Whenever I go off on a rant when writing some critical polemic screed, I try not to edit myself. Just get it all out in print, and we can worry about editing down for style and clarity later. That works especially well if you, as a writer, have a some idea of where you want to go and what you want to say with a piece.

It also helps if you work with a top notch editor, and I have been fortunate to work with several: Aaron Task, my editor on Bailout Nation as well as at TheStreet.com; Thom Donlan at Barron’s; and my  editor at the Washington Post, Kelly Johnson.

Its freeing to blather out 2,000 words and let the professionals focus and tighten it up. But every now and again, something interesting ends up on the cutting room floor. In Bailout Nation, a delightfully vicious comment about Greenspan’s relationship with Ayn Rand was edited out (It was so obnoxiously clever I may have to publish it posthumously).

My column for this Sunday’s Washington Post, What Caused the Financial Crisis? The Big Lie Goes Viral, looks at the false crisis narratives pushed by people for various reasons. Its not unusual to see this from the usual suspects, but it is a big surprise when it comes out of NYC’s pragmatic technocrat Mayor Mike Bloomberg.

KJ slashed my blather in half, cutting out the flabby digressions and distractions. The finished piece just hums.

But as I alluded to earlier, some of the more interesting parts got lost in the process. What follows are some of the trimmings from two earlier versions of The Big Lie, none of which made it to the final piece.

First up: The original draft was all over the place, kinda randomly calling out people; the early version had the following text:

Peter Wallison, FCIC member: Before joining the financial commission, Wallison was the Co-Director of co-director of the American Enterprise Institute Financial Deregulation Project. Since the crisis occurred, the AEI changed the project’s name to the more benign “program on financial policy studies.” They also scrubbed Wallison’s bio from any mention of the Financial Deregulation Project.

Joe Kernan, CNBC Anchor: Viewers who tune in each morning expecting to get a quick update on the news instead see Squawkbox Anchor and former Merrill Lynch Broker Kernan shilling for the Street. He never seems to pass up an opportunity to exonerate banks and blame the wrong players for the financial collapse. Whether it was the Community Reinvestment Act or Fannie & Freddie, apparently anyone but Wall Street was at fault. Perhaps the tiresome repetition of the same discredited memes helps to explain the CNBC’s softening ratings.

Investor’s Business Daily: IBD published not an opinion piece, but an article laying fault for the entire crisis on a 1994 HUD statement against bank redlining. Of course, if that was the cause of the crisis, then the bank redlined areas of the country – inner cities like Harlem and the worst parts of Philly and Chicago and Detroit and Washington DC was were the lending boom and bust would have taken place. But we know it was the tony suburbs of California and Arizona, as well as the Condos in Florida and the Exurbs in Nevada that boomed the most.

Mayor Mike Bloomberg: Embarrassed himself this week, blindly repeating the discredited talking points. He exonerated Wall Street, stating “It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp.” What made Bloomberg’s erroneous comments so stunning is that he built his Bloomberg Data Service business on the notion that data is what ultimately matters most to investors. He ignored his own principles to repeat statements he knew (or should have known) were false.

I thought about the pieces to this as KJ and I edited it down to a more reasonable size. “Man bites Dog” is really the story here, mostly because Mayor Bloomberg is not just another wingnut. So the mid version of the column focused more on Bloomberg, and downgraded the usual Financial Crisis Denialists to a mere sentence apiece.

Cleaned up a bit, and notably better than the series above, it looked like this:

Mayor Mike Bloomberg: Embarrassed himself this week, blindly repeating the discredited talking points. He exonerated Wall Street, stating “It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp.” What made Bloomberg’s erroneous comments so stunning is that he built his Bloomberg Data Service business on the notion that data is what ultimately matters most to investors. He ignored his own principles to repeat statements he knew (or should have known) were false.

