If you think that Patrick McHenry's smears against Elisabeth Warren are somehow out of character, you haven't been paying attention. He pulled a similar stunt against the Chairman of the FCIC, Phil Angelides. See excerpts from the transcript below.
Thanks to Mike Konczal, whose blog was picked up by Salon, Paul Krugman and others, more people are aware that FCIC Commissioner Peter Wallison based his dissent on a fraudulent premise. Konczal derides The American Spectator because it failed to perform the most rudimentary level of fact checking, although the same criticism could be lobbed against Bloomberg.com, Bloomberg Law and the editors of Mortgage Banking, which is published by the Mortgage Bankers Association. Anyone who read the FCIC report, or did a five-minute Google check on "FCIC Pinto," could see that Wallison's central claim--that the FCIC ignored the research of Edward Pinto, Wallison's colleague at the American Enterprise Institute--was an audacious lie.
Rep. Barney Frank got to the heart of the matter in open hearings on February 16, 2011, when he questioned FCIC Chair Phil Angelides:
REP. BARNEY FRANK: I do want to begin with one of the accusations, Mr. Angelides, because I'm impressed with what seemed to me frankness and the openness. In Mr. Wallison's dissent from the dissent and the majority, he talks about Mr. Pinto and says that you were not fair to Mr. Pinto's information. Would you respond to that? It's a fairly serious charge.
MR. ANGELIDES: Yes, Mr. Frank.
Let me just quickly -- yes, Mr. Wallison in his dissent said that Mr. Pinto, who is a housing expert, provided information to the commission that was never distributed to the commission, never analyzed and Mr. Pinto's testimony was never taken.
Let me just point out that Mr. Wallison distributed that information to all commissioners -- including members of the housing working group. Our staff met six times in person and by phone with Mr. Pinto and his July interview is posted on our web. The staff undertook an analysis of Mr. Pinto's work and provided that to the commission.
In fact, Mr. Pinto commented on that analysis. And on pages 219 through 221 of the report, you can find a discussion of Fannie Mae, Freddie Mac, Mr. Pinto's analysis, the staff's analysis. And if someone would like to read the staff's analysis of Mr. Pinto's work, it is footnoted -- chapter 11, footnotes 11 and 12 – and posted on the Web. So I'm a little surprised by that.
Angleides' testimony was simple, straightforward and damning. So Rep. Patrick McHenry went on the warpath. He tag-teamed with FCIC Co-Chair Bill Thomas:
REP. PATRICK MCHENRY (R-NC): Thank you, Mr. Chairman.
And, Mr. Angelides, the accusation has been made that -- well, the commission failed to conduct an objective investigation. And so I know you discussed this immediately to Mr. Frank, his question to you, about Edward Pinto's report on housing. And you referenced page 219 to page 221. You're being a bit generous.
I mean, you used three paragraphs to rebut or to explain Mr. Pinto's report. And the crux of what Pinto is saying is that there 49 percent of the mortgages out in 2008 in America were Alt-A or subprime or equivalent to that.
Of these, Pinto counts 11.9 million or 45 percent that were purchased or guaranteed by GSEs. In contrast, the GSEs categorize fewer than 3 million of their loans as subprime or Alt-A.
Did you verify, Mr. Pinto's work?
MR. ANGELIDES: Yes. Let me just say --
REP. MCHENRY: Why is that not included in the report?
MR. ANGELIDES: Well, first of all, it is discussed in the report, and the staff's analysis of Mr. Pinto's work -- full analysis where it's been placed on the Web -- it is Footnote No. 11 and 12 in this chapter.
So you can see -- first of all, everyone can see -- first of all, the staff did an analysis. The staff put together a database of 25 million loans to see how loans purchased and guaranteed by the GSEs performed, how those guaranteed by FHA performed, how those created by Wall Street and other private lenders performed.
And the fact is that we did that analysis and an analysis of Mr. Pinto's work. And here's something that's very important. You can't just lump up those loans together. They perform differentially.
Now, look, the GSEs were a disaster but could I point something out, sir? If you take, for example, loans purchased and guaranteed by the GSEs and versus those created by Wall Street and private lenders, for similar loans to borrowers with FICO scores below -- credit scores below 660, by the end of 2008, the default rate in GSE-guaranteed or purchased loans was 6.3 percent. For the Wall Street or other private firms, it was 28 percent.
REP. MCHENRY: Okay. Reclaiming my time. I certainly appreciate that. I just wanted to point --
MR. ANGELIDES: But the information -- (inaudible) -- fully available.
REP. MCHENRY: Sure. I read that in your report and you outlined that very well.
But the GSEs are saying that it was 3 million. You know, Mr. Pinto is saying it's closer to 12 million that are at these lower quality. Did you analyze the GSE's portfolio?
MR. ANGELIDES: Yes. We did --
REP. MCHENRY: And where is that?
MR. ANGELIDES: I believe we -- the staff analysis is a high- quality staff analysis prepared for the full commission and, again, on the Web. I don't have it handy at this moment.
REP. MCHENRY: Sure. Okay. Well, I've got a brief amount of time.
I will say you two gentlemen are fantastic at filling the time. So I do want to ask short questions here.
Can you give me a specific example, Mr. Angelides, where you changed your mind after doing research, after a lot of input and looking at the facts, where you changed your mind about this financial crisis? Give me an example.
MR. ANGELIDES: Well, for example --
REP. MCHENRY: Is there one?
MR. ANGELIDES: Yeah. I didn't come in with a predisposition about Fannie and Freddie's role and, frankly, I -- which looked at Fannie, their management practices, how they operated -- I was taken aback.
REP. MCHENRY: Is there a preconceived notion that you had that was changed?
MR. ANGELIDES: And you might -- well, the other was that I did not necessarily assume that this crisis was avoidable. But when I looked at all the facts -- because a lot of the narrative is no one saw it coming. What changed my mind was when I saw the full record, for example, of what was before the Federal Reserve, what they knew about predatory lending, what they knew about lending standards from the late 1990s on, yes, I changed my mind and I came to the conclusion that the Federal Reserve fell down badly on the job.
REP. MCHENRY: Reclaiming my time.
Congressman Thomas, look, you know, there's this sort of notion that, you know, you were there just to sort of battle it out; that, you know, that at the end of the day, they were going to go their own path and it was going to be a 6-to-4 vote.
Walk us through this. I mean, at what point did things turn where you realized that you're not going to have a unified narrative because they didn't really care about that?
MR. THOMAS: It, to me, was very difficult from the beginning because I chaired a number of conference committees in my 28 years in the House. And the only way you can get to almost a near-unanimous or unanimous position is, frankly, accommodation and compromise. And there virtually was no real accommodation and compromise. There will be any number of indications where we were able to do this or do that.
I invite you to listen to Peter Wallison in terms of his level of frustration and, frankly, my level of frustration in trying to direct where we might be going in terms of the investigation. This was a top-down structure from day one. He was the chairman, I was the vice chairman. So I tried to deal with it as best I was able to create a broader willingness to share.
Wallison gave himself the last word on The American Enterprise blog. He went after Konczal, Krugman, and David Min of The Center for American Progress. Min, who could not have been more cordial, demolished Wallison's thesis at an AEI conference held two days before the FCIC report was released. Wallison wrote, "There is no end of the deceptions that the Krugmans, Konczals, and Mins will cook up in order to avoid the truth."