Krugman is warning us that another Whitewash is underway ...
Wall Street Whitewash
By Paul Krugman, NYTimes.com - Dec 16, 2010
The bipartisan Financial Crisis Inquiry Commission was established by law to "examine the causes, domestic and global, of the current financial and economic crisis in the United States."
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Last week, reports Shahien Nasiripour of The Huffington Post, all four Republicans on the commission voted to exclude the following terms from the report: "deregulation," "shadow banking," "interconnection," and, yes, "Wall Street."
When Democratic members refused to go along with this insistence that the story of Hamlet be told without the prince, the Republicans went ahead and issued their own report, which did, indeed, avoid using any of the banned terms.
But just because the Dems didn't fall in line with GOP's Tale of Banking Misfortune --
It does not mean that their Economic Crisis Report will tell the full story either.
Of course to the GOP -- Unchecked Greed and Unwatched Derivatives had nothing to do with it (the Housing Bubble Collapse of 2008).
No, it's all the Govt's fault -- specifically the fault of Freddie and Fannie -- and its bleeding heart programs, designed to promote Home-ownership.
Financial Crisis Panel In Turmoil As Republicans Defect; Plan To Blame Government For Crisis
Shahien Nasiripour, huffingtonpost.com Dec 15, 2010
The four Republicans appointed to the commission investigating the root causes of the financial crisis plan to bypass the bipartisan panel and release their own report Wednesday, according to people familiar with the commission's work.
The Republicans, led by the commission's vice chairman, former congressman and chair of the House Ways and Means Committee Bill Thomas, will likely focus their report on the explosive growth of subprime mortgages and the heavy role played by the federal government in pushing mortgage giants Fannie Mae and Freddie Mac to purchase and insure them. They'll also likely focus on the Community Reinvestment Act, a 1977 law that encourages banks to lend to underserved communities, these people said.
The Republicans' report is expected to conclude that government policy helped inflate the housing bubble and that prices weren't expected to crash because the government pushed homeownership so aggressively. They say that the report will note that once the bubble burst, a financial panic followed because firms weren't adequately prepared.
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During a private commission meeting last week, all four Republicans voted in favor of banning the phrases "Wall Street" and "shadow banking" and the words "interconnection" and "deregulation" from the panel's final report, according to a person familiar with the matter and confirmed by Brooksley E. Born, one of the six commissioners who voted against the proposal.
Brooksley Born confirms the GOP coverup whitewash and the censorship of certain key words.
And according to the actual GOP Report itself -- the Republican Commissioners are using the trick equating Freddie and Fannie with unrestrained activities of Hedge Funds ... and then they excuse the Credit Rating Agencies' enabling as simply "being naive".
Republican members of crisis commission blame government in separate report
By Peter Schroeder, thehill.com - 12/15/10
The 13-page document largely blames government policies aimed at expanding homeownership for driving Fannie and Freddie to take on excessive risk with the implicit backing of the American taxpayer.
"Subsidizing mortgages through the GSEs [government-sponsored enterprises] was a particularly politically expedient way to increase the homeownership rate," they wrote in the report. "The government, in effect, encouraged the GSEs to run two enormous monoline hedge funds that invested exclusively in mortgages and were implicitly backed by the U.S. taxpayer."
The report also said that private financial institutions and credit rating agencies failed to appreciate the developing risk in the housing sector.
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The Republican members delivered their report on the date the FCIC's official report was originally due to the president. In November, the commission decided, by a 6-4 partisan vote, to delay delivering its findings until January. In a statement announcing the delay, the commission said it needed more time to craft a report that "best serves the public interest and fully informs the president, the Congress and the American people."
I hope before the President decides to take the GOP's version of facts at face value -- he takes a few moments to read the critique by Paul Krugman, even if he is a liberal. Nobel Prize winners deserve to be heard.
Back to Krugman ...
Wall Street Whitewash
By Paul Krugman, NYTimes.com - Dec 16, 2010
In the world according to the G.O.P. commissioners, it’s all the fault of government do-gooders, who used various levers -- especially Fannie Mae and Freddie Mac, the government-sponsored loan-guarantee agencies -- to promote loans to low-income borrowers. Wall Street -- I mean, the private sector -- erred only to the extent that it got suckered into going along with this government-created bubble.
It’s hard to overstate how wrongheaded all of this is. For one thing, as I’ve already noted, the housing bubble was international -- and Fannie and Freddie weren’t guaranteeing mortgages in Latvia. Nor were they guaranteeing loans in commercial real estate, which also experienced a huge bubble.
Beyond that, the timing shows that private players weren’t suckered into a government-created bubble. It was the other way around. During the peak years of housing inflation, Fannie and Freddie were pushed to the sidelines; they only got into dubious lending late in the game, as they tried to regain market share.
But the G.O.P. commissioners are just doing their job, which is to sustain the conservative narrative. And a narrative that absolves the banks of any wrongdoing, that places all the blame on meddling politicians, is especially important now that Republicans are about to take over the House.
Krugman's Bullet Points for Deconstructing the GOP's Govt Blame Game:
* The Housing bubble was international, which Fannie Mae and Freddie Mac had nothing to do with
* During the peak years of housing inflation, Fannie and Freddie were pushed to the sidelines
And about the GOP Commissioners primal fear of these four phrases:
"Wall Street", "Shadow Banking", "Interconnection" and "Deregulation" ...
* Wall Street -- They only created the Mortgage Derivative Instruments -- they did not force any one to bet on them.
* Shadow Banking -- They only funded the Eazy Re-fi Credit, and Sub-prime Loan Booms -- they did not force any one to take part.
* Interconnection -- the fact that Investment Banks and Wall Street firms regularly re-assign Investment Risks, like monopoly money -- does not mean that all their AIG-like Counter-Party bets are a House of Cards.
* Deregulation -- the fact that Deregulation allowed the Crisis to happen, and accelerated its magnitude -- does not mean that more Regulations on Investment Banks and Wall Street is the right solution.
At least that's what the GOP Members of the Commission want you to believe, that is if you are predisposed to accepting the GOP version of History, which has been the "pragmatic" thing to do, of late.