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.


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Comments [15]

Gaetano Catelli from Oxford, Mississippi

Good, balanced segment, Brian.

Dec. 16 2010 05:07 PM
Eugenia Renskoff from Brooklyn

Hi, Brian, I am one of those people who did not gain by the mortgage crisis. In fact, I lost a lot—my very good credit, my savings, and finally my home in Atlanta, GA. I feel and will always feel that those of us who have gone through this terrible ordeal deserve to get our money back and testify before Congress. Eugenia Renskoff

Dec. 16 2010 01:28 PM
Dr. Goose from New York

"The truth is unsparingly ugly:
That mortgage-backed bonds became bubbly,
Thanks to Wall Street's big guys
Who would securitize
The same mortgages triply or doubly."

"The real estate market was screamin' out:
'We must cast the government demon out!
We'd have steadily grown
If they'd left us alone,
Except when they didn't bail Lehman out.'"

Dec. 16 2010 11:04 AM
Longstreet from NYC area

All eyes on Ron Paul's sub-committee next year. He authored End the Fed and is now going to have oversight of the Fed. [That is, if the lame duck Congress lets him. Since the implementation of the new rules of engagement (the Pelosi process), we have to first enact the laws to tell everyone what's in them. Maybe we'll learn that Dr. Paul's committee was eliminated.]

Dec. 16 2010 11:01 AM
Jeff Pappas from Ct.

Thanks asdf

Dec. 16 2010 10:29 AM
jgarbuz from Queens

Soviet-style historical revisionism is not dead. Nor is totally laissez faire thinking. However, it is true that economies are self-correcting, if you allow enough people to starve to death in the interim.

Dec. 16 2010 10:23 AM
Jeff Pappas from Ct.

Yes again my proposal for a" Factionary "
Both the Republicans and Advertisers in general twist facts and essentially LIE.
Why can't there be TRUTH ? Especially for the God fearing set, I dare say Your God forbids bearing false witness !!!

Dec. 16 2010 10:22 AM
3rd rail apparently

what about the %^$#$ id$ots who, rather than saying "too expensive" said "ah what the heck"

Dec. 16 2010 10:20 AM
Antonio from Westfield, NJ

Chicken before the egg conundrum. One can state that "Wall Street" affected the government to move policy that led them down the road to ruin.

Dec. 16 2010 10:19 AM

It's going to be an interesting 2 years with Republican thinking responsible for so many major decisions. Not only are they operating under their own opinions -- they are truly operating with their own facts.

Dec. 16 2010 10:16 AM
Ken from Little Neck

What is really distressing to me is my complete lack of surprise. The republicans on the panel have decided that their ideology trumps the facts of the case, and that's completely in line with what they've been doing for years.

Dec. 16 2010 10:14 AM

google your own question jeff pappas from ct

-- it's answered directly in the second entry.

ps we should all know this basic info by now assuming you are from the us or invest here.

Dec. 16 2010 10:12 AM
Susan from New York

Spare me. The Republicans will always denied that their policies are the ones that lead to how Wall Street did and continues to rob us blind.

Dec. 16 2010 10:12 AM

Hang on a second... if the Republicans are blaming government for the lead up to the meltdown, aren't they effectively blaming themselves and the Bush administration?

(Yes, I'm intentionally ignoring the "language control" issue)

Dec. 16 2010 10:08 AM
Jeff Pappas from Ct.

I heard that the Federal Reserve is actually Not part of our Government but a stand alone Entity ?
Can your guest please answer this, and if its not part then what is it and what sort of loop hole is this?

Dec. 16 2010 10:05 AM

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