Not their hybrid structure, nor hostile market conditions. The failure of the housing giants Fannie Mae and Freddie Mac was the result of human beings, a failure of leadership.
So said the man charged with regulating the two government-sponsored enterprises from 1999 to 2005 under what he describes as most adverse conditions.
Armando Falcon, who led the one-time little known regulatory agency with the awkward acronym, Ofheo, didn’t mince words with the bipartisan panel that’s supposed to make sense of what led us into this credit crisis and follow-up deep recession.
“Their failure was deeply rooted in a culture of arrogance and greed. I should be clear that this was a failure of leadership,” wrote Falcon in testimony prepared for delivery today to the Financial Crisis Inquiry Commission.
(Ofheo stands for Office of Federal Housing Enterprise Oversight.)
He said the two mortgage giants’ political might, in an era before they had to be bailed out by the federal government, subjected his underfunded and underpowered agency to constant “malicious political attacks and efforts of intimidation.”
According to Falcon, he and his regulatory colleagues were facing off not only against political power, but power teamed with greed.
“While all of this political power satisfied the egos of Fannie and Freddie executives, it ultimately served one primary purpose: the speedy accumulation of personal wealth by any means,” Falcon wrote.
His testimony constitutes a particular viewpoint on a very sad chapter of American economic history.