Research summary
Research summary
Topic summary
What caused the 2008 financial crisis? — 20 sourced claims. The FCIC found that several financial industry figures appeared to have acted illegally and referred individu… · The SEC's 2004 regulatory amendments were implemented to comply with the European Parliament's Financial Cong… · The Senate Permanent Subcommittee on Investigations (PSI) Levin-Coburn inquiry attributed the crisis to four…
Key research questions
- Research this topic from public information: What caused the 2008 financial crisis?.
Important claims and supporting citations
The FCIC found that several financial industry figures appeared to have acted illegally and referred individuals for potential criminal prosecution.
The SEC's 2004 regulatory amendments were implemented to comply with the European Parliament's Financial Conglomerates Directive (2002/87/EC), which mandated global consolidated supervision for firms operating in Europe.
The Senate Permanent Subcommittee on Investigations (PSI) Levin-Coburn inquiry attributed the crisis to four specific causes through case studies of Washington Mutual, Moody's, S&P, Goldman Sachs, Deutsche Bank, and OTS.
- https://www.hsgac.senate.gov/subcommittees/investigations/rep/senate-investigations-subcommittee-releases-levin-coburn-report-on-the-financial-crisis/
- https://www.hsgac.senate.gov/wp-content/uploads/imo/media/doc/PSIfinancialreportrelease041311.pdf
- https://levin-center.org/what-is-oversight/portraits/financial-crisis/
The claim that the 2004 net capital rule change allowed investment banks to raise leverage from 12-15:1 to 30-40:1 is contested by the SEC, which argued the net capital rule applied to broker-dealers rather than holding companies.
The FCIC found that AIG senior management experienced severe governance breakdowns and did not understand the terms and risks of the company's derivatives exposure.
The SEC's 2004 Consolidated Supervised Entity (CSE) program brought the holding companies of Lehman Brothers, Bear Stearns, Goldman Sachs, Morgan Stanley, and Merrill Lynch under SEC supervision.
The Levin-Coburn Senate investigation identified widespread conflicts of interest as the central driver of the crisis, detailing how firms exploited clients and credit rating agencies assigned AAA ratings to high-risk assets.
- https://www.hsgac.senate.gov/subcommittees/investigations/rep/senate-investigations-subcommittee-releases-levin-coburn-report-on-the-financial-crisis/
- https://www.hsgac.senate.gov/wp-content/uploads/imo/media/doc/PSIfinancialreportrelease041311.pdf
- https://levin-center.org/what-is-oversight/portraits/financial-crisis/
The FCIC rejected claims that regulators lacked authority, noting that the SEC could have limited risky practices and required more capital at major investment banks, and the New York Fed could have intervened in Citigroup's excesses.
Competing explanations
The claim that the 2004 net capital rule change allowed investment banks to raise leverage from 12-15:1 to 30-40:1 is contested by the SEC, which argued the net capital rule applied to broker-dealers rather than holding companies.
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The SEC's 2004 Consolidated Supervised Entity (CSE) program brought the holding companies of Lehman Brothers,…
The SEC's 2004 Consolidated Supervised Entity (CSE) program brought the holding companies of Lehman Brothers, Bear Stearns, Goldman Sachs, Morgan Stanley, and Merrill Lynch under SEC supervision.
Labels: Source-linked, Low, known
AIG Liquidity Crisis and Derivatives Exposure
AIG Liquidity Crisis and Derivatives Exposure
Labels: Inferred, Low
FCIC Findings on Crisis Causes and Oversight
FCIC Findings on Crisis Causes and Oversight
Labels: Inferred, Low
Failure and Lending Practices of Washington Mutual
Failure and Lending Practices of Washington Mutual
Labels: Inferred, Low
Senate Levin-Coburn Investigation
Senate Levin-Coburn Investigation
Labels: Inferred, Low
AIG's collapse was triggered by credit rating downgrades from S&P (to A-), Moody's, and Fitch following Lehma…
AIG's collapse was triggered by credit rating downgrades from S&P (to A-), Moody's, and Fitch following Lehman Brothers' bankruptcy, which required billions in cash collateral for AIG Financial Products' credit default swaps.
Labels: Inferred, Low, known
Washington Mutual Bank was a $300 billion thrift institution that became the largest bank failure in United S…
Washington Mutual Bank was a $300 billion thrift institution that became the largest bank failure in United States history.
Labels: Inferred, Low, known
The Senate Permanent Subcommittee on Investigations (PSI) Levin-Coburn inquiry attributed the crisis to four…
The Senate Permanent Subcommittee on Investigations (PSI) Levin-Coburn inquiry attributed the crisis to four specific causes through case studies of Washington Mutual, Moody's, S&P, Goldman Sachs, Deutsche Bank, and OTS.
Labels: Source-linked, Low, known
On March 16, 2011, the FDIC filed a lawsuit against three former Washington Mutual executives (Kerry K.