Its not just Mayor Bloomberg – you can see the Big Lie in action everywhere. Perhaps the Mayor saw a recent The Investor’s Business Daily article that blamed the crisis on a 1994 Housing and Urban Development memo (Smoking-Gun Document Ties Policy To Housing Crisis, by PAUL SPERRY 10/31/2011). Maybe he read FCIC member Peter Wallison’s dissent; of course, Wallison was co-director of the American Enterprise Institute “Financial Deregulation Project” so its no surprise he dissented from the report laying blame on radical deregulation of the finance sector. Perhaps the Mayor watches CNBC’s morning program, Squawkbox. Viewers are treated to a regular repetition of the Big Lie, as anchor Joe Kernan exonerates banks and blames Congress for the crisis on a near daily basis.

The final version is even more compact. It dispatched all of the goofballs — Wallison, Kernan, IBD are totally dropped from the finished product. The focus is partly on why Bloomberg went off the reservation, but mostly on what actually caused the finacial crisis.

I’ll tweet it as soon as soon as its out online @ritholtz

Category: Bailouts, Really, really bad calls, UnGuru, UnScience

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

75 Responses to “The Big Lie (Previews & Edits)”

  1. Apple fanboy says:

    Killer shit dude.

    Cannot wait for the full article.

  2. amboycharlie says:

    I totally agree. If the CRA was the crux of the problem, why had not been a problem before the speculative madness began? I think the truth of the matter is that once the market for quality mortgages topped out in 2005, the banks began to look toward urban neighborhoods, where less sophisticated customers could be turned into real estate speculators by putting them into sub-prime and Alt A loans. They might have turned to those neighborhoods because the CRA called them to the bankers attention, but they only did so keep the game going. For a while,it preserved the illusion that the market was still going up and permitted the banks to keep the fraud going, but to anyone with half a brain, the market looked like a house of cards by 2005.

  3. Bomber Girl says:

    Perhaps Bloomberg was listening to Paul Volcker who had some choice words for the lax, government tolerated underwriting standards and the overwhelming presence (and moral hazard) of GSEs in the residential mortgage market.

    ~~~

    BR: What Volcker has been railing against has been leveraged trading at banks with a federal insured guarantee on their deposits. (Any links, speeches or public works of is you might care to reference that support the view Volcker believed GSEs caused the crisis?)

    And the GSEs required conforming — i.e. Prime — mortgages. After losing lots of market share to Wall Street, in 2005 the GSEs petitioned for permission from OFHEO to chase the same subprime junk everyone else was chasing — it was only then, at the peak of the boom, that they changed their standards. (permission was granted by OFHEO in late 2005).

    They blew themselves up doing the same thing the banks did — chasing profits.

  4. RW says:

    Mike Konczal lays out Bloomberg’s idiocy in detail at http://tinyurl.com/5ul7qhl and the struggle to stem the endless river of bullshit designed to protect oligarchs goes on but the immediate objection I have with your ‘cleaned up’ commentary is to the (possibly rhetorical) assumption that Bloomberg had any respect for data or investors just because he made money from selling data to investors.

    Bloomberg is a used car salesman, writ slightly larger than most but no different in principle.

  5. FNG says:

    Why did you “roll over” ? Did she threaten to cut you off from your “Post bully pulpit”. You could have at least stood your ground on the cleaned up version. It was quite concise and TRUTHFUL! Now your readers will eat pasteurized trash. Remember BR, your message is only as relevant and pure as the size of your balls allow it to be.

    ~~~

    BR: Nothing of the sort — I have 1000 words and 35 column inches in the Sunday business section; I submitted 2059 words and 62 column inches.

    Thats what happens in the physical world — actual space limitations.

    (and if I had no balls, I sure wouldnt post the edits here!)

  6. gman says:

    This passion for reality is why I check in here everyday!
    It is why I was able put a nice chunk of long term assets into equities in early march 09 @ 700. At same time the IBD was yelling “islamo socialist to cause sp to go to 350″

    It is also how I have been able to stay long bonds while above mentioned entities WSJ, AEI and CNBC have been screaming for years about “DEBT THREAT, hyperinflation, crowding out” all caused by the p@rch monkey in the white house named Barry Soetaro.

    It also enabled me to buy and hold BP in the high 20′s when the meme that was always being repeated was “Obama is always looking to beat up on big oil and he will take BP down”

    Thanks Barry!

