(By Bruce Schmiechen, cross-posted at Titanic Sails At Dawn)
David Brooks wrote another of those “David Brooks columns” on Friday. Citing a recent book on the financial crisis, he targets Fannie Mae as “a cancer that helped spread risky behavior and low standards across the housing industry.” Brooks notes portentiously, “We all know what happened next.”
Yes, Fannie Mae and Freddie Mac are examples of government agencies that acted irresponsibly and were co-opted by the financial industry. And, yes, “we all know” there was a financial crisis in 2008 triggered by the mortgage meltdown.
But the notion – or even implication – that Fannie Mae was the “cancer” underlying the industry’s “risky behavior and low standards” is a right-wing talking point that is so misleading and misdirected that it constitutes a Big Lie. It’s provenance – desperation on the part of the right to blame government rather than markets for the greatest market failure in recent memory – is no mystery. “Conservatives” need to implicate government rather than under-regulation and and the voracious market velocity of the industry itself.
Dean Baker at Center for Economic and Policy Research responded definitively to Brooks:
“Night is day,” “slavery is freedom,” okay David Brooks edited those lines out of his column on Fannie Mae today, but this is pretty much how the rest of it reads. He tells us that the economic crisis was the result of Fannie Mae pushing bad mortgages and buying off everyone who tried to stand in their way.
There’s a small problem in this story. The worst junk mortgages that inflated the housing bubble to extraordinary levels were not bought and securitized by Fannie and Freddie, they were securitized by Citigroup, Merrill Lynch, Goldman Sachs, Lehman and the other private investment banks. These investment banks gobbled up the worst subprime and Alt-A garbage that sleaze operations like Ameriquest and Countrywide pushed on homebuyers.
The trillions of dollars that the geniuses at the private investment banks funneled into the housing market were the force that inflated the bubble to its 2006 peaks. Fannie and Freddie were followers in this story, jumping into the subprime and Alt-A market in 2005 to try to maintain market share. They were not the leaders.
Fannie and Freddie were not legally allowed to engage in the junk mortgage excesses until 2005 – and they followed the big players into that market because it had already grown so large. The impetus for the government-backed agencies to jump into this market – a market created by willingness of big investment banks to “securitize” junk mortgages – came directly from then-President Bush’s HUD authorities, who directed Fannie and Freddie to increase their share of the overall “affordable” loan business, even as regulators were beginning to raise some warnings about the bad loans.
Brooks fails to mention anyone related to the banking industry or the Bush administration in spreading this “cancer” throughout the housing industry. But somehow he targets Barney Frank, a member of the Congressional minority at the time, as well as ACORN (!) as major players. This column is indicative of the “David Brooks problem.”
The fact that a voice on the Right such as Brooks isn’t as crazy as Michele Bachmann or Glenn Beck wins him a certain admiration among moderates and even many liberals. His apparent legitimacy in countering the obviously shrill voices that tend to marginalize the Right allows him to shill sotto voce in the terrain of the New York Times. That Brooks plays his high-profile hand with a large measure of “bland” doesn’t mean he’s a deep thinker or even particularly honest in his offerings.
Update: Jonathan Bernstein at WaPo “Plumline” offers this:
(I)n Brooks’ fairy tale, you can blame it all on the House minority party, ACORN, and other bystanders like the Congressional Black Caucus. Surely as influential a commentator as Brooks knows that Washington just doesn’t work this way. Brooks knows better.
One would hope…
Note: Read Dean Baker’s entire response to Brooks HERE. It’s a deeper look at the evolution of the crisis – which Baker saw brewing in 2002 – and useful for more than the take-down of Brooks’ misleading musings.