On March 16, 2011, the FDIC filed a lawsuit against three former Washington Mutual executives (Kerry K. Killinger, Stephen J. Rotella, and David C. Schneider) alleging extreme and historically unprecedented risk-taking in home loans.
Labels: Inferred, Medium, known
The FCIC identified over-the-counter (OTC) derivatives as one of its nine primary conclusions, stating they f…
The FCIC identified over-the-counter (OTC) derivatives as one of its nine primary conclusions, stating they fueled mortgage securitization and expanded unchecked to trillions in notional value.
Labels: Source-linked, Low, known
The claim that the 2004 net capital rule change allowed investment banks to raise leverage from 12-15:1 to 30…
The claim that the 2004 net capital rule change allowed investment banks to raise leverage from 12-15:1 to 30-40:1 is contested by the SEC, which argued the net capital rule applied to broker-dealers rather than holding companies.
Labels: Contested, Low, known
The Financial Crisis Inquiry Commission (FCIC) concluded that the 2008 financial crisis was avoidable and res…
The Financial Crisis Inquiry Commission (FCIC) concluded that the 2008 financial crisis was avoidable and resulted from human action and inaction rather than natural causes or computer modeling failures.
Labels: Source-linked, Low, known
The FCIC found that several financial industry figures appeared to have acted illegally and referred individu…
The FCIC found that several financial industry figures appeared to have acted illegally and referred individuals for potential criminal prosecution.
Labels: Source-linked, High, known
The SEC's 2004 regulatory amendments were implemented to comply with the European Parliament's Financial Cong…
The SEC's 2004 regulatory amendments were implemented to comply with the European Parliament's Financial Conglomerates Directive (2002/87/EC), which mandated global consolidated supervision for firms operating in Europe.
Labels: Source-linked, Low, known
The Levin-Coburn staff report released on April 13, 2011 was the only bipartisan congressional report on the…
The Levin-Coburn staff report released on April 13, 2011 was the only bipartisan congressional report on the financial crisis, as the FCIC divided along party lines.
Labels: Source-linked, Low, known
The FCIC explicitly identified five primary causal mechanisms: widespread regulatory failures, breakdowns in…
The FCIC explicitly identified five primary causal mechanisms: widespread regulatory failures, breakdowns in corporate governance, excessive borrowing and risk-taking, ill-prepared policymakers, and systemic breaches in accountability and ethics.
Labels: Source-linked, Low, known
The Office of Thrift Supervision (OTS) allowed Washington Mutual to issue hundreds of billions in high-risk O…
The Office of Thrift Supervision (OTS) allowed Washington Mutual to issue hundreds of billions in high-risk Option ARM mortgages knowing the bank used unsafe teaser rates and unrealistic borrower qualifications.
Labels: Inferred, Medium, known
The Levin-Coburn Senate investigation identified widespread conflicts of interest as the central driver of th…
The Levin-Coburn Senate investigation identified widespread conflicts of interest as the central driver of the crisis, detailing how firms exploited clients and credit rating agencies assigned AAA ratings to high-risk assets.
Labels: Source-linked, Low, known
AIG's collateral-call crisis began months before September 2008, with counterparties demanding billions by Ju…
AIG's collateral-call crisis began months before September 2008, with counterparties demanding billions by June, a large share of which was requested by Goldman Sachs.
Labels: Inferred, Low, known
Prior to the 2004 CSE rule change, Bear Stearns had already reported a gross leverage ratio of 28.0 with $226…
Prior to the 2004 CSE rule change, Bear Stearns had already reported a gross leverage ratio of 28.0 with $226.7 billion in total assets as of February 29, 2004.
Labels: Inferred, Low, known
The FCIC found that AIG senior management experienced severe governance breakdowns and did not understand the…
The FCIC found that AIG senior management experienced severe governance breakdowns and did not understand the terms and risks of the company's derivatives exposure.
Labels: Source-linked, Low, known
Bear Stearns operated under an internal financial statement guideline capping its net adjusted leverage ratio…
Bear Stearns operated under an internal financial statement guideline capping its net adjusted leverage ratio at no more than 15.0 rather than an explicit regulatory cap.
Labels: Inferred, Low, known
Republican Senator Tom Coburn concluded that unresolved and undisclosed conflicts of interest were at the hea…
Republican Senator Tom Coburn concluded that unresolved and undisclosed conflicts of interest were at the heart of the financial crisis rather than government housing policy.
Labels: Inferred, Low, known
The FCIC rejected claims that regulators lacked authority, noting that the SEC could have limited risky pract…
The FCIC rejected claims that regulators lacked authority, noting that the SEC could have limited risky practices and required more capital at major investment banks, and the New York Fed could have intervened in Citigroup's excesses.
Labels: Source-linked, Low, known