SACRAMENTO, Calif. -- Former California Treasurer Phil Angelides, appointed by Congress to investigate the financial crisis of 2008, declared Thursday that the entire mess could have been avoided.
In a blistering report that followed 18 months of testimony and fact-gathering, Angelides and his Financial Crisis Inquiry Commission blamed a wide cast of characters for the epic meltdown, including executives of insurance giant AIG and Goldman Sachs and government policymakers such as Alan Greenspan, Timothy Geithner and Ben Bernanke. The report said human error created the crisis.
"This didn't need to happen," Angelides, the commission's chairman, said in a phone interview with the Sacramento Bee.
But the release of the report at a Washington news conference was anything but an unqualified win for Angelides, also a former Democratic nominee for governor.
The crisis commission's findings were caught up in immediate partisan bickering. While the report was endorsed by the six Democrats on the commission, the four Republicans refused to sign off on its conclusions.
Instead, the Republicans issued dissenting opinions -- two of them, in fact -- that took not-so-gentle swipes at the Democrats' conclusions. One of the Republicans, Peter Wallison of the American Enterprise Institute, said the commission exhibited a "lack of objectivity."
Angelides said he isn't bothered by the Republicans' protests.
"Every major project like this has challenges and critics," he said. "We called this straight-up without regard to partisanship."
Angelides and his allies blamed mortgage lenders for the flood of risky subprime loans that ignored "a borrower's ability to pay." Wall Street investment banks recklessly packaged the loans into toxic securities that exposed the entire financial system to meltdown, the report concludes.
All the while, government watchdogs were asleep. For more than 30 years, lawmakers and presidents bought into the free-market ethic backed by the officials like Greenspan, the former Federal Reserve chairman.
"The sentries were not at their posts," the report said.
While Greenspan retired, the Angelides commission faulted three men who were responsible for policing the financial system when the crisis unfolded: Greenspan's successor Bernanke, former Treasury Secretary Henry Paulson, and Geithner, the current Treasury secretary. Geithner was head of the New York Federal Reserve Bank until 2009.
"When the crisis hit, they were woefully unprepared," Angelides told The Bee.
The Republicans said the majority report was too simplistic. Wallison said the inquiry should have focused more on federal policies aimed at spreading home ownership, which he said contributed heavily to weak lending standards.
He said the commission investigated "only the facts that supported its initial assumptions."
The other three Republicans, including former Congressman Bill Thomas of California, said it's a mistake to blame loose U.S. regulatory standards when the crisis popped up in other countries as well.
"If the political influence of the financial sector in Washington was an essential cause of the crisis, how does that explain similar financial institution failures in the United Kingdom, Germany, Iceland, Belgium, the Netherlands, France, Spain, Switzerland, Ireland, and Denmark?" they said.
Angelides said the spread of the crisis to other countries actually proves his point about the danger of lax government oversight. Iceland, for instance, went bust because it "drank the Kool-Aid of deregulation," he told The Bee.
After losing the governor's race in 2006, Angelides began investing in green tech and urban development, often working from a small office in east Sacramento. That work was set aside when he became head of the crisis inquiry in July 2009.
"It's been very consuming," he said.
The panel held high-profile hearings in Washington and New York, sometimes putting powerful political and business leaders in an uncomfortable light. In one famous exchange last fall, Goldman Sachs Chief Executive Lloyd Blankfein compared the crisis to an act of God.
Angelides interrupted him, saying, "Acts of God, we'll exempt. These were acts of men and women."
The panel held four field hearings, all in communities that were among the hardest hit by the real estate crash: Sacramento, Las Vegas, Bakersfield and Miami.
In Sacramento, commissioners heard about the Central Valley's vulnerability to the housing price bubble. One witness testified that appraisers were pressured by lenders to make inflated appraisals so shaky loans would go through.
The final report mentions Sacramento numerous times, noting that housing prices more than doubled in a five-year stretch.
Angelides, 57, said he plans to return to Sacramento soon and will spend time with his recently widowed father. He also will continue to push the ideas in the report.
"I will speak out on this issue," he said.
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