Take That You Scallywags!!

This past week was great for those of us who believe that for years the Right has dominated the headlines with specious attacks on Fannie Mae and its affordable housing investments. With no choreographed coordination, a series of high profile push backs appeared in the past several days.

Gretchen Morgenson’s book, excoriating former Fannie Chairman and CEO Jim Johnson, was the most recent major anti-GSE diatribe, while happy talk reviews of Morgenson’s screed (see George Will) just added to the bull pucky.

Of course much in Morgenson’s book repeats the themes of Peter Wallison and Ed Pinto, erstwhile American Enterprise Institute “researchers,” who have suggested that Fannie Mae feasted on subprime and poor quality loans in the 1990’s—when Johnson was Fannie’s Chairman—and those investments precipitated the domestic and international financial meltdowns three years ago.

(The AEI cabal continues to ignore the fact that a variety of government reports, including from the SEC and the company’s regulator, show how well those loans performed and what few losses they generated. The Fed could well be part of this list of “rejecters” but their memo on this subject still is not public, although it has been shared with Congress and discussed in the media.)

This week's sharp rebukes to the AEI suggestions came from a variety of sources, including researcher David Min, Nobel Prize winner Paul Krugman, Bob Kuttner, and folks writing about the Morgenson work in the New York Times Review of Books*. (*Corrected from original blog, see "Comments.")

Another liklely damaging rebuttal of AEI reportedly was a special report from the Federal Reserve—sought by the President’s Financial Crisis Inquiry Commission several months ago—which some media claim specifically rebutted the Wallison/Pinto work on which most of the GOP and right wing assaults on Fannie (and Freddie) rest.

Everything but the Fed report is public and the links to the others all appear below.

Read these writings and see if you think that Fannie Mae, in the 1990’s and early 2000’s, engaged in the shady business which the AEI and their fellow conservative travelers claim?

Now, before anyone runs off and misinterprets what I’ve just written, I am referring to the AEI, Wallison Pinto, WSJ, and Morgenson collected aspersions on the pre-2004 Fannie Mae.

Fannie Mae and Freddie Mac screwed up royally when they bought the Wall Street private label subprime poison in the early 2000’s and I’ve written that several times in this blog.

But, don’t conflate the two eras as Fannie’s (and Freddie's) business and political foes seek to do.



Here is David Min’s superb and substantive rejection of the AEL line.

http://www.ritholtz.com/blog/2011/07/why-wallison-is-wrong-about-the-genesis-of-the-u-s-housing-crisis/

Bob Kuttner in the American Prospect.

http://prospect.org/cs/articles?article=fanniebackwards

Here is Paul Krugman’s work in the NYT.

http://krugman.blogs.nytimes.com/2011/07/14/fannie-freddie-phooey/?partner=bloomberg

Here is a review of the Morgenson book on the New York Times Book Review blog.

http://www.nybooks.com/blogs/nyrblog/2011/jul/13/why-fannie-and-freddie-are-not-blame-crisis/


Here is a Huffington Post link, which contains the most detailed description of what reportedly was in the Fed memo sent to the FCIC, as well as Wallison’s admission to leaking it to Pinto. (It’s amusing to me that the bogus research—which Wallison utilized heavily before it started getting criticized—suddenly is descried by Peter as “Pinto’s work.”

http://www.huffingtonpost.com/2011/07/13/financial-crisis-panel-leaks-lobbyists_n_897186.html


Wallison “Spooked?”

I guess all of this noise has worried the AEI gurus, since Peter Wallison is up today on the AEI website with a very, very defensive charge that his views were all but ignored, while the FCIC tried to shift all of the mortgage blame to Wall Street. Hardly.

Once again, Peter is prevaricating, since Fannie and Freddie and other government programs came in for FCIC criticism, just not the exclusive blame as Wallison, Pinto, and Morgenson have sought to do.

Compare the FCIC’s balanced verdict with the Commission’s “minority views” which refused to mention the phrase “Wall Street,” in discussing the mess.

I guess those billions and billions of dollars of “private label subprime securities”—which by definition avoided the higher F/F underwriting demands, ergo the name “subprime,” just immaculate conceptioned themselves!!


Maloni, 7-17-2011