For months now, the Financial Crisis Inquiry Commission — which is supposed to be offering a report on the causes of the 2008 financial meltdown — has been bogged down by partisan bickering, with the Republican commissioners griping about the tone of the commission’s final report, which they think is too tough on the banking industry. Now, as Shahien Nasiripour reported, all of the commission’s Republican members “voted in favor of banning the phrases ‘Wall Street’ and ‘shadow banking’ and the words ‘interconnection’ and ‘deregulation’ from the panel’s final report.”
Instead, the Republican commissioners plan to politicize the report by concluding that “government policy helped inflate the housing bubble and that prices weren’t expected to crash because the government pushed homeownership so aggressively.” Particular blame is to be reserved for Fannie Mae, Freddie Mac, and the Community Reinvestment Act, which have played the part of conservative bogeymen for the financial crisis ever since it struck.
The claim that Fannie, Freddie, and the CRA caused the financial crisis has been so thoroughly debunked that it’s hardly worth going over again. And even the Republican commissioners themselves didn’t always believe the nonsense they’re now selling. As the Roosevelt Institute’s Mike Konczal noted, commissioner Keith Hennessey used some of the banned words on his blog back in October:
Some of these large financial institutions were so big and so interconnected with other institutions, that their failure would create a domino effect. This is what we call “too big to fail”, which should more precisely be called “too big and interconnected to fail suddenly”.
And the commission’s Vice-Chairman Bill Thomas has also pointed to problems on Wall Street:
This was a multifaceted problem, cross-disciplinary, or interdisciplinary, if you will, affecting the government regulators, affecting a product, housing to a very great extent, but other products, Wall Street.
Commissioner Douglas Holtz-Eakin (who, admittedly, tends to allow his opinions to blow with the political winds), defended a pronouncement from his candidate, Sen. John McCain (R-AZ), that “we’re going to put an end to the reckless conduct, corruption and unbridled greed that have caused the crisis on Wall Street”:
“It has never hurt John McCain to tell the truth,” says policy adviser Doug Holtz-Eakin. “He’s running for president to help Main Street, not to be popular on Wall Street.“
Holtz-Eakin also said that Wall Street has “failed us”:
Where do you place your faith? Do you place it in the institutions that have failed us, which quite frankly are in Washington and in Wall Street, or do you put the money in the places where we know we can get effective results?
Holtz-Eakin added in May that something in the shadow banking system “went badly, badly wrong”:
The goal in these two days is not so much to understand Bear Stearns or GE Capital or the other witnesses, but to understand what happened with this set of practices that is referred to as shadow banking. Short term funding for long term investments went badly, badly wrong.
The only Republican commissioner, it seems, who has never allowed the facts to get in the way of his ideology appears to be the American Enterprise Institute’s Peter Wallison.
As CAP’s David Min explained, “because the shadow banking system lacks risk regulation or a liquidity safety net, it is highly susceptible to the bubble-bust cycle that historically plagues unregulated banking systems. This was what we saw during the last credit cycle from 2003 to 2008.” But the Republican commissioners are instead trying to pin the blame for a global financial conflagration on poor people receiving loans they couldn’t afford.