  7. dgriff69 says:

    It figures that Kernen would use the CRA as a red herring, seeing as he spent the whole MBS melt-up kissing Angelo Mozilo’s ass from coast to coast (or cheek to cheek). The “lax, government tolerated underwriting standards” wouldn’t have blown up the financial system if the predators hadn’t moved those robo-mortgages on to be sliced, diced and leveraged beyond all reason.

  8. Frilton Miedman says:

    Sounds to me like the gist of the article is lost, limited to the more “safe” targets, lest there be risk of rubbing a friend or two in the industry the wrong way.

    Joe Kernan in particular, who blindly extols the vast benefits of tax cuts for the wealthy with zero empirical evidence that it’s truth, having degree’s from both M.I.T. and Harvard, symbolizes the genius who can’t figure out why pushing a door with all his might won’t open the door, despite the boldly lettered sign in plain sight that states “PULL”, he knows how to open a damned door, doesn’t need some silly sign to tell him how.

    Is there something in the water these folks drink?

  9. The sitting mayor in NYC, and the founder / owner of Bloomberg (where I occassionally publish) is a safer target than a fucktarded CNBC anchor?

    THATS your argument?

    (And I dont think its Harvard where is undergraduate degree is from )

  10. Jim Greeen says:

    AGNOTOLGY

  11. jaymaster says:

    Or maybe it was edited out because you are quite possibly wrong, and unable to see that because of your biases.

    Bloomberg left the reservation? Bloomberg?!?

  12. reedsch says:

    “Representative Paul Ryan, also of Wisconsin, requires staffers to read Atlas Shrugged.”

    Members of a religious cult, not just drinking the Kool-aid, but pouring it into the public water system.
    http://www.tnr.com/blog/jonathan-chait/80552/paul-ryan-and-ayn-rand
    http://www.tnr.com/article/books-and-arts/wealthcare-0

    I read a ton of books, and honestly Atlas Shrugged was so insipid that I actually resented the time spent reading it. One could just read John Galt’s rant and skip the rest of the book.

  13. reedsch says:

    The David Stockman interview is dynamite. Anybody read his new book yet?

    “I think that President Obama has been sold down the river by his Secretary of the Treasury. I think Mr. Geithner has been a bag carrier for Wall Street throughout his entire career. He was behind the bailout of Wall Street in Sept 2008, it was totally unnecessary, it was an unjustifiable policy.” {10:20}

    The interviewer says to Mr. S: “You’re sounding like Bernie Sanders.” {12:30}
    http://dailycapitalist.com/2011/10/18/david-stockman-interview-part-1/

    p.s. BR, I understand the need for brevity, but we need to name names. These are not invaders from Mars: http://motherjones.com/mojo/2011/09/koch-brothers-million-dollar-donor-club

    p.p.s. Intelligent, educated, intellectually honest people who look objectively at the facts are all starting to sound like Bernie Sanders. Present company included.

  14. jaymaster says:

    OK, that was bad.

  15. jaymaster says:

    And to clarify, it was bad by Bloomberg, not Barry.

    My apologies.

  16. Kitty says:

    I write and copyedit for a very large financial firm. A good editor can turn decent writing into something very readable and good writing into something great.

    The quality of your writing, based on what I see in the blog and in your book is fine. If you gave your editor something comparable, you have nothing to worry about.

  17. znmeb says:

    Well … I suppose I’ll have to wait until I read the piece, but I’ve seen so many articles and books on “what caused the financial crisis” that I’ll be surprised if your take adds anything. I’m quite frankly much more concerned about the *next* financial crisis than the one we “survived” in 2007 – 2009.

    ~~~

    BR: If you want to learn the full story as to what caused the credit crisis, please read this.

  18. NeutralObserver says:

    They say Ernest Hemmingway learned the art of brevity, that is choosing a few words carefully such that the rest of the information can be inferred, when he was a correspondent in Spain during the cival war. He had to send his missives home to the states via telegram. It helped make him a great writer. Less is always more. Great job Barry.

  19. MikeG says:

    Bloomberg’s customers are financial institutions, so of course he’s going to excuse them from responsibility for the disaster rather than piss them off. He’s spinning for his business interests, not speaking truth.

  20. Frilton Miedman says:

    Barry Ritholtz Says:
    November 3rd, 2011 at 10:46 pm
    “The sitting mayor in NYC, and the founder / owner of Bloomberg (where I occassionally publish) is a safer target than a fucktarded CNBC anchor?

