Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Friday, December 17, 2010

Bipartisanship Reigns at FCIC

Four Republican members of the Financial Crisis Inquiry Commission released a 9-page "primer" on December 15, the date Congress set for the final report, which a majority of the Commissioners deferred for one month.  According to its introduction:

This primer contains preliminary findings and conclusions released by Vice Chairman Bill Thomas, Commissioner Keith Hennessey, Commissioner Douglas Holtz-Eakin, and Commissioner Peter J. Wallison, and represents a portion of the findings and conclusions resulting from our work on the FCIC. As the transmission of the report of the FCIC to the President and Congress requires a majority vote of the Commission, these findings and conclusions do not constitute the Commission’s report. Rather, this document is an effort to reflect the clear intention of our enabling legislation.
* * *
Our framework reflects a central premise that the financial crisis was distinct from other recent important economic events, including the housing bubble and the prolonged economic recession. We believe that the financial crisis was, at its core, a financial panic that was precipitated by highly correlated mortgage-related losses concentrated at large financial firms in the United States and Europe. While the housing bubble, the financial crisis, and the recession are surely interrelated events, we do not believe that the housing bubble was a sufficient condition for the financial crisis. The unprecedented number of subprime and other weak mortgages in this bubble set it and its effect apart from others in the past.

The FCIC website posted this response:

Today some members of the Commission made public their personal views on the financial
crisis. The Commission had not previously seen or had an opportunity to review what was
released today. But, as it does with the views of any of its members, the Commission will review
and take them into consideration.

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We call economics the dismal science. Maybe we should just call it dismal reflections.

Posted by: Clyde Kahrl | Dec 20, 2010 6:39:54 AM

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