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Showing posts with the label Financial Crisis Inquiry Commission

Professor compares subprime borrowers to e-coli

We attended today's Financial Crisis Inquiry Commission (FCIC) hearing earlier today. The Commission brought "experts who have researched the financial crisis for a forum in Washington, DC on February 26-27, 2010 at American University Washington College of Law."

More smoke than light was shed on the cause of the crisis. I was struck, however, by one comparison made. In the last session on Shadow Banking, Gary Gorton, Professor of Finance, School of Management, Yale University, compared subprime borrowers to e-coli, suggesting they had "infected" the home loan market.

According to Wikipedia, "Between 2004-2006 the share of subprime mortgages relative to total originations ranged from 18%-21%, versus less than 10% in 2001-2003 and during 2007. The value of USA subprime mortgages was estimated at $1.3 trillion as of March 2007, [17] with over 7.5 million first-lien subprime mortgages outstanding." That's a lot of e-coli, too much for this analogy to …

Bankers to Commission: Screw You

The First Public Hearing of the Financial Crisis Inquiry Commission was held on January 13, 2010 at the Longworth House Office Building in Washington, DC. "The Commission..has been given a mission to examine the causes of the financial crisis and to report findings to the Congress, the President, and the American people."

According to the New York Times, "The heads of Wall Street’s largest banks faced skeptical questions on Wednesday about executive pay and the failures of regulation from the bipartisan commission established to examine the causes of the biggest downturn since the Depression. Tensions flared as commission members retraced the events leading to the near-collapse of the financial system in 2008 and pressed bankers on whether they or their employees had acted unethically."

This is inaccurate. There were no skeptical questions. There was no tension. No one pressed the bankers on anything. They lied at will, without fear of being contradicted. It was as i…