    THATS your argument?

    (And I dont think its Harvard where is undergraduate degree is from )”

    I think you misunderstood my reply as a critique (of you), it was a critique of what “KJ left on the floor”.

    It was not, I wasn’t making an “argument”, I was agreeing with this -> “But as I alluded to earlier, some of the more interesting parts got lost in the process.”.

    And Yes, Joe Kernan’s undergrad wasn’t Harvard, I should have looked first, but I stand by the rest of my assessment of his blind belief that any and all tax cuts to the wealthy in light of the Bush rates are “robbing the harder, more deserving Americans”.

    It’s easy to assume that he’s of a caste of the most deserving when he collects a seven figure salary, I’d like to see how he’d handle a 5 figure salary working a physical job at the age of 50 with failing joint or back problems…hearing some 7 figure desk jockey pronounce he doesn’t deserve healthcare or “entitlement” spending after a lifetime of paying his fair percentage tax share once his body gives out.

    There are extremes in economics, Joe Kernen, Kudlow, Carruso-Cabrerra and numerous like them just don’t seem to see we’ve reached one, Joe refuses to see the sign that states”PULL” on the door he insists pushing on because he’s too smart to have to bother.

  21. csainvestor says:

    Greenspan Suggested Cutting Taxes on the Wealthy to Increase Debt so the Fed Wouldn’t “Lose Control of Monetary Policy”

    Back in January 2001, just as George W. Bush was entering office, Federal Reserve Chairman Alan Greenspan was worrying; If the U.S. totally paid off its debt, it would no longer need to sell off Treasury bonds to borrow money. To avoid that scenario, Greenspan ended up endorsing tax cuts as a way of reducing surpluses. The Bush administration happily obliged

    http://www.npr.org/blogs/money/2011/10/21/141510617/what-if-we-paid-off-the-debt-the-secret-government-report

    http://media.npr.org/assets/img/2011/10/20/LifeAfterDebt.pdf

    Greenspan Supports Tax Cuts To Reduce Surplus

    Opponents of tax cuts are dismayed that Federal Reserve Board Chairman Alan Greenspan supports reductions in the federal tax burden. His reasoning implies that paying off the national debt is not a good idea.

    http://www.washingtonpost.com/blogs/ezra-klein/post/imagining-a-world-without-us-debt/2011/10/21/gIQAG3iK3L_blog.html

  22. Jeff Pitman says:

    This is a great blog. Thanks.

    So many lies to go around! Hey, America wanted equality and more of the American Dream. What America wants, it gets (well… almost).

  23. norcal_steve says:

    I’m sorry you left out the opprobrium of Joe Kernan. That asshat never ceases to annoy me. I’m often awake at 3-5 am PDT and terribly interested in is going on overnight in the markets so I turn on CNBC (that is the only finance channel in my cable package or i would never watch those goons). Kernan is a huge moron who makes every effort every second to politicize everything with his perspective of ‘those liberals are just so stupid’ and ‘why are those idiots commies who don’t know that everything good stems from the wonderful world of wall st’. What A huge douchebag!

    The international bus news they have on from 1am-3am pacific time is straightforward market news without the right wing propaganda for idiots from Kernan et al. The rest of the time cnbc is dominated by raving market pumpers and grossest sucker-upers-to-wall st ceo’s.

  24. foggygoggles says:

    You are soooo right about Kernan and CNBC. I stopped wasting time on both a long time ago. I greatly appreciate your allegiance to the Truth, and your willingness to tell it like it is. You are truly a breath of fresh air. I’m so sick of the self-serving bullshit that pervades all forms of media these days. BR, you ROCK!

  25. troubled times says:

    Kernan’s drooling over the powerful on Wall Street caused me to turn CNBC off years ago. His fawning and slobbering was more than i could take. Life is better without CNBC

  26. I cannot believe that a CNBC anchor is mo0re important than institutions like the Mayor of NY or the dominant crisis meme of most of the GOP (There are still lots of Rational Republicans, but they seem to be harder to find).

