The Financial Crisis Inquiry Commission report was published in January, it followed the commission’s review of millions of pages of documents, interviews with more than 700 witnesses and 19 days of public hearings. OWS Senior Editor Lorie Konish spoke with commission Chairman Phil Angelides about the report’s findings and how they can help shape the industry’s future.

1. How early could the financial crisis been turned around? If you take just for example subprime mortgage lending, which in many respects was at the heart of this crisis, the very poor quality loans that were then packaged up by financial institutions and sold to investors across the world; the warning signs were there in the late 1990s. The Federal Reserve in the late 1990s was getting reports of egregious lending practices across this country; predatory lending practices. In 2001, the Federal Reserve staff proposed tightening up lending standards to try to curb some of the abuses in the marketplace. The Federal Reserve took an action in 2001 but the rules were so watered down that they only affected 1% of the subprime loans being made in this country. Reports of lending abuses, poor quality mortgage loans accelerated through the 2000s, but it wasn’t until 2006 that Alan Greenspan, who was head of the Federal Reserve until the beginning of 2006, [that the Fed] even put out voluntary guidance to banks and other financial institutions warning them about mortgage lending practices. It wasn’t until July 2008 when the financial system is already in collapse that the Federal Reserve adopts a rule that says you can’t make a loan to a person who can’t afford to pay that loan back. And if you look at that period from the late 1990s to the early 2000s, what you see are plenty of warning signs. You see the unsustainable rise in housing prices. You see widespread reports of lending abuses in the marketplace. You see the creation of trillions of dollars of mortgage securities, many of which turned out to be phony and highly defective. So the warning signs were all along the way, but they were ignored by the policymakers, by the regulators and by the CEOs of the major financial institutions.

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