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I want to know how something works.

I want to know when something doesn’t work and why it doesn’t work.

It doesn’t matter to me if it’s a product or process. I want to know what makes it go and how to fix it when it doesn’t.

Please try to control your excitement as I tell you this…

The report on the causes of the financial crisis, as prepared by the Financial Crisis Inquiry Commission (FCIC) is out. Their website is

However; it was a bi-partisan committee that reached partisan conclusions. I suppose that will happen when you get six Democrats and three Republicans together. Fortunately, the only major disagreement was that the Republicans wanted the global economy and China’s manipulation of the value of the dollar mentioned as a contributing factor, but they were over-ruled by the majority. Nonetheless…

How did our country’s financial system “break”?

If you didn’t feel its effects, then why should you care?

Well; from my personal experience, let me say this: like many of you, Life moved on as we were seeing news snippets about banks, mortgage companies, investment firms, insurance companies and yes; our auto companies that were in some form of financial difficulties.

On the surface, I saw no cause for concern; that is, until my company eliminated my yearly bonus, froze my salary, stopped contributing to my retirement fund and switched group health providers in an effort to keep costs down.

That was in 2008; the same year that I changed my retirement portfolio from “moderate risk” to conservative. It paid off, as the value of my fund did not free fall like many of my co-workers, who left their funds “as is”.

And is it a coincidence that retirement funds were dropping at the same time we were getting other bad, financial news or was some of our retirement money finding its way into the mortgage mess?

Were pensions being hit hard by investments in risky stocks at the time? Even in cities where they were still fully funding their plans; were bad investments costing pensioners? Why was the UAW labor union given tax money for its pension fund, but no others?

The Financial Crisis Inquiry Committee (FCIC) concludes: “…This crisis was avoidable-the result of human actions, inactions and misjudgments. Warnings were ignored. ‘The greatest tragedy would be to accept the refrain that no one could have seen this coming and thus, nothing could have been done. If we accept this notion, it will happen again’.

So; just like our government leaders ignored many of the recommendations of the 9/11 Commission, what would possibly compel them to follow the advice of the FCIC to avert another financial collapse?

I am not a conspiracy theorist, but you have to wonder if problems dating back to 2006 weren’t already migrating to some of our communities. In other words; was our local landscape getting a global assist?

Here is a timeline of the financial crisis that was published in the USAToday and was part of the news story “Finding Blame”.

April 2006 – Home prices peak as home ownership starts to drop.

Summer 2007 – Increasing delinquencies are seen in subprime mortgages.

August 2007 – Countrywide reports first loss in 25 years of 1.4 billion dollars.

March 2008 – Bear Stearns, after making bad bets on mortgage securities is taken over by JPMorgan Chase in a government-backed rescue.

September 2008 – Feds take over Fannie Mae and Freddie Mac; AIG gets a government bail-out; Merrill Lynch is bought by Bank of America and Lehman Brothers files for bankruptcy.

October 2008 – Dow Jones drops below 10,000 points for the first time in four years and the Troubled Assets Relief Program (TARP) is established to get aid to banks who took toxic assets in subprime loans.

December 2009 – Home prices have dropped 28% since 2006. Ten percent of all residential mortgages are delinquent by 90 days or more.

Mid 2010 – All major loan originators and underwriters are being sued.

Fall 2010 – Problems with foreclosure documents arise; states’ attorney generals get involved.

December 2010 – For the first time, more than one million homes are repossessed.

Now that you have seen this road map to collapse, is it possible that its impact has been felt in communities like Camden or Trenton New Jersey? Gary Indiana? Ann Arbor or Flint Michigan?

Just recently, Moody’s Investor Service, who provides credit ratings, research and risk analysis, announced that they will now include pensions when rating cities for credit ratings. Where pensions had always been separate from a city’s debt in the past, it could now have a major impact on a cities’ ability to acquire loans or bonds for projects.

Moody estimates that there is $700 billion of pension debt in this country. California and Illinois lead the way in underfunded pension funds.

If the economy is improving as some believe, then how do we get our states and our communities rolling again? How do we even get services back to pre-2008 levels?

If pensions are funded by employees, their employers and return on investments, then where is the funding coming from to get funds healthy again?

What strategies are going to be necessary going forward to avoid another collapse?

Really; I’m asking because I want to know.

The views and opinions expressed are those of the author, Art Goodrich, who also writes under the name ChiefReason.  They do not reflect the views and opinions of, Fire Engineering Magazine, PennWell Corporation or his dog, Chopper. Articles written by the author are protected by federal copyright and cannot be reproduced in any form.

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Comment by Brad Hoff on January 31, 2011 at 4:28pm
That is the Trillion Dollar Question everyone wants to know!

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