  27. Bomber Girl says:

    This is the Volcker speech I was referencing. He talks about many issues including TBTF and the need for structural reforms, including the important housing sector with its inordinate government role – and which played an important role in the bubble. He did not (and I did not) say it was THE cause, but a important factor – Fannie/Freddie were not just like any other bad bank in this disaster.

    http://graphics8.nytimes.com/packages/pdf/business/23gret.pdf

    ~~~

    BR: Thank you for the link. I suspect you are misreading Volcker’s statement, which discusses the Moral Hazard of bailing out the GSEs, and critiques their former quasi public nature, and their current structure of them being (back) on the US balance sheet. But he in no way blames them (or Congress) for the crisis.

  28. Bomber Girl says:

    Tell me how I am misreading this seemingly clear statement: “the financial breakdown was in fact triggered by extremely lax, government-tolerated underwriting standards, an important ingredient in the housing bubble.”

    ~~~

    BR: In the context of our conversation, Bloomberg is claiming GSEs pushed bad loans. The facts are that the bansk took it upon themselves to issue these lax underwriting standards in a reckless pursuit of profit regardless of risk.

    The lax underwriting standards Volcker is criticizing has nothing to do with the Big Lie Mayor Bloomberg stated, but rather the non-bank lenders who were allowed by the Fed to crank out nonconforming, non GSE compliant mortgages. They did not have to be complaint because they were sold to Wall Street for securitiation, and (prior to 2006) not to Fannie/Freddie.

  29. mathman says:

    Along with the fiscal mess we have the environmental one which isn’t improving despite all the warnings:
    http://thinkprogress.org/romm/2011/11/03/361158/biggest-jump-ever-in-global-warming-pollution-in-2010-chinese-co2-emissions-now-exceed-uss-by-50/

    Vets show up en masse @ OWS:
    http://www.businessinsider.com/veterans-march-for-occupy-wall-street-2010-11##ixzz1cbYTtTSC

    i don’t watch tv for financial info – like many who commented above, i come here for the “real deal.”
    Though i’m no trader, i appreciate the economic picture being explained by insiders who know what they’re talking about. Thanks BR, commenters.

  30. BusSchDean says:

    The VERY BEST part of this post and comments — the explicit demonstration and discussion that words matter. If we could get more people to digest the meaning of words and logic (or not) of arguments a number of talking heads and writers in a number of media outlets would have never gained traction.

  31. PDS says:

    BR…Kernan a “goofball”????…so I guess that means by extension u don’t think much of CNBC either eh?…but then, yes u r correct…but what happened? biting the hand that feeds u (or your ego)???…did CNBC dunp u again?….that’s ok….did u a favor…cause now u can spend more time on your clients instead of in front of a camerra

    ~~~

    BR: Part of my job involves promoting the firm, and so I do that via the media. But I cannot help myself, I am compelled to callout nonsense where I see it.

  32. budhak0n says:

    Crisis “shmisis” . Nothing to see here.

    The Red Line is for passengers boarding international flights.
    The Blue Line is for passengers seeking refuge inside the friendly confines.
    The Yellow Line is for passengers seeking to Tune in, Turn on and Hang out with the OWS.
    And the purple Line is for the fashion district.

    I know . It’s only rock and roll but I like it, like it, yes I do.

    How do “I” get somebody to approve a ridiculous note on a house I can’t afford along with a boat loan for a piece of crap I don’t know how to drive? Yeah yeah yeah whatever.

    Whatcha got here is a bunch of people who were given the world and just don’t want to pay for it. Absolutely nothing new in this sordid tale. It’s as old as the bible.

  33. dead hobo says:

    BusSchDean Says:
    November 4th, 2011 at 6:45 am

    The VERY BEST part of this post and comments — the explicit demonstration and discussion that words matter. If we could get more people to digest the meaning of words and logic (or not) of arguments a number of talking heads and writers in a number of media outlets would have never gained traction.

    reply:
    ————
    Sorry, being stupid is easy and much media glorifies stupidity. To some extent there isn’t a big cost for being stupid and, because there are so many stupid people, you frequently get government benefits for being stupid. Not being stupid takes work. It’s much easier to confuse opinions with facts and to blame liberals for letting new fangled ways take over and ruin the pastoral memories of old.

