Republican Amnesia on the Financial Crisis

Sometimes party loyalty asks too much, even among today's rigidly unforgiving Republicans.

In December, the four Republicans on the Financial Crisis Inquiry Commission (FCIC) appeared to accept the Republican agitprop explanation, or "narrative," of the financial crisis: government regulators, under pressure from liberal Democrats like Barney Frank and Maxine Waters, bullied banks into making foolish, "politically correct" loans so poor folks could buy homes that they couldn't afford. But when the FCIC issued its final report last week, three of the four Republican commissioners flinched, apparently unwilling to sacrifice forever their scholarly reputations to the cause of partisan hackery. Instead, the three Republican commissioners argued that the financial crisis was caused by a combination of dimly understood macroeconomic forces, an unforeseeable "perfect storm."

Was this crisis preventable? "We don't know," said Republican FCIC commissioner Keith Hennessy. That argument has also been justly mocked by economics bloggers as "hoocoodanode?" ("Who could have known?"), but is far less laughable.

http://www.huffingtonpost.com/brad-miller/republican-amnesia-on-the_b_816466.html




Frum reads the FCIC, or: The Ownership Society as the Bridge to a Permanent Republican Majority.


Brad Miller has a post at Huffington Post, Republican Amnesia on the Financial Crisis. The important story is that that during the 2000s conservatives and libertarians hated the CRA and the GSEs because they believed that these institutions blocked or slowed the ability to give loans to poor people. After the crash, the Right did an immediate about-face, blaming these institutions for lending too much.

I’m not making that up. Check out the Miller post. We’ve been documenting this here for a while. As Cato put it in 2003 “…by increasing the costs to banks of doing business in distressed communities, the CRA makes banks likely to deny credit to marginal borrowers that would qualify for credit if costs were not so high.” Bill Black walks through the about-face by Wallison on everything, the GSEs in particular, here and here.

Meanwhile David Frum is reading the FCIC report. Here is his post on the CRA, Did Washington Push Banks to Make Bad Loans?, which ends with the quote: “George Bailey of It’s a Wonderful Life retired from mortgage lending forever. In the new anonymous securitized market, high-flown liberal egalitarian ideals became the material out of which self-interested and consequence-indifferent financial engineers built the biggest economic bomb since World War II.”

Hey! I’m both a liberal egalitarian and a financial engineer. I better respond.

First the FCIC report emphasizes this in passing but not by structure or percentage of content, but we had a credit bubble, and bubbles showed up everywhere, not just housing. Second, I’m actually surprised that the FCIC didn’t cover deregulation and securitization, considering they cover the early 1980s deregulation that gets us to the S&L crisis. The private securitization market was the creation of the early Reagan administration. Particularly the Secondary Mortgage Market Enhancement Act of 1984 (SMMEA) where Congress preempted a variety of state laws that inhibited private home mortgage securitization.

Ownership Society

http://rortybomb.wordpress.com/2011/01/31/frum-reads-the-fcic-or-the-ownership-society-as-the-bridge-to-a-permanent-republican-majority/

where they can be called out with facts and hard data.

We've still got the Senate, such as it is.

The right-wing wants us to forget about the true events that led up to the Great Republican Recession. They want us to forget about the deregulation specifically aimed at the EXACT industries that created the sub-prime crisis. They want us to forget about Bush's homebuyership push. They want us to forget about the fact that the GREs weren't as deeply into the sub-prime crisis as their private cohorts.

There's alot that they want us to forget and that's an important enough reason that we MUST remember. History shows us that the US economy will recover fully and the right-wing will set the same balls in motion making their investment buddies a WHOLE lot of cash on the backs of Americans who must actually work for a living.