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.