  34. BusSchDean says:

    Here is a typical example of the logic we hear every day:

    Successful farmers eat well and produce a bumper crop that benefits society; therefore we should value and protect all people who eat well.

    Translation: Successful business people get rich and produce benefits for society; therefore we should value and protect all people who are rich.

  35. Bomber Girl says:

    I do not put so many words in Volcker’s mouth as you since the paragraph of my quote regarding standards is about GSEs…He (Volcker) simply seems to be saying that the government role in the mortgage market has been too dominant and that it’s “leadership” (in terms of standards, etc.) was poorly executed, contributing to the crisis, and is in need of massive structural change. The pursuit of profit by banks and others was enabled by the broadly assumed government backing – the moral hazard which was “confirmed” in 2008 not created by it. Bloomberg is shifting blame from banks to congress when surely it is a shared blame; I am not crying for greedy bankers…but if the parents are out of the house, the kids are going to bring beer into the basement unless there is some real fear of a consequence.

    ~~~

    BR: Your context was that Bloomberg might have gotten the blame GSE nonsense from Volcker. That is simply incorrect, and a ery misleading statement about Volcker’s longstanding belief

  36. BusSchDean says:

    dead hobo: So true. What happened to the social value we used to put on work? Perhaps it went to wherever the value we put on frugality went. I have had too many business students tell me they want to get rich so they never have to work. Somehow they missed the fact that many, many successful, respected, happy business people work hard and enjoy (most) of the challenges they face — and, in fact, seek out new challenges.

    BUT, why now? Either the percentage and level of stupidity stays constant or somehow we have ramped up on stupidity.

  37. dead hobo says:

    BusSchDean Says:
    November 4th, 2011 at 7:54 am

    BUT, why now? Either the percentage and level of stupidity stays constant or somehow we have ramped up on stupidity.

    reply:
    ————
    The people at the bottom are just imitating the people at the top. The crooks own Washington and the fringes of the financial markets to the extent that what they do is not only legal, it’s defended as economic freedom. At this point, it’s probably impossible to not be corrupt at the highest levels of Washington and politics. They can’t admit to being corrupt, so they just act stupid and this stupidity is imitated.

    OWS is a tiptoe in the right direction, but it would take an effort of 1000x more to make a difference. The end result would be less stupidity. I really don’t expect much to change.

  38. holulu says:

    Barry you are my hero.
    At least I want to see that there one person left with intgrity to speak truth in the world of deception and lies.

  39. ToNYC says:

    Information arbitrage is for the last generation of monkeys that have been left behind. Good riddance. The high road don’t go to Hell.

  40. Julia Chestnut says:

    It always warms the dark coal lump of my heart when someone thanks his editor. ;)

    Right after “Financial Deregulation Project,” “its” should be “it’s.”

    I am not a great talent as an editor, I’m just meticulous as hell.

    I’ll look forward to your weekend article!

  41. Jim67545 says:

    It is tiresome that people, including someone who should know better like Bloomberg, seems compelled to reduce a complex issue like the housing blow-up with many contributory factors to a single cause. It is tiresome when they maintain that fixing that one element will fix the entire problem. It is even more tiresome when people seize upon a “cause” that happens to further their own self interests, such as blaming government regulation for sluggish employment when they are a trade group that fights regulation, high tax rates when they are a corporate CFO whose bonus would be greater with higher after tax income, whatever, often in defiance of fact.

    Kernan = class clown.

    Although there were many willing partners in the sub-prime housing situation and probably CRA gave some some cover, I think the key ingredient was the ability to securitize the stuff and pass the risk down the line. Nobody would have originated that stuff for portfolio at anywhere near the 30 year fixed rates they were getting (Fed’s contribution.) The interest rate in no way reflected the risk, which the rating agencies understated enough to get the s__t sold. It was a group grope.

  42. low-tech cyclist says:

    What Barry said about editors is absolutely true.

    I’ve published an article in a periodical only once, and it was a really tiny publication that almost nobody’s heard of.

    That publication’s editor took my so-so initial draft and did absolute magic with it. Like Barry said about his editors, she spotted and removed the digressions, tightened up the prose, and in general made a rhinestone look like a diamond.

