The Big Lie is the gift that keeps giving:
No. 1. “The financial crisis was caused not by Wall Street but by the federal government, namely Fannie Mae (FNMA) and Freddie Mac.”
This is a convenient argument made by conservatives trying to gut regulation of Wall Street (or attack Freddie “consultant” Newt Gingrich), one that draws its force from Fannie and Freddie’s role as a piggy bank for ex-officials from both parties over the last 20 years. The two institutions performed abominably and attempted to conceal their mistakes and thwart regulators; so far, six of their former executives have been sued by the Securities and Exchange Commission.
But the abuses of Fannie and Freddie did not cause our woes. David Min of the Center for American Progress makes mincemeat of Peter Wallison, a lonely dissenter on the Financial Crisis Inquiry Commission who has loudly and fallaciously insisted that the government’s affordable housing policies lie at the root of the entire financial crisis. Min points out that bubbles in commercial real estate and consumer credit developed independent of housing, and that the crisis extended around the globe to regions and institutions with no U.S. residential housing exposure. Besides, mortgages from private lenders defaulted at higher rates than those from Fannie and Freddie, which got into the securitization racket much later and at lower levels than Wall Street, the true source of the mess. This week’s $335 million settlement in the Countrywide case, where private lenders preyed on blacks and Hispanics, is a reminder that Fannie and Freddie were hardly the only miscreants and shouldn’t be immortalized as the direct cause of the crisis.
Economics is now divided into two camps: Those who see the world as it is, and those who see the world as they want it to be.
Which camp are you in?
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Source:
Lies, Damn Lies and the Four Whoppers of 2011
Jonathan Alter
Bloomberg Dec 22, 2011 7:01 PM ET
http://www.bloomberg.com/news/2011-12-23/lies-damn-lies-and-the-big-whoppers-of-2011-commentary-by-jonathan-alter.html
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