Back in August of 2007, we looked at the The Ongoing Impact of the Housing Sector.
At the time, I had assigned blame for all of the problems in the credit market to a variety of institutions and people. The blame went as follows:
* Federal Reserve [FOMC]
* Mortgage brokers
* Federal Government
* Fannie Mae (FNM)
* Lending banks
* Wall Street firms
* CDO Managers
* Credit agencies
* Hedge funds
* Institutional Investors (pensions, insurance firms, banks, etc.)
* And back to the regulatory role of the Federal Reserve
Wednesday's WSJ has a front page article looking at the same issue: Housing Bust Fuels Blame Game. However, they assess blame somewhat differently, with a bit of a political slant:
Democrats are quick to blame Republicans, who were in power during the housing bubble and subprime lending frenzy. For years, America's leaders failed to restrain the markets, companies, investors and consumers from the missteps that led to the most pervasive financial crisis in decades.
But in hindsight, the failure stretches across government and across party lines. At bottom are two strong currents. From the Republican president to urban Democratic congressmen, homeownership was pushed as an overriding and unquestioned goal. And many significant attempts at regulation were obstructed by the prevailing belief that the economy did best when financial markets operated as freely as possible.
While the headline writer tries to call this a "Bipartisan Failure," the bulk of the actual article is less kind to the GOP. The Journal blamed:
* The Bush administration for cheerleading homeownership and pressuring government-sponsored mortgage lenders Fannie Mae and Freddie Mac (FRE) to provide funding for riskier mortgages.
* Congress for allowing Fannie and Freddie to invest heavily in securities backed by subprime loans.
* While Democratic congressmen pushed federal law to restrain sub-prime lending practices, Republicans (with some Democratic allies) blocked or countered with weaker versions;
* Federal Reserve Chairman Alan Greenspan, revered for not using the Fed's authority to more aggressively regulate lender behavior.
* California -- where the country's subprime lenders where -- saw Democratic state lawmakers refusing to impose tougher regulations on a prized local industry.
Perhaps it's bias on my part, but that list looks a little one sided to me...
graphic courtesy of the WSJ
Housing Bust Fuels Blame Game
Democrats Seize On Opponents' Role;
GREG IP, JAMES R. HAGERTY and JONATHAN KARP
WSJ, February 27, 2008; Page A1
Formula for a Housing Bust
A White House push to encourage higher levels of home ownership and oversight failures at all levels of government appear in hindsight to have spawned the current housing crisis. (See related article.)