There have been many lies promulgated regarding the meltdown in the real estate market, the subsequent Wall Street crash, and the seemingly unending unemployment crisis gripping the country some three years later.
But none of the lies reach the level of intensity surrounding the GOP lie that basically states that Fannie Mae / Freddie Mac created the crisis.
As always, the GOP has marketed this lie with propagandist efficiency.
- They started with a theory that has a modicum of plausibility.
- They found a co-conspirator with a background that suggests that he / she’s an “expert”
- Out of the region on one’s body where the sun never shines, he / she makes up pertinent “data.”
- He / she writes articles in sympathetic publications, repeating the made-up numbers endlessly (or so it seems anyway).
- Congressmen who can use this made-up data pick up the mantra and invite you to testify at hearings.
- He / she is chosen for a similarly-related investigative panel.
- Any other panel members who reject the theory are deemed to have done so for “political” reasons.
- Soon, the echo chamber created by the repetitive droning of this “data” drowns out dissenting views and the GOP congressmen/women, even presidential candidates, begin repeating the Big Lie.
What is described above is exactly the method and result achieved by Peter Wallison, a resident scholar at the American Enterprise Institute, and a former member of the Financial Crisis Inquiry Commission utilized to create the myth that Fannie Mae and Freddie Mac caused the real estate bubble and the subsequent crisis in the U.S. economy.
Wallison then recruited a partner, another A.E.I. scholar, Edward Pinto, a former chief credit officer for Fannie Mae, albeit a very long time. Pinto claims that as of June 2008, 20+ million “risky” mortgages had been issued — most of them were on Fannie and Freddie’s books.
Of course his definition of “risky” is so panoptic that it includes mortgages with extremely low default rates as well as those with default rates nearing 30 percent.
Naturally the “30-percenter” mortgages were the ones created by the subprime lenders and Wall Street.
Pinto’s numbers are the Big Lie’s primary data point.
So, who’s to blame for this particular web of lies?
The most accurate starting place would be the Republicans in Congress, whose primary purpose has been to deflect the blame, for purposes of eliminating Fannie and Freddie. Add Rupert Murdoch’s The Wall Street Journal editorial page, which recently published one of Wallison’s articles which loaned credence to the Fannie / Freddie Big Lie. A day later, The Journal making essentially the same point, repeated the assertion. After all, repetition is all-important to spreading any lie to the inattentive, easily-convinced masses.
Wallison’s argument is that the government’s effort to encourage homeownership among low and moderate income Americans is what led to the crisis. Fannie and Freddie, which were required by law to meet certain “affordable housing mandates,” were the primary instruments of that government policy; their need to meet those mandates, says Wallison, is what caused them to dive so heavily into those “risky” mortgages and in essence dragged along the rest of the mortgage industry into the subprime market.
The S.E.C., however, charges that the executives were motivated to begin buying subprime mortgages because they were trying to reclaim lost market share, and thus maximize their bonuses.
As Karen Shaw Petrou, Managing Partner of Federal Financial Analytics, puts it: “The S.E.C.’s facts paint a picture in which it wasn’t high-minded government mandates that did [Fannie and Freddie] wrong, but rather the monomaniacal focus of top management on market share.”
These facts clearly show that Fannie and Freddie got into riskier mortgages only after the damage had been already started and, yes, in doing so made it worse, but was hardly the CAUSE.
In fact, they were rapidly becoming irrelevant in the most profitable segment of the market — subprime. Lenders felt that they could not afford to let such an opportunity pass them by.
Three years after the financial crisis, it would seem that a true investigative effort regarding the role of government in housing would be in the U.S.’s best interest.
But in order to have that debate, wouldn’t we need a clear understanding of what role the government’s affordable-housing goals did or did not actually play in the real estate bubble, and how did so many “knowledgeable” people in and out of government not see what was happening, despite the fact that many of the “small” economists clearly were reading the red flags and being dismissed out-of-hand as “anti-capitalists”, “anti-profit”, or downright “anti-american”?
Well …. who’s looking stupid is clearly big stakes for the political parties and their constituents.
That’s where I’d focus … not where the slight-of-hand lies were first perpetrated upon us. As I’ve stated before, isn’t this the inarticulate, albeit highly appropriate theme that OWS is trying their best to bring to the forefront?
Could this be why the GOP is so profoundly dismissive of the entire movement in general, and Mr. Gingrich in particular?
I know one thing for sure … we need some straight damn answers once and for all … BEFORE the 2012 elections.