The 600-plus page report of the US Financial Crisis Inquiry Commission should make for interesting reading for those with the patience to read it. It would be useful to wade into the argument between the Commission, which argues that the crisis was “avoidable” and the Financial Times, which argues that it was not. Maybe later.
The main omission from the Report seems to be any serious consideration of the role of fiscal policy in generating the bubble. Substantial tax cuts, accompanied by the increased spending necessitated by two wars, played vital roles in generating the bubble. However, neither of the two Bush era tax cuts (the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003) are mentioned by name in the report. Nor is the extra spending required to fund the Iraq or Afghanistan wars.
Similarly, monetary policy is given too little attention in the report (see pages xxv-xvi and 420-422). Monetary policy was too loose. Period. The report offers something along the lines of “some say monetary policy was too loose, others say it was not.”
Poor monetary and fiscal policies were at the heart of the crisis. True, there is more blame to go around. Nonetheless, ignoring these two causes is a serious omission.