[1] The commission,[2] led by Phil Angelides, held public hearings, gathered testimony from hundreds, and released its report in January 2011.
The report concluded that "the collapse of the housing bubble—fueled by low interest rates, easy and available credit, scant regulation, and toxic mortgages—that was the spark that ignited" events leading to the financial crisis.
(5) to build upon the work of other entities, and avoid unnecessary duplication, by reviewing the record of the Committee on Banking, Housing, and Urban Affairs of the Senate, the Committee on Financial Services of the House of Representatives, other congressional committees, the Government Accountability Office, other legislative panels, and any other department, agency, bureau, board, commission, office, independent establishment, or instrumentality of the United States (to the fullest extent permitted by law) with respect to the current financial and economic crisis.Speaker of the House Nancy Pelosi of California and Senate Majority Leader Harry Reid of Nevada (both Democrats) each made three appointments, while House Minority Leader John Boehner of Ohio and Senate Minority Leader Mitch McConnell of Kentucky (both Republicans) each made two appointments: As part of its inquiry, the commission will hold a series of public hearings throughout the year including, but not limited to, the following topics: avoiding future catastrophe, complex financial derivatives, credit rating agencies, excess risk and financial speculation, government-sponsored enterprises, the shadow banking system, subprime lending practices and securitization, and too big to fail.
On January 13, 2010, Lloyd Blankfein testified before the commission, that he considered Goldman Sachs' role as primarily that of a market maker, not a creator of the product (i.e.; subprime mortgage-related securities).
The following experts have appeared before the Commission in public or in private: Martin Baily, Markus Brunnermeier, John Geanakoplos, Pierre-Olivier Gourinchas, Gary Gorton, Dwight Jaffee, Simon Johnson, Anil Kashyap, Randall Kroszner, Annamaria Lusardi, Chris Mayer, David Moss, Carmen M. Reinhart, Kenneth T. Rosen, Hal S. Scott, Joseph E. Stiglitz, John B. Taylor, Mark Zandi and Luigi Zingales.
May 5–6, former Bear Stearns CEO Jimmy Cayne, former SEC Chairman Christopher Cox, Tim Geithner and Hank Paulson are scheduled to appear before the commission.
Writer Joe Nocera of The New York Times praised the commission's approach and technical expertise in understanding complex financial issues during July 2010.
Darrell Issa, a top Republican on the House Oversight and Government Reform Committee, questioned the Federal Reserve's involvement as a possible conflict of interest, and there has been disagreement among some commission members on what information to make public and where to place blame.
Trillions of dollars in risky mortgages had become embedded throughout the financial system, as mortgage-related securities were packaged, repackaged, and sold to investors around the world.
Among those dissenting Thomas, Hennessey, and Holtz-Eakin collaborated on a single report while Wallison, from the American Enterprise Institute drafted his alone and proposed that the crisis was caused by government affordable housing policies rather than market forces.
This approach had opened up gaps in oversight of critical areas with trillions of dollars at risk, such as the shadow banking system and over-the-counter derivatives markets.
"[K]ey policy makers ... were hampered because they did not have a clear grasp of the financial system they were charged with overseeing, particularly as it had evolved in the years leading up to the crisis.
While many of these mortgages were kept on banks' books, the bigger money came from global investors who clamored to put their cash into newly created mortgage-related securities.
"The enactment of legislation in 2000 to ban the regulation by both the federal and state governments of over-the-counter (OTC) derivatives was a key turning point in the march toward the financial crisis.
They amplified the losses from the collapse of the housing bubble by allowing multiple bets on the same securities and helped spread them throughout the financial system.
The government ultimately committed more than $180 billion because of concerns that AIG's collapse would trigger cascading losses throughout the global financial system.
In addition, the existence of millions of derivatives contracts of all types between systemically important financial institutions—unseen and unknown in this unregulated market—added to uncertainty and escalated panic, helping to precipitate government assistance to those institutions."
... [T]he forces at work behind the breakdowns at Moody's ... includ[ed] the flawed computer models, the pressure from financial firms that paid for the ratings, the relentless drive for market share, the lack of resources to do the job despite record profits, and the absence of meaningful public oversight."
In a 27-page dissenting statement, Vice Chairman Bill Thomas and Commissioners Keith Hennessey and Douglas Holtz-Eakin criticized the majority report for being an "account of bad events" rather than a "focused explanation of what happened and why."
[15] American Enterprise Institute senior fellow Peter Wallison authored a 93-page dissent in which he disagreed with both the majority report and the three other Republican appointees.
Wallison argued that the US government's housing policies—implemented primarily through the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac—caused the financial crisis.
Because the GSEs dominated the mortgage market, they set the underwriting standards for the entire industry and pushed private institutions into riskier loans.
Wallison concludes that these policies fueled a massive housing bubble full of non-traditional, risky loans that ultimately led to a financial crisis.