Economics

Phil Angelides’s False Narrative

Phil Angelides’s recent op-ed in the Washington Post contained one true statement: “the winners get to write history.” So the Democrats, who won control of Congress in 2008, got to appoint Angelides to write the history of the financial crisis that they wanted. In his “history”—written as the chairman of the Financial Crisis Inquiry Commission—the contributions of Fannie Mae and Freddie Mac to the financial crisis were “only marginal,” and Fannie and Freddie followed Wall Street into subprime lending.

He almost got away with it. By limiting the pages available for dissent in the widely circulated commercial version of his commission’s report and ignoring the contrary evidence that only made it into my full dissent, he had succeeded in slipping by any serious challenge.

Then came Reckless Endangerment, a new book on the financial crisis by New York Times business writer Gretchen Morgenson and financial analyst Josh Rosner. In the book, they show that far from being “only marginal” to the financial crisis, the Democratic political operative Jim Johnson turned Fannie Mae into a political machine that created and exploited the government housing policies that were central to the financial crisis and led the way for Wall Street. Indeed in my dissent I show that of the 27 million subprime and other weak mortgages outstanding before the financial crisis struck, more than two-thirds were on the books of government agencies or entities controlled by the government. Less than one-third were attributable to the private sector. The big problem with the Big Lie technique in a free society is that someone, somewhere ultimately gets curious.

Angelides also forgot to mention that the winners also write legislation, and the folks who appointed him to write their history also got to write the Dodd-Frank Act. In fact, the legislation was named after Chris Dodd and Barney Frank, the very legislators who are identified in Reckless Endangerment as the principal congressional protectors of Fannie Mae and the government housing policies it implemented. By odd coincidence, the legislation they wrote—before the Angelides report was even published—was based on the very ideas that Angelides set out in the report. According to this narrative, the financial industry and not the government was responsible for the crisis, so Fannie and Freddie and government policies were left untouched. Instead, the financial industry was now to be controlled by the most comprehensive set of regulatory laws since the New Deal. The result has been much like the New Deal itself—a seemingly interminable period of deep recession and incurable unemployment.

Let’s hope that the next election does for government regulatory policies what Reckless Endangerment did to Angelides’s false narrative.

8 thoughts on “Phil Angelides’s False Narrative

  1. Wallison just won’t give up. Here are some facts:

    “Of the 3.9 million loans in serious delinquency as of March, 2009, only 32 percent of seriously delinquent loans were attributable to the federal government, despite the fact that the federal government owned or guaranteed 67 percent of all outstanding mortgages. Conversely, private-label securitization was responsible for 42 percent of all serious delinquencies, despite only generating 13 percent of all outstanding loans. Thus the rate of serious delinquencies for private-label securitization is nearly seven times that for federal government owned or guaranteed mortgages. That’s all you really need to know in judging the veracity of Wallison’s claims.”

    His dissent to the dissent of the Angelides report could not even get the support of the other right-wing Repubs on the committee.

    You can also check out Wallison’s position some years ago when increased home ownership was a goal of the GWB administration:

    http://www.creditwritedowns.com/2011/02/wallison-on-fannie-mae-and-freddie-mac.html

  2. ED,

    Wallison is so right. I was in the biz at ground zero(S FL) and in 2002, fannie was pushing their sub-prime97% LTV and buying all our loans. It was only AFTER Fannie became super aggressive in sub-prime did the Argents, Encore and New Centurys’ come into the market.

    I was there, living it and Wallison is spot on. My question Ed is: were you?

  3. Thank you for including the government’s role in creating this crisis. That aspect was glaringly absent in Angeledis report. Certainly there was plenty of blame for this crisis to go around in both the public and the private sector. I doubt that it would have ever happened if the Clinton administration had not put the Community Reinvestment Act on steroids in their rush to make home ownership affordable to everyone, regardless of their inability to pay for there “unaffordable” sub prime mortgages.

    Angeledis was also the Secretary of the California Treasury when this was going on, as Rick Sperry pointed out in his book, “The Great American Bank Robbery.” He stated, “Angeledis steered billions of dollars in state funds to CRA friendly banks that loaded up with subprime and other risky investments. Then he sank billions more into subprime securites backed by Freddie Mac.He also urged the state’s two biggest pension funds – the California Public Employees Retirement System and the CaliforniaTeachers retirement system – to invest more in the state’s urban communities.” California took a bath suffering huge losses as a result of Angeledis advice. But then he seemed to have escaped blame by leaving office in 2007, the year the crisis broke.

    Angeledis Report and Post article are examples of revisionist history at its worst.

  4. To Ed and Wall Street and the other posters:

    Those are good blog post links, but it seems like partial facts for partial knowledge of those facts (in other words, the very same thing that you’re accusing Wallison of). It seems to me that there are competing facts:

    - 39% of all “seriously” delinquent loans were attributable to Fannie and Freddie, while 42% were attributable to the private-sector securitization. This is so even with the fact that the federal government “backed” 67% of all home loans. So far, so good. And, the 7 times number in terms of delinquencies is interesting, if true.

    - Wallison states that there were 27 million delinquent loans, and the vast majority were all on the government’s balance books.

    It seems to me that what needs to be known is how much Fannie and Freddie distorted the market itself, and whether or not “seriously” delinquent is the relevant standard, or whether the standard is whether all of these delinquencies – whether serious or not – needed to be “bailed out” (because the line of credit, which is government-backing, of Fannie and Freddie, is essentially unlimited, something that exists nowhere else in any other government program, agency, mission – including Iraq and Afghanistan, Libya, Haiti, Social Security, Medicare/Medicaid):
    http://www.washingtonpost.com/wp-dyn/content/article/2009/12/24/AR2009122401588.html

    Now, I’d like more information on the essence of having a Fannie and Freddie at all (bear in mind that they can distort the market AND also get bailed out, apparently indefinitely, each and every time, whereas private housing firms cannot, or, should not).

    Plus, the canard that Wallison was advocating for “affordable housing” is something that’s long been governmental policy since the late 1970s, encompassing all administrations – which includes their spokesmen (and, those spokesmen reply on behalf of the government, and not their own policy prescriptions) and Wallison was one. I don’t take that very seriously, any more than I take the fact that Jay Carney actually believes everything (he certainly has to believe some of what he says, but not all, certainly) he says in the job of being Press Secretary.

    But, I do believe that Mr. Wallison has consistently written about Fannie and Freddie and the danger of its distortions of the market, and those blog posts cited by Mr. Black, Salon, and others. We’re still not getting the “entire story,” and we Americans need that.

    Thanks.

    -

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