Shocked (Not)

Well, the Financial Crisis Inquiry Commission report is in. The collapse of 2008 was caused by:

• Excessive borrowing and risk-taking by households and Wall Street.
• Systemic breaches in accountability and ethics at all levels.
• Corporate Mismanagement, Ineptitude and Greed
• Widespread failures in financial regulation.
• Dramatic breakdowns in corporate governance.
• Policy makers who were ill prepared for the crisis.

The best part, though? The report definitively proves through undeniable facts that Fannie Mae and Freddie Mac  were not the cause of the problem and, in fact, followed Wall Street and the sum prime companies into their maze of greed and insanity.

Of course, this didn't stop Peter Wallison from offering up his lone dissent, described quite eloquently by Joe Nocera in a recent New York Times article.

Or that Peter Wallison, the American Enterprise Institute scholar and the fourth Republican F.C.I.C. commissioner, had already released his own, one-man dissent — a lonely, loony cri de coeur that placed the blame for the financial crisis entirely on Fannie Mae, Freddie Mac and federal home ownership policies, a position so contrary to the facts that even his fellow Republican commissioners did not agree with him.

The commission’s analysis of the role of Fannie Mae and Freddie Mac — a hotly contested battleground — is utterly persuasive. You may recall a few months ago, when I scoffed at Mr. Wallison’s contention that Fannie Mae and Freddie Mac were ground zero for the financial crisis, he told me that he had seen internal documents that would prove him right. His dissent does not deliver the goods. Instead, it is the report itself that is chock-a-block with internal documents conclusively showing that the two government-sponsored entities followed Wall Street and the subprime companies off the cliff, rather than the other way around.

I'm certain that we will continue to hear cries of Fannie/Freddie for years to come. No doubt we will also continue to hear the mouth foaming about  the Community Reinvestment Act as being the problem. Both of these canards are rooted in the anaphylaxis about entitlements and illustrate a clear denial of what caused the problem which is so eloquently detailed in the report.

None of this is anything new to me, of course. I've been saying it for months if not years now. And I don't really hold out much hope, even if Elizabeth Warren does, that the new finreg bill will help. Until there are real consequences for greed (jail and/or liquidation of all assets) and a decided shift in how our country defines success (intrinsically as opposed to extrinsically), we don't be getting anywhere.

I do take heart, though, that Inside Job was nominated for an Academy Award.