I. EXECUTIVE SUMMARY
A. Subcommittee Investigation
In November 2008, the Permanent Subcommittee on Investigations initiated its investigation
into some of the key causes of the financial crisis. Since then, the Subcommittee has engaged
in a wide-ranging inquiry, issuing subpoenas, conducting over 150 interviews and depositions,
and consulting with dozens of government, academic, and private sector experts. The
Subcommittee has accumulated and reviewed tens of millions of pages of documents,
including court pleadings, filings with the Securities and Exchange Commission, trustee
reports, prospectuses for public and private offerings, corporate board and committee minutes,
mortgage transactions and analyses, memoranda, marketing materials, correspondence, and
email. The Subcommittee has also reviewed documents prepared by or sent to or from
banking and securities regulators, including bank examination reports, reviews of securities
firms, enforcement actions, analyses, memoranda, correspondence, and email.
In April 2010, the Subcommittee held four hearings examining four root causes of the financial
crisis. Using case studies detailed in thousands of pages of documents released at the hearings,
the Subcommittee presented and examined evidence showing how high risk lending by U.S.
financial institutions; regulatory failures; inflated credit ratings; and high risk, poor quality
financial products designed and sold by some investment banks, contributed to the financial
crisis. This Report expands on those hearings and the case studies they featured. The case
studies are Washington Mutual Bank, the largest bank failure in U.S. history; the federal
Office of Thrift Supervision which oversaw Washington Mutual's demise; Moody's and
Standard & Poor's, the country's two largest credit rating agencies; and Goldman Sachs and
Deutsche Bank, two leaders in the design, marketing, and sale of mortgage related securities.
This Report devotes a chapter to how each of the four causative factors, as illustrated by the
case studies, fueled the 2008 financial crisis, providing findings of fact, analysis of the issues,
and recommendations for next steps.
