born describes as stunning instances of irresponsibility and perilous
business decisions.

BROOKSLEY BORN: Too many firms set aside their judgement by embracing mathematical models as
reliable predictors of risk. Too often risk management became risk justification.

JANE COWAN: The former senator commissioner Bob Graham says from the Treasury Department to the
board of the Federal Reserve and the Federal Reserve Bank of New York the government and its
agencies were caught off guard.

BOB GRAHAM: The commission concluded that senior public officials failed to recognise that a
bursting of the housing bubble could threaten the entire financial system.

JANE COWAN: The panel found regulators had no clear grasp of the system they oversaw and could have
taken action to forestall or mitigate the crisis but didn't.

Commissioner John Thompson:

JOHN THOMPSON: It is clear the sentries were not at their post. This was in large part because of a
widely accepted belief in the self-correcting nature of the markets and the ability of the
financial firms to police themselves.

JANE COWAN: The commissioners made a point of saying their report identifies facts and records
history - but the findings aren't unanimous with Republicans on the panel dissenting and
criticising the report as "unbalanced" and for overstating the role of lax regulation.

Michael Perino specialises in corporate and securities law at St John's Law School in New York and
says the division on the panel will undermine its findings.

MICHAEL PERINO: When you look at the history of independent commissions there's one strong lesson
that you take away which is that they are most powerful when they speak with a single voice. And
commissioners in charge of these investigations strive as hard as possible to get one consensus

We don't have that here. And because we don't have that here there is a strong possibility that
this report will be chalked up as just another example of Washington political divisiveness and be

Further blunting the report's impact is the fact it comes after the passage of the Obama
administration's laws reforming the financial system.

This is Jane Cowan in Washington for AM.