Last week, a bi-partisan commission of U.S. Senators, including both conservative Senators and Tea Party favorites such as Tom Coburn, Rand Paul and Scott Brown, released a 635 page report which details the causes of the financial market crisis of 2008. This report includes bi-partisan recommendations such as “Narrow Proprietary Trading Exceptions,” and “Design Strong Conflict of Interest Prohibitions.” This release, similar to the official release of the Financial Crisis Inquiry Commission report, was met with a decided yawn by national media.
Following a quick review, it appears that the Levin-Coburn report lays primary blame for the financial collapse at the feet of reckless Wall Street executives, federal regulators “who cast a blind eye,” and out-of-control incompetent credit rating agencies who downplayed the serious risks of “crap” mortgage backed securities and collateralized debt obligations in order to maintain record breaking fees collected from the very entities requesting the ratings. Megabanks like Washington Mutual and Countrywide also aggressively shifted their sales from lower risk fixed rate loans to subprime adjustable loans, flooding the market seeking greater profit margins. Senator Levin pointed out that “rampant conflicts of interest are the threads that run through every chapter of this sordid story.” Notably, the Community Reinvestment Act came up only one time in the report, signifying again the miniscule role it played in the crisis: buried in footnote 495.
Importantly, this report sends a clear signal to the Justice Department that laws have been broken – not just by low hanging fruit such as brokers and borrowers (see Charlie Engle), but by Wall Street titans, like Goldman Sachs CEO Lloyd Blankfein. “Federal regulators should review the [investment banking] activities described in this Report to identify any violations of law.” Will federal regulators take up the Report's invitation to investigate Wall Street executives that acted recklessly?