Congressional Committee Identified for the Recent Financial

¶ … Congressional Committee identified for the recent financial crisis. It would be nearly impossible to assess the financial crisis from 2006 to 2010, which largely began in the United States and reverberated around the world, without acknowledging the complicity of credit agencies. This fact is widely acknowledged by the Financial Crisis Inquiry Commission, which "spreads the blame widely to regulators, politicians, financial firms and credit rating agencies" (O'Donnell, 2011).

The role that crediting agencies played in the aforementioned fiscal crisis was substantial -- they egregiously relaxed their standards and issued credit and credit products (such as ratings of an individual's credit) to those who previously, they would not have. Moreover, it is noteworthy that this trend in which the attaining of credit and credit products became easier and easier to access began well before the actual crisis. The following quotation alludes to this fact. "It is generally accepted that credit standards in the U.S.

mortgage lending were relaxed in the early 2000's" (Jickling, 2010, p. 2). This fact is one that was greatly addressed by the Congressional Committee dedicated to the financial crisis. The ramifications of giving credit to purchase homes to individuals who did not rightfully deserve it, and who would not be able to maintain jobs and pay off their loans was a considerable factor in the housing bust that greatly exacerbated the crisis. Such "high risk lending" (Levin, 2011, p. 2) typified many home loans during this time period.

Moreover, loan standards were so greatly lowered that, due to some of the lowest prime interest rates in the better part of the previous century, individuals were able to purchase homes purely based on credit, without putting any money down. Such practices created a situation in which there was not enough capital going around and the economy dangerously teetered on credit as its mainstay. Thus, when its lack of capital was finally exposed, it reached an inevitable implosion that, combined with several other key events, led to the financial crisis.

Another contributor to the financial crisis as identified by the Congressional Committee was unscrupulous financial and accounting practices on the part of various financial entities. Specifically, the practice of mark-to-market accounting led to a system in which the valuation of various assets was imaginary at best, and again contributed to a situation in which there was not enough actual capital within the economy. The practice of mark-to Market accounting was one of the conditions that led to the position in which the U.S.

economy suffered during the first few years of the second millennium. The Enron scandal exposed the fallacy that mar-to-market accounting can become. One of the reasons that the Houston power company eventually went bankrupt was because of an unrestrained, creative license in this accounting practice in which organizations can value an asset based on its market worth -- regardless of what sort of funds or revenues they have actually generated from it.

Using this tactic, Enron recorded huge gains and profits without actually making any money -- which eventually led to its own implosion which would eerily mirror that of the overall economy in the coming years.