Update: February 2011. It has been 2+ years since the “perfect storm” impacted and quickly enveloped the planet. Thanks to massive corporate bailouts gratis of taxpayers, and central-banks’ fiscal stimulus programs (e.g. quantitative easing – QE1 & QE2, etc), world economies have stabilized, stock markets have recovered nicely and corporate balance-sheets have improved. But the news is not all good. Many housing markets remain weak and the wounds inflicted upon homeowners and taxpayers are deep. Many citizens will be permanently impaired by the loss of employment and/or destruction of equity.

In the wake of this apocalypse, the Obama administration tasked the Financial Crisis Inquiry Commission with the job of analyzing and reporting on the underpinnings of the melt-down. The Financial Crisis Inquiry Report was released in January 2011. The full report can be found > at fcic.gov

One overriding theme of the report is that this crisis was man-made, not a naturally occurring “perfect storm,” and was preventable. Moreover, despite clear, convincing and early evidence of rampant toxicity (loans doomed to fail) pouring into structured securities… banks, the mortgage industry and Wall Street firms understood the risk/reward calculus and opted to continue (take the $ and run) down the path of destruction. Yes, greed was at the core of this crisis and subsequent melt-down. Perhaps most galling is that many who were most responsible for creating this crisis, have not been held to account and instead have walked away with seven figure bonuses. I strongly encourage readers to click over and listen to FCIC Chairman Phil Angelides > here

For inquiring minds, here are a few additional resources:

• Read the full FCIR (< report download)
  
• Dr Michael J. Burry, 2012 UCLA Commencement Address > watch video (highly recommended) 
• CNBC’s “House of Cards” documentary
• Frontline’s “The Warning” documentary (< Brooksley Born story)
• Bill Moyers’ interview with Bill Black (< truth behind liars loans)
• The oscar winning documentary “Inside Job”
• Andrew Ross-Sorkin’s “Too Big to Fail”

The 2008 Financial Crisis – How did this happen?

by Dan Butterfield

December 4, 2008

“I never thought I’d see the day when someone defaults on their condo in Ft. Lauderdale, and Iceland melts.” So said Princeton’s Nobel prize-winning economist Paul Krugman in November 2008. Professor Krugman was offering a bit of gallows humor, yet his quote is a fitting way to highlight the global nature of the current financial crisis. What began as a housing bubble in the United States soon grew into an international credit crisis that roiled financial markets and destabilized world economies. The 24/7 news media love a good crisis and it’s no surprise that economic doomsayers have been featured guests on financial shows. Fear can be its own self-fulfilling prophecy and all of the dramatic headlines have had an effect on consumer and corporate behavior. Businesses have curbed spending, instituted hiring freezes and begun layoffs. Consumers are tightening their belts, and most are making due with last year’s model. It’s not all bad news for business. More-for-less foods such as Spam, pasta and oatmeal are flying off the grocery shelves. Discount retailers such as Wal-Mart, and value menu restaurants such as McDonalds, are doing surprisingly strong business. Yet this may be more a sign of the times than reason for solace.

There are a few sliver-linings… Continue Reading »

Tags: Alan Greenspan, Angelides, bill black, Brooksley Born, CDS, Credit Crisis 2008, Credit Default Swaps, credit freeze, FCIC, Financial Crisis, foreclosure, fraud, Inside job, liars loans, Melt down, mortgage crisis, Paulson, perfect storm, Rating Agencies, Real estate bubble, Rescue, scam, SEC, securitization, short selling, TARP, Tim Geithner, uptick rule, Video