I learned yesterday that the Financial Crisis Inquiry Commission (FCIC) final report was available on-line, including quite literally tens of thousands of pages of evidence and hundreds of hours of video testimony, both before the Commission as well as such testimony before Congressional committees as appeared relevant to the Commission's mandate, to "examine the causes of the current financial and economic crisis in the United States," as laid out in the Fraud Enforcement and Recovery Act of 2009. If it weren't for widespread unrest in the Middle East, including a successful revolution in Tunisia and an incipient one in Egypt, the report would certainly be the subject of closer scrutiny.
I decided to check it out, if for no other reasons that I could at least say I had read it, if matters related to the general topic of the financial collapse arose. With a handy link provided here, it would be easy enough to click it, or insist others do so.
What surprised me - and I was, quite pleasantly surprised - was embedded within the "Conclusions" (like the rest of the report, this is .pdf format) lies a marvelous, yet incomplete, theory of the common good that, juxtaposed as closely as it is, to the still-reigning insistence that markets are and should be autonomous spheres of activity, was refreshing. The majority report rests its conclusions - that the crisis itself was avoidable; that systemic oversight and regulatory failures created an unstable support for the financial markets; that there was a breakdown in corporate governance and risk management; that excessive borrowing, risky investments, and lack of transparency increased the possibility for a coming crisis; despite repeated warnings and even clear statutory and regulatory imperatives, the government was not prepared for the crisis, and its lack of preparation led to even greater market instability; that there was a systemic breakdown in accountability and ethics, both in private and public institutions; the rise of mortgage-backed investments as a tool for high-yield returns fueled ever riskier mortgage practices; the deregulation of so-called over the counter derivatives (OTC) led to their exponential growth, a specific area that contributed to overall weakness and instability; compromised by a number of factors, the credit-rating agencies failed in their independent and essential capacity as watchdogs of various financial instruments - upon a view of financial markets as a necessary, integral part of the larger economy and society of which they are a part. Their healthy, safe, and legal operations are necessary for the health of the larger polis of which they are a part. In that regard, while the majority report does hold certain public office-holders and corporate executives responsible, they also make clear that responsibility for what happened lies, too, with us as a whole. By allowing ourselves to succumb to the view that markets freed of the constraints of regulation and oversight will not only yield greater returns but will be self-regulating, we all share the blame for what was, as the first conclusion of the Commission says, a preventable, foreseeable disaster.
That short paragraph alone makes struggling through much of the report worthwhile. Here, within this official, Congressionally mandated report, is a view linking the common good, the demands of democratic governance, and the responsibilities incumbent upon all of us to ensure, as it says in the Preamble to the Constitution, domestic tranquility and enhance the general welfare.
I call it incomplete, however, because it does not go quite far enough in its criticism of the rise of the financial sector as a part of our larger economy. While investment may be necessary in some limited way to encourage business expansion, particularly as an alternative to increased private debt; with the major financial asset most Americans hold, their homes, needing to be purchased on credit, some sort of private credit should, indeed, exist; spreading, thus theoretically reducing, overall risk is a wise approach for insuring against the occasional shocks that are a part of the round of the business cycle; while all this may be true, to an extent, the exponential growth of the financial sector, and the increasing reliance upon it for a sense of the general health of the larger economy, as well as the inflated rewards offered to individuals and corporations within the financial sector for ever-greater short-term returns regardless of long-term risk raise questions about the place of financial markets within the larger economy. At one time, such were considered parasitic, earning a far greater share of wealth that was actually created through real work. The ever-increasing (computer-generated) wealth of investment firms, large banking houses, and even mortgage brokers is hardly the sign of a healthy, robust economy. It seems to me that even greater regulation and oversight, not least of which might include restricting the size and scope of the financial sector relative to the broader economy, is necessary to ensure a truly healthy society.
That being said, I have to admit I liked much of what was in the summary of conclusions.