BEFORE OUR VERY EYES
In examining the worst fnancial meltdown since the Great Depression, the FinancialCrisis Inquiry Commission reviewed millions o pages o documents and questionedhundreds o individuals—fnancial executives, business leaders, policy makers, regu-lators, community leaders, people rom all walks o lie—to fnd out how and why ithappened.In public hearings and interviews, many fnancial industry executives and toppublic ocials testifed that they had been blindsided by the crisis, describing it as adramatic and mystiying turn o events. Even among those who worried that thehousing bubble might burst, ew—i any—oresaw the magnitude o the crisis thatwould ensue.Charles Prince, the ormer chairman and chie executive ocer o Citigroup Inc.,called the collapse in housing prices “wholly unanticipated.”
Warren Buett, thechairman and chie executive ocer o Berkshire Hathaway Inc., which until was the largest single shareholder o Moody’s Corporation, told the Commissionthat “very, very ew people could appreciate the bubble,” which he called a “massdelusion” shared by “ million Americans.”
Lloyd Blankein, the chairman andchie executive ocer o Goldman Sachs Group, Inc., likened the fnancial crisis to ahurricane.
Regulators echoed a similar rerain. Ben Bernanke, the chairman o the FederalReserve Board since , told the Commission a “perect storm” had occurred thatregulators could not have anticipated; but when asked about whether the Fed’s lack o aggressiveness in regulating the mortgage market during the housing boom was aailure, Bernanke responded, “It was, indeed. I think it was the most severe ailure o the Fed in this particular episode.”
Alan Greenspan, the Fed chairman during thetwo decades leading up to the crash, told the Commission that it was beyond the abil-ity o regulators to ever oresee such a sharp decline. “History tells us [regulators]cannot identiy the timing o a crisis, or anticipate exactly where it will be located orhow large the losses and spillovers will be.”
In act, there were warning signs. In the decade preceding the collapse, there weremany signs that house prices were inated, that lending practices had spun out o control, that too many homeowners were taking on mortgages and debt they could illaord, and that risks to the fnancial system were growing unchecked. Alarm bells