Financial Meltdown Was 'Avoidable,' Crisis Panel Finds

According to a new report written by Democrats on a panel that investigated the financial collapse and bailouts, the meltdown could have been avoided. In fact, the group is blaming both Washington and top financial firms for the crisis. Small comfort for people who lost everything…

Huffington Post reports:

The Democratic majority of the 10-member Financial Crisis Inquiry Commission spreads the blame widely to regulators, politicians, financial firms and credit rating agencies.

"We conclude this financial crisis was avoidable," the report said.

It said regulators failed to adequately police financial markets, that financial firms had poor risk management and corporate governance practices, and that government was ill-prepared to handle the fallout from excessive borrowing when loans soured.

"The crisis was the result of human action and inaction, not Mother Nature or computer models gone haywire," the draft report reads. "The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand, and manage evolving risks within a system essential to the well-being of the American public."

The report will be officially released on Thursday but it has been endorsed only by the congressionally appointed panel's six Democratic commissioners. Three Republican members will release a separate minority report and a fourth Republican plans to unveil a report of his own that will focus on government housing policies.

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FDIC: List Of 'Problem' Banks Grows In Q3

From Huffington Post.com:

The number of banks on the Federal Deposit Insurance Corp.'s "problem" list grew over the summer, even as the industry posted solid net income and fewer loans soured.

The number of troubled banks rose to 860 in the July-September quarter from 829 in the previous quarter. That's the most since 1993, during the savings and loan crisis.

The FDIC also said banks earned $14.5 billion during the third quarter. That was a decrease from the previous quarter's result of $21.4 billion.

The FDIC said earnings fell because Bank of America Corp took a one-time hit of $10.4 billion. That was because of new limits on debit card swipe fees that retailers pay to banks.

The industry's third-quarter results were well above the $2 billion that banks earned a year earlier.

The troubled banks were smaller, on average, holding $379.2 billion in assets. That's down from $403.2 billion in the April-June quarter.

The 10 Missteps of Financial Reform

From MarketWatch.com:

In hopes to create a new and safer game, Washington has shuffled the deck with which Wall Street plays, but anyone who's gone back to the table after a big loss knows the score.

Same cards, same risks, and the house always wins.

There are a lot of good intentions built into the Dodd-Frank bill. Lawmakers have tried to create standards for mortgage underwriting, preserve and strengthen bank capital and move risky derivative exposure off the balance sheet and into the open.

The banks with the most to lose include Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. Goldman Sachs Group Inc. and Morgan Stanley.

If you had to boil down the complex bill's main flaw it's that it puts too much emphasis on regulators who have failed in their charged tasks. The Securities and Exchange Commission and Federal Reserve -- at least based on their track record -- are short on the kind of man and brain power required to successfully oversee Wall Street risks.

Without trained and well-paid regulators and without closing the revolving door, it's hard to feel hopeful about financial reform, as well-intentioned as it may be. And even with the best intentions, the bill leaves plenty of loopholes to exploit. Here is 1 obvious one:

1. The Volcker Rule. Intended to reduce bank risk, the rule curtails bank participation in proprietary trading, private equity and hedge fund investments -- businesses that arguably were tangential to the financial crisis. Don't believe it? Name one depository institution that teetered due to investments in these businesses.

Moving Your Money? Then Try a Credit Union

From The HuffingtonPost.com:

We applaud the call for folks to move their money to local financial institutions; we just think that call should also include credit unions.

Credit unions, not-for-profit, member-owned financial institutions, have been widely recognized for their prudent business practices and great service. A key reason for this is that "profits" are returned to members in the form of lower fees and competitive rates.

This investment has paid off: Today, credit unions serve approximately 92 million members.

Federal credit unions also offer great rates on all types of loans, including automobiles, cars, credit cards, and mortgages. Credit card interest rates and other loans cannot exceed 18 percent at federal credit unions and usually average much lower. You can go to www.nafcu.org/dailyrates and compare rates between credit unions and banks.

In addition, while banks were tightening their commercial lending, credit unions member business loans have increased nearly 17 percent since Sept. 2008. In fact, through the third quarter of 2009, credit unions provided over 139,000 loans for a total of nearly $28 billion to their members.