In Wall Street and the Financial Crisis: Anatomy of a Financial Collapse, the Permanent Subcommittee on Investigations summarizes their findings on the causes of the financial crisis. The article claims that they have found four root causes of the financial crisis: high risk lending, regulatory failures, inflated credit ratings, and poor quality financial products. The 2008 Housing Crisis, on the other hand, argues that government policies, which allowed consumer’s affordable loans, were not to blame for the crash. It says that the weakness of the government was to lack oversight in consumer protection, mortgage securitization, and financial markets. It claims that the majority of the problem came from homeowners buying risky products, which would become unaffordable when economic conditions changed.
While both articles point out some similar causes of the crisis, the first places blame almost directly on the Office of Thrift Supervision and banking practices, while the second tries its hardest to prove the government played no role in it. Mortgages insured by the FHA didn’t cause the crisis, McArthur and Edelman claim. It was the predatory loans that led to crisis. Instead, the article focuses a good amount on the positive effects of government lending programs in the growth of homeownership in America. Article two also diverts the blame away from Fannie May and Freddie Mac, insisting that they provided liquidity to the mortgage market, allowing lenders to get repaid quickly.
Taking into account the evidence and opinions of both articles, one could argue that a new argument could be made that both private financial institutions as well as the government are to blame in the crash. Without adequate government collaboration and oversight, banks were left on a path to their own destruction. Numbers were being fudged on both sides to infer better turnouts than were actually happening. If government programs could work directly with banks and lenders to fact check before the situation spiraled out of control, the crash could have been more predictable, if not avoided altogether.
Closely related to the topics of these essays is an art exhibition, FDIC Insured (began in 2008), by Michael Mandiberg. During the great recession, he noticed that whenever a bank failed, the FDIC basically erased the company’s failure footprint from the internet. Mandiberg took note of this and collected the banks’ logos from the internet before they failed, displaying them on the covers of faulty investment guidebooks. These, along with other recession paraphernalia were carefully curated and displayed in the exhibition. The show opened on September 15th, the anniversary of the failure of Lehman Brothers. In its entirety, the exhibition is Mandiberg’s way of letting the institutions know they have no way to hide, even if their public internet presence has been fudged to show a perfect record. This show backs the argument that both the government and banks should have been more closely fact-checked and held accountable for their actions through the implementation of government funded programs and collaborations.
Here’s the link to the exhibition page