One of the enduring precepts of politics is that one should never argue with someone who buys ink by the barrel. But thanks to the Internet, Joe Nocera’s attack in Saturday’s New York Times will get a response which, with luck, will receive as much attention as the attack itself.
The ostensible subject of Nocera’s article was a 13 page “primer” issued by the four Republican members of the Financial Crisis Inquiry Commission, the congressionally appointed commission that was supposed to look into the causes of the financial crisis and report to Congress, the President and the American people. The Commission, which is made up of six Democrats and four Republicans, has been working for about 15 months, and is now in the process of preparing its report, which should be available in mid-January.
The primer that I and three of my Republican colleagues signed sought to outline the major issues that we thought the Commission should address. It was not a reply to or a dissent from the report of the Democratic majority, which is still a work in progress. It was issued on December 15 because that was the date on which, under the law that established the Commission, its report was supposed to be issued, and the primer was released in recognition of this statutory deadline. It is now being used by the left to attack us as partisans for dissenting from the Commission’s report even before the report has been issued. Nocera’s article is an example of such treatment.
But Nocera also used his article to attack me personally, and it is to that attack that I am replying in this post.
First, the internal contradictions in the Nocera article. He ridicules the primer as a “presponse,” a dissent from the Commission’s report before it was even published. Then he proceeds with a “presponse” of his own—attacking me for what he assumes is my position on the causes of the financial crisis. So Nocera is guilty of exactly the fault he has indicted in others. In reality, what I will say in connection with the release of the Commission’s report will be quite different from what Nocera attributes to me.
Then, he describes the views in the primer as “dogma”—by which he means opinions based on ideology rather than facts. But in our conversation as he was writing this article, he told me that his reporting “has shown that Fannie Mae and Freddie Mac simply followed Wall Street” into buying subprime and other risky loans. I told him this was wrong—that as part of the Commission’s work I have seen internal documents from Fannie and Freddie that show this particular mantra of the left to be a myth. For a reporter, that would have been a signal to hold his fire—a warning that there were facts out there of which he was unaware. I was telling him he should wait and see what I might write in connection with the Commission’s report. But he repeated his own dogma immediately thereafter. In buying all those subprime mortgages, he said, “Fannie and Freddie were reacting to the realities of the market, not to the government.”
All this brings me to the one fact which formed the heart of his attack on me. He notes that I have long been a critic of Fannie Mae and Freddie Mac, and praises me for that. Then he quotes from something I wrote six years ago to the effect that Fannie and Freddie, despite the benefits they received from the government “have failed to lead the private market in assisting the development and financing of affordable housing.” This is true. At the time, I, like virtually all the other critics of Fannie and Freddie, thought that their major risk was interest rate risk, resulting from their holding portfolios of mortgages with a value of more than $1.5 trillion. I could not imagine that as a result of their affordable housing requirements they would actually be taking the enormous credit risks that finally drove them into insolvency.
I discovered this in financial data that Fannie and Freddie began to publish for the first time after they were taken over by the government, and it was confirmed in documents that the Commission sought and received from Fannie Mae. Under these circumstances, I can only respond to Nocera with a riposte attributed to John Maynard Keynes: “When the facts change, sir, I change my opinion. What do you do?” Well, we’ll see.