    Ever since then, I’ve wished I could carry an editor around with me in my shirt pocket, for use as needed. I do a lot of writing for work and for fun, and s/he would have plenty to do.

  43. KeithOK says:

    When I read these arguments blaming the CRA and Fannie Mae, I wonder where these people were in the middle of the last decade. Didn’t they know anyone that suddenly struck it rich working for an independent mortgage broker. Didn’t they read about the risky mortgages being sold by these private companies. Didn’t they hear about the way non-bank mortgage brokers were pushing, or know people who got these loans, or get the offers in the mail or under their windshield wiper when parked at the local strip mall.

    The only part I played in the financial industry was as a consumer of their products, but it was still clear to me what was going on. While Barry’s article, and past posts and articles, provide the numbers and create a coherent narrative about what happened, I don’t really need it to know that risky lending did not come from the CRA and Barney Frank. I was there.

    I was there for the last decade, and I was conscious for a good portion of it. Where were these people? Why are they trying to parse and stack evidence to create a past reality when all they really need is to remember what was happening?

    It’s like they went for a walk thorugh the Park on a Saturday morning and when they returned, they started looking for evidence to convince themselves that they had actually spent the morning cleaning the garage, because that was their plan. And of course, they found enough evidence.

  44. John L says:

    Barry, your second paragraph incorrectly uses “its” in place of “it’s” in two place. You might talk to your editor. : ) Bomber Girl has the opposite problem, but who cares, it’s only a comment.

  45. ssc says:

    To John L: and I thought nobody proof read anymore. Good for you..

  46. csainvestor says:

    the Quacks / hacks at CNBC think insider trading is a good thing, they think it should be legal.

    insider trading a victimless crime

    http://www.cnbc.com/id/44894853

    The SEC’s Absurd War Against Insider Trading
    By: Michelle Caruso-Cabrera

    http://www.cnbc.com/id/40318804/

  47. Frilton Miedman says:

    Barry, I wasn’t discounting the fact that you openly & honestly discuss Bloomberg’s ignorance of the cause of the MBS crisis, a common delusion shared by Neocons, that banks were “forced” to lend money to everyone, therefore it’s bad lending practices by low income homebuyers that caused this.

    That’s completely wrong, banks knowingly pawned as many liar/subprime loans as possible for the sole purpose of securitizing them as “triple A” assets to an unknowing public – investment fraud.

    Another more recent development was Bernie Sanders revelation of CFTC records from ’08 that showed GS and MS had been pumping oil futures, which was part of the cause of that summer’s oil bubble and lent a hand to the defaults which started the market crash.

    If GS, MS and the other tbtf banks knew CDO’s were teetering after years of pawning garbage loans onto people who could barely pay them, they could easily have gotten short CDO’s and used oil pricing to restrict disposable incomes which in turn would trigger mass defaults to the advantage of their shorts.

    I only mentioned Joe for the fact that although Mike Bloomberg is a good example of this ignorance, morons like Joe, Michelle C-Cabrerra, Kudlow, Santelli…the entire crew of Fox Network, are the main perpetrators of this myth….the same set of “professionals” who still have a large percentage of the public believing Obama wasn’t born in America and is bent on “socialism”, “death panels” And “government takeovers”.

  48. Bomber Girl says:

    John L – yes, I noticed that misplaced ‘ after I posted the comment. Perhaps BR and I are providing “balance”. ;)

    BR – I am not sure why you say I am misrepresenting Volcker’s views since I am citing his recent speech which is critical of the GSEs’ role in the market or why the Mayor cannot have picked up on certain aspects of those views, without necessarily providing a broader picture of the nature of the problem. The gentlemen tread the same block regularly.

    ~~~

    BR: For the record, I was critical of the GSEs, I called them scams. I was very pubicly short the GSEs and got into battles over them. And after the government takeover, I state that they had become a backdoor bailout for banks.

    But despite that, I could find no data supporting the separate claim they were a prime, or even a significant, cause of the collapse.

