US inquiry warns: Wall Street unchanged, 2008 crisis avoidable

Jan 27, 2011, 17:03 GMT

Washington - A US inquiry on Thursday found that the 2008 financial crisis could have been prevented and that many of the conditions that led to Wall Street's near collapse have yet to be addressed.

The findings could also lead to some people in the financial world facing criminal charges for the failures that led to the turmoil.

The 10-member Financial Crisis Inquiry Commission, created in May 2009 by President Barack Obama, spread the blame for Wall Street's excesses, which came crashing down with Lehman Brothers' bankruptcy in September 2008, provoking a market firestorm that helped plunge the world into recession.

'We concluded, first and foremost, that this crisis was avoidable,' Phil Angelides, chairman of the commission, said in a press conference. 'There were many, many warnings signs that were ignored or discounted.'

But the four Republican-appointed members of the panel opposed its findings, arguing it cast the net of blame too widely. The opposition among conservatives is likely to blunt the commission's impact on the US debate.

Despite the passage of an overhaul of financial regulation by the Obama administration last year, the panel warned that many of the conditions that forced the US government to bail out the financial industry in 2008 remained in place.

'Our financial system is, in many respects, still unchanged from what existed on the eve of the crisis,' the report said. 'Indeed, in the wake of the crisis, the US financial sector is now more concentrated than ever in the hands of a few large, systemically significant institutions.'

While much of its findings have already been well documented by others, the panel painted a gloomy picture of questionable ethics, irresponsibility and incompetence by Wall Street bankers who dabbled in the US housing market using complex financial products that few of them could understand.

The committee also finds major blame with government regulator agencies that failed to prevent the crisis. It argues the US Federal Reserve should have seen the threats and could have halted a boom in subprime mortgage lending, by which people with poor credit histories were lured into taking home loans they could not afford to repay.

'The government's hands-off philosophy (and) increasingly perilous business decisions went hand-in-hand,' said commission member Brooksley Born.

Born said the group had referred 'several' people to the US Justice Department and state authorities for engaging in possible criminal activity, 'but we're not going to talk about any of the details of those referrals.'

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