Panel cites multiple reasons for financial crisis

The Financial Crisis Inquiry Commission issued a report Thursday that pointed to multiple reasons for the meltdown. But the commission's findings were split along partisan lines. The six Democrats on the panel agreed with the report's findings. The four Republicans dissented. Here are key findings from both groups.

The Financial Crisis Inquiry Commission issued a report Thursday that pointed to multiple reasons for the meltdown. But the commission's findings were split along partisan lines. The six Democrats on the panel agreed with the report's findings. The four Republicans dissented. Here are key findings from both groups.

MAJORITY:

— The financial crisis was avoidable. Wall Street engaged in risky practices and lenders pushed high-risk mortgages. At the same time, government officials permitted the risky investments to flourish.

— The government prepared poorly and responded inconsistently to the crisis, causing panic in the financial markets. For example, it rescued Bear Stearns in March 2008 by brokering a sale to JPMorgan Chase. But in the fall, it put housing giants Fannie Mae and Freddie Mac in conservatorship. The government let Lehman Brothers collapse. But it gave American International Group financial support. Another major factor was that the Federal Reserve failed to stop the flow of risky subprime mortgages. The Fed could have done this by imposing higher standards on lenders.

— Accountability and ethics among lenders and financial firms and throughout the financial system broke down.

— Eroding standards for mortgage lending and the securities they were bundled into had devastating effects throughout the financial system.

— The explosion of trading in derivatives — complex financial instruments used to hedge against risk — helped fuel the crisis.

DISSENTERS:

— Clinton and Bush administration policies that sought to raise home ownership rates encouraged lenders to make high-risk subprime loans. When the housing bubble burst, it triggered the financial crisis.

— A credit bubble formed in the U.S. and Europe starting in the late 1990s. It became cheaper to borrow to finance risky investments, such as subprime loans.

— Many financial companies amassed big blocks of high-risk investments related to housing. Some of the investments were essentially bets on whether housing prices would rise or fall. The losses on mortgage securities after housing prices collapsed plunged some firms toward collapse.

— High-risk mortgages and deceptive lending practices proliferated. Yet many home borrowers didn't understand the terms of their mortgages and didn't meet their responsibilities. These factors helped pump up the housing bubble, which inevitably burst.

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