The four Republicans on the Financial Crisis Inquiry Commission released their own report Wednesday on the causes of the financial crisis after voting—I kid you not—to ban the words “Wall Street,” “shadow banking,” “interconnection,” and “deregulation” from the main report. Sure enough these words are nowhere to be found in their report.
What can you say about that?
How about calling it “shockingly incomplete,” “a ludicrous distortion,” “simply false,” “utterly dishonest,” “calculatedly incomplete,” “a whitewash,” with “breathtaking conclusions.”
That’s Bethany McLean at Slate on what the Republican commissioners, Bill Thomas, Douglas Holtz-Eakin, Peter Wallison, and Keith Hennessey had to say. Thing is, she’s not being hyperbolic.
Shahien Nasiripour of The Huffington Post was first to report the stunning Orwellianism of the Republican word ban, which is like writing about the origins of the Civil War without “The South,” “slavery,” “nullification,” and “secession.”
The Republican remembers of the Financial Crisis Inquiry Commission want to blame the government for causing the financial crisis. Why? In no small part it’s because they know much of the press is institutionally incapable or unwilling to call them on Big Lies. Or to put it another way:
The Republican report sets up a competing set of narratives for the financial crisis…
and score a few political points themselves.
That’s The Wall Street Journal‘s news story yesterday on the Republicans’ report (It was also headlined “GOP Set to Issue Own Fiscal Report,” which is imprecise at best and misleading at worst).
Reuters’s story goes with this lede:
The panel empowered by Congress to investigate the causes of the 2007-2009 financial crisis is falling prey to the partisan bickering gripping Washington…
The focus by Republicans on the role of government policies that subsidize and push homeownership as a problem stands in contrast to panel Democrats, who at hearings and other public events have pointed to fraud and shady business practices as a major factor in the crisis.
Of these stories, plus ones in the Washington Post, Financial Times, and New York Times, not one points out that the Republicans’ report, or even elements of it, is misleading and/or false.
Which brings us back to McLean’s Slate piece. Naturally, the Republican report places most of the blame for the crisis on Fannie Mae and Freddie Mac (which is wrong). McLean says:
As for the implication that subprime lending began with Fannie and Freddie and resulted from the government’s affordable housing goals, that’s simply false. Subprime lending began in the 1990s with a group of other, nongovernment-affiliated companies more aggressive than Fannie and Freddie that sold the mortgages they made to Wall Street. These mortgages, for the most part, had nothing to do with putting people in homes. They were refinancings, not purchase loans, and they allowed people to use their homes as ATMs. Homeownership was just a convenient fig leaf—albeit one embraced by lenders and politicians alike.
For most of the 1990s, Fannie’s and Freddie’s affordable-housing goals required them to buy a certain percentage of mortgages made to families with a median income level. That was hardly onerous or risky, and anyway Fannie executives, who were far more preoccupied with return to shareholders, used to joke about the ways they neutered the affordable-housing rules. Indeed, there was an odd alliance between housing advocates and right-wing Republicans, both of whom complained—legitimately—that Fannie and Freddie weren’t really doing anything to help homeownership. For Republicans to ignore now those earlier contentions in order to claim that it was the housing goals that gave birth to subprime lending is utterly dishonest.
McLean is writing a column here, but there’s quite a bit in these two paragraphs that a straight-news reporter could or should write (besides the last two words). Isn’t the question of whether a report is accurate or not something news reporters ought to be at least attempting to explore in their stories, especially when there’s plenty of reason to thing that it’s intentionally misleading?
Paul Krugman on that:
Never mind relearning the case for bank regulation; what we learned, instead, is what happens when an ideology backed by vast wealth and immense power confronts inconvenient facts. And the answer is, the facts lose.
It’s hard to come up with a better explanation.
I could quote McLean’s whole piece, but I’ll just go with this last part:
Now, get ready for a few of the primer’s breathtaking conclusions. “Put simply, the risk of a housing collapse was simply not appreciated.” Shit happens. (“Bubbles happen” is, in fact, the first sentence in the report.) How about some exploration of why consumer advocates—who in the 1990s began warning the Federal Reserve and members of Congress that people were getting loans they couldn’t pay back—were ignored? Here’s another genius insight: “The panic ended when confidence returned.” That one inspired me to check the definition of panic (a “sudden overwhelming fear”) to make sure I wasn’t wrong to find this a bit redundant. Daylight appeared when the sun rose. War ended when the armies stopped fighting. Hurt went away when the pain subsided.
That is what we call a beatdown.
Bravo.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.