Moreover, the fact that he didn’t list Greenspan’s control of rates as part of the bundle of policy problems doesn’t indicate he thinks they weren’t a problem. His piece was about fixing policy, and there’s not much you an (realistically) do to legislate the Fed’s discretionary interest rate choices, right?

And give me a break about the grand theft characterization of Goldman collecting on its swaps. Seriously. That people line up with pitchforks to agree doesn’t make that less ridiculous.

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BR: Does Correlation vs Causation mean anything to you ?

If macro choices were half as simple as writings like this pretend they are, every corner of the globe wouldn’t have experienced a serious recession in the last 20 years.

http://www.bloomberg.com/news/2010-06-13/fannie-freddie-fix-expands-to-160-billion-with-worst-case-at-1-trillion.html

The question is: What was the impact of those 6 trillion dollars on the price of real estate? According to the calculation I have done, that is responsible for a good chunk of the real estate price inflation.

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BR: The data I see says $5.5 trillion; the Bloomberg article you reference uses $5.67T

I agree, a bailout was the least bad option. What I cannot forgive is the way they bailed companies out. It should have been “we save your sorry a$$es but then we own you – from now on you are our bi…..”. You can save companies and institutions without saving their owners, loaners and leadership. Why were the financial institutions not saved the same way Obama saved the auto-industry. Was it the fear of being accused of Sociali$m? I say that if that tough a$$ free market ideology of yours is about to throw you into the abyss, then be a man and give it up for real, not half a$$ed.

Just for fun I checked what Raghuram Rajan actually says about the CRA in his book. Anwer? Not much. The CRA is mentioned a total of 5 times in a 260 page book and the references are not profound.

Of course, RR does have a lot to say about the overall role of public policy. I quote

“By 2000, HUD required that low-income loans make up 50 percent of Fannie and Freddie’s portfolios. Out of “compassionate conservatism,” perhaps, the Bush administration raised that mandate to 56 percent. Rajan cites Fannie Mae’s former chief credit officer, Edward Pinto, who notes that, by 2008, “the FHA and various other government programs were exposed to about $2.7 trillion in subprime and Alt-A loans, approximately 59 percent of total loans to these categories.” Peter Wallison of the American Enterprise Institute found that government-mandated loans accounted for two-thirds of “junk mortgages.””

You don’t have to trust the AEI to see that these are big numbers. 59% doesn’t make F&F, the FHA, etc. solely responsible for the bubble/crash. However, it doesn’t exculpate them either.

A key problem here is blind, naked, partisanship. People seem convinced that either public policy (of which the CRA was one minor element) is exclusively to blame for the crisis or wholly innocent. Isn’t anyone here capable or recognizing the notion of ‘multiple contributing factors’? Is that so hard?

We have the folks on the right either blaming the CRA+F&F or more subtly blaming the Fed for keeping interest rates too low for too long (notably John Taylor). If know that BR subscribes to the same theory and he is not ‘on the right’. However, this is a (mostly) right wing talking point.

On the left we have the greedy banksters and their corrupt allies in Washington.

“I keep asking those of you who espouse this view to prove it, with facts and data and actual evidence, rather than squishy theory and talking points. The deafening silence speaks volumes . . .”

OK, no more silence. The purpose of what follows is not to ‘prove’ that public policy (of which F&F and the CRA were only a part) caused the bubble and crash, but to demonstrate that public policy (which included much more than F&F and the CRA) did play a role. See http://bit.ly/c7oAgb. A few quotes.

“Thus, in a 2004 address to home builders, Bush called for the Federal Housing Administration to issue zero down payment mortgages in order to aid 150,000 first-time buyers per year, saying,

To build an ownership society, we’ll help even more Americans to buy homes. Some families are more than able to pay a mortgage but just don’t have the savings to put money down.”

At the time, this person called ‘Bush’ was the President of the United States.

” Yet the political agenda triumphed—with the president of the Boston Fed saying no new studies were needed, and the US comptroller of the currency seconding the motion.

No sooner had the ink dried on its discrimination study than the Boston Fed, clearly speaking for the entire Fed, produced a manual for mortgage lenders stating that: ‘discrimination may be observed when a lender’s underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower-income minority applicants.’

Liebowitz asked:

Some of these ‘outdated’ criteria included the size of the mortgage payment relative to income, credit history, savings history and income verification. Instead, the Boston Fed ruled that participation in a credit-counseling program should be taken as evidence of an applicant’s ability to manage debt.”

The above notes are from “Insight on the News reported – 1999″

“The Bush Administration announced on June 17, 2002:

Today, President Bush announced a new goal to help increase the number of minority homeowners by at least 5.5 million before the end of the decade… The President also issued ‘America’s Homeownership Challenge’ to the real estate and mortgage finance industries to join in his effort to increase the number of minority homeowners by taking concrete steps to tear down the barriers to homeownership that face minority families.”

That’s the same ‘Bush’ we found earlier.

“MSNBC reported in a March 27, 2004, article subtitled “President wants to add new minority home owners:”

He also proposes to make zero down-payment loans available to first-time buyers whose mortgages are guaranteed by the Federal Housing Administration.

The Washington Post reported on June 10, 2008, in “How HUD Mortgage Policy Fed the Crisis:”

In 2004, as regulators warned that subprime lenders were saddling borrowers with mortgages they could not afford, the U.S. Department of Housing and Urban Development helped fuel more of that risky lending. Eager to put more low-income and minority families into their own homes, the agency required that two government-chartered mortgage finance firms purchase far more ‘affordable’ loans made to these borrowers. … Housing experts and some congressional leaders now view those decisions as mistakes that contributed to an escalation of subprime lending that is roiling the U.S. economy.”

That’s the WaPo, not the dastardly Raghuram Rajan.

Read the entire article. Note that the author does not blame public policy for the bubble/crash. He states that it was ‘one factor’.

It’s barbaric ( and powerfully effective, to boot).