  49. inthewoods says:

    Here’s my question: why does Andrew Sorkin continue to tolerate Joe Kernan and just sit there and say NOTHING while that asshat spews his bullshit? He knows Joe is factually challenged and just sits there and takes it. And then he has someone on the show that is defending these banks and he just gives them all a pass in the interviews – asking nothing in many cases. Paid to NOT play, or hoping for a Wall st job down the line. Please, Barry, explain this one to me.

  50. csainvestor says:

    Andrew Sorkin is just as bad as Joe Kernan- he might be worse.

  51. Bokolis says:

    It’s no surprise Bloomberg is waving the flag for Team Wall Street (and always has been), as he has been whoring out Manhattan RE on the taxpayers’ dime his entire time in office. It’s just that nobody caught on to his act (or gave a fcuk…y’all were all buying his I’m-gonna’-do-exactly-what-Rudy-did platform) while the gettin’ was good.

    I am surprised that he began tipping his hand on this, even if it took about 7 years in office for him to start getting sloppy.

  52. whskyjack says:

    inthewoods,

    It’s a gentlemans agreement, “you don call me on my BS, I won’t call you on yours”. Besides if you piss everybody off you aren’t called back and you have to go to work for a living.

  53. Bomber Girl says:

    I know you are tired from hearing from me about this, but here’s something from a reliable source (today’s guest post on TBP blog) about Volcker’s views on the GSEs.

    “One very large part of American capital markets—indeed the dominant part—is the market for residential mortgages. The financial breakdown was directly related to, and abetted by, lax, government-tolerated underwriting standards for those mortgages. The origination and huge volume of so-called “subprime” mortgages, typically securitized in large CMOs and CDOs (collateralized mortgage and debt obligations), supported the unsustainable rise in prices of homes and the housing bubble. So far the calls for large-scale structural change have not resulted in legislation, but the need for reform and the direction of change is clear.

    The mortgage market in the United States has long been supported by a few government agencies, and particularly by government-sponsored but privately owned organizations. Collectively, these so-called government-sponsored enterprises (GSEs)—Fannie Mae, Freddie Mac, and the Home Loan Banks—have provided an efficient secondary market for mortgages, but in the process they have issued or guaranteed obligations rivaling the amount of publicly held Treasury securities.

    The interest rates on those GSE securities have been close to those on Treasury bonds because it has been broadly assumed, quite accurately as it has turned out, that in case of difficulty the creditors would be directly or indirectly paid by the government (i.e., the taxpayer). The effect has been to permit high leverage of the GSEs—allowing large-scale borrowing against the mortgages—and to provide an indirect subsidy to the mortgage market, benefiting the GSE stockholders as well as home buyers. In the 2008 crisis, the government, confirming market expectations, took control of both Fannie Mae and Freddie Mac, assuring their continued operation despite large losses. The “moral hazard” implicitly protecting creditors of stockholding GSEs has thus been confirmed.

    ~~~

    BR: You are confusing assigning causal blame with mere mention. No where does Volcker say “AND THE GSES WERE A PRIME CAUSE.

    You must read Sunday’s column.

  54. VRWC says:

    It is ridiculous to argue that the cause of the housing bubble and resulting financial crisis was either “Wall Street” or “Government”.

    The answer is clearly “all of the above” and then some. Government DID have a hand in both the lowering of credit standards and Wall Street clearly went WAY over the top leveraging up with toxic bilge securities.

    Those things are not mutually exclusive.

    Greenspan kept rates too low too long…. the ratings agencies failed miserably…. Republicans eliminated the cap on leverage for banks and Democrats protected Fannie and Freddie from proper oversight.

    Throw in mortgage lenders interested only in fees and the loan buyers who enabled them…. plus a couple of million idiot home buyers who couldn’t understand what an ARM was but signed up anyway….

    What part of “all of the above are to blame” don’t you understand?

  55. norcal_steve says:

    inthewoods,

    if Sorkin challenged JK or MC-C everytime they said some dumb stuff, there would be no program only arguing. Heck, JK does not need opposition to say anything, he loves to preemptively bash any non-idiotic ideas. When John Harwood comes on, JK likes to waste a lot of time ragging on Harwood with meaningless policized BS, often preempting most of the time that Harwood might otherwise spend telling us something really worth listening to.

    I have emailed cnbc a few times to protest, never got any reply. The producers must think like the