Blogs > Liberty and Power > Be Wary of the Center for Public Integrity Report

Aug 16, 2009 3:18 pm


Be Wary of the Center for Public Integrity Report



Mark, don’t confuse cause and effect. The federal government opened the door of “opportunity” and the banks walked through it. That doesn’t excuse the banks for what they did, but they were responding to incentives that the federal government provided.

The federal government pressured banks to lend money to unqualified homebuyers. The federal government backed Fannie Mae and Freddie Mac, which bought up those home loans, making them essentially risk-free for the original lenders.

The Federal Reserve made money readily available. (On these pages, there has been some dispute about that, but the disagreement reflects the time period under discussion; I don’t think there is any doubt that from 2002 to 2004, under Greenspan, the Federal Reserve increased the money supply, and some would say to an extreme degree.)

The Center for Public Integrity is taking a selective look backward to see who offered subprime mortgages and whether they were the same companies that accepted TARP funds. That's almost tautological.

You will recall that Henry Paulson brought the leading banks into his office and told them that they had to accept funds from the federal government before they could leave the room.

I welcome any improvements on this chronology.

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Jane S. Shaw - 5/8/2009

Maybe I did miss the point. My general view is that when lobbying has the potential for success, it will occur, whatever the price (within some extraordinary limits).

If you're saying they were stupid and sleazy, I probably agree, but the crime was not to let them fail. And that's a government crime.


Mark Brady - 5/7/2009

That's all very well, and I'm not looking to correct your chronology of events. However, as far as I can tell, you haven't addressed the argument that banks and other mortgage lenders who made reckless loans to subprime borrowers lobbied to the tune of $370m to keep federal regulation at bay, and that, if true, this makes them somewhat less than the victims of state intervention. It thus casts doubt on the narrative that free market commentators have told.

And no, I’m not a fan of the Center for Public Integrity and, no, I’m not saying that therefore the banks should have been regulated.