The Financial Crisis Inquiry Commission has seemed like an afterthought for some time now. It was especially telling that Congress didn’t even wait for the board’s findings before passing its financial-overhaul bill. There have been one or two moments that were television-worthy, but overall the group has worked in what can charitably be called a state of benign neglect. Nobody in Washington really wanted anything constructive to come out of this effort.
But the latest episode, in which the board’s four Republican members are publishing their own breakaway findings, really brings the point home that the entire thing has been a waste of time, and that the ultimate cause of the housing/credit/banking crash, while painfully obvious to anybody with an even slightly objective lens, is something that just isn’t talked about down in DC.
The bank-lobby apologists would have you believe it was the CRA, or government policy toward housing via Fannie Mae and Freddie Mac that caused the crisis. That is absolute horse manure. The causes of the crisis were, in no particular order: scuttling Glass-Steagall, not regulating derivatives in 2000, Greenspan cutting the fed funds rate in the early 2000s (ultimately to 1% in 2003) and leaving them low for too long, and the SEC’s decision to take the leverage caps of Wall Street banks in if memory serves correct 2005. Those are the four biggies, off the top of my head, and three of the four center on a specific philosophy: deregulating the financial system.
The Times reports today that:
The Republican members of the commission appointed by Congress to investigate the causes of the financial crisis plan to release on Wednesday a document that assigns government housing policies substantial blame for the origins of the 2008 financial crisis.
The release of the 13-page document is an indication of a major partisan division within the 10-member , which was required to deliver its report on Dec. 15 but has pushed that deadline back to January.
This is pathetic. These jokers spent more than a year and I don’t know how much money, and in the end they’re no nearer any agreement than the left/right panelists on a Sunday morning talk show. What was the point of this whole exercise? It wasn’t to uncover the truth; that had come tumbling out in the panic of September 2008. Let’s be for real; Congress didn’t need this commission to find the truth. The truth smacked knocked them on their backsides the weekend of Sept. 12, 2008.
What it needed the commission for was to whitewash the truth, because the people who pay the bills in Washington (incidentally and largely the same people responsible for the crisis) want no part of the truth. They want business as usual.
This was never going to be a modern Pecora Commission. But it didn’t have to devolve into a total joke. Yves Smith over at naked capitalism goes pretty apoplectic over it, and rightly so:
The intent is pretty transparent: to discredit an effort at fact finding into the roots of the crisis, what was hoped to be a Pecora Commission, by making it appear partisan and launching an alternative narrative to muddy the waters. And the reason is clear. Even though FCIC is certain not to have the same effect that the Pecora Commission did, of discrediting major financial services industry figures and exposing various forms of chicanery, it appears that even lesser forms of criticism of the banksters must be sandbagged (the bizarre part of this drama is that at least some Democrats and very selectively, Republicans in office are willing to call out the predatory, extractive behavior of the large banks. But no one has the guts to buck an industry that is a major paymaster in a very serious way.)
This whole line of thinking is garbage, the financial policy equivalent of arguing that the sun revolves around the earth. Yes, the US and other countries provide overly generous subsidies to housing, and curtailing them over time would not be a bad idea. But that’s been our policy for decades. Calling that a major, let alone primary, cause of the crisis, is simply a highly coded “blame the poor” strategy, In reality, both the runup to the crisis and its aftermath were on of the greatest wealth transfers from the citizenry at large to a comparatively small group of rentiers in the history of man.