from Wednesday morning
re-posted with permission from the author
When I started this blog in January 2005, one of my goals was to alert people to the housing bubble, and to discuss the possible consequences of the then approaching housing bust. Residential investment has historical been one of the best leading indicators for the economy, and I was deeply concerned a major housing bust – both in terms of activity and house prices – would take the economy into recession.
There were others sounding the alarm – Robert Shiller, Tom Lawler, Dean Baker, Doris “Tanta” Dungey, and others. There was discussion of loose lending standards (including, but not limited to subprime), lack of regulatory supervision, agency problems with the originate-to-distribute model, and more. And although we might have disagreed on the exact causes of the bubble, as far as I know none of the people who are commonly credited with identifying the bubble, and predicted the bust, blamed it primarily on Fannie and Freddie or the Community Reinvestment Act (CRA).
When the Financial Crisis Inquiry Commission was announced, I was skeptical if they’d be willing to address the willful lack of regulatory supervision, and the role of Wall Street in the crisis. This morning, Shahien Nasiripour at the HuffPo wrote: Financial Crisis Panel In Turmoil As Republicans Defect; Plan To Blame Government For Crisis
The Republicans, led by the commission’s vice chairman, former congressman and chair of the House Ways and Means Committee Bill Thomas, will likely focus their report on the explosive growth of subprime mortgages and the heavy role played by the federal government in pushing mortgage giants Fannie Mae and Freddie Mac to purchase and insure them. They’ll also likely focus on the Community Reinvestment Act, a 1977 law that encourages banks to lend to underserved communities, these people said.
During a private commission meeting last week, all four Republicans voted in favor of banning the phrases “Wall Street” and “shadow banking” and the words “interconnection” and “deregulation” from the panel’s final report, according to a person familiar with the matter and confirmed by Brooksley E. Born, one of the six commissioners who voted against the proposal.
If Nasiripour story is correct, the explanations offered by these four individuals are blatantly false. Lets name names: Bill Thomas, Peter Wallison, Keith Hennessey and Douglas Holtz-Eakin. These are all subprime thinkers.