Crisis Within the FCIC and the Meltdown Blame Game
Thursday, December 16, 2010
Welcome to Politics Bites, where every afternoon at It's A Free Country, we bring you the unmissable quotes from political conversations on WNYC. On today's Brian Lehrer Show, Financial journalist and contributor to New York Times Dealbook Heidi Moore talks about how the federal Financial Crisis Inquiry Commission is fragmenting along partisan lines.
In nine harsh pages, the GOP members of the "bipartisan" FCIC commission laid out their argument on Wednesday that government is entirely to blame for the financial collapse and the Great Recession—and Wall Street had no part in it.
The members even voted to ban the use of the words "Wall Street," "shadow banking system," "interconnected" and "deregulation" from their version of history. They blame the government for starting Fannie Mae and Freddie Mac and creating lower capital standards for banks that encourage lending, and they blame the government for not saving Lehman Brothers. On the Brian Lehrer Show, Heidi Moore summed it up:
Really, the government can't win on either side, because they say the government was too interventionist, and then it was not interventionist enough in the case of Lehman.
Moore thinks any hope that the FCIC Commission would harken back to the legacy of the Pecora Commission that investigated the causes of the Great Depression seems lost. Pecora led to many reforms, including the creation of the Securities and Exchange Commission. But this report demonstrates that consensus on how to read the text of history is officially a casuality of our hyper-partisan era. Moore says that's unfortunate, because everyone was in it together.
Reasonable minds can disagree but there are some facts that we can all agree on. Which is that all the way up the mortgage structure people benefitted, either from making money on properties or from fees, or from interest rate arbitrage, as in the case of Fannie and Freddie. So if everyone benefitted, you really can't exclude anyone from blame.
This isn't about blaming the Obama administration. Moore says that the problems stem all the way back to the Clinton administration, from something that was considered a virtue: affordable housing for all.
And due to economic reasons and bubble reasons, that metasticized, that just grew out of control. But you can't necessarily blame a single administration because the growth was over such a long period and was so participatory.
What was the motivation behind this rogue report? Moore says the GOP has been angry for years about the government's creation of Fannie and Freddie, and this might be their way of getting that off their chests.
And the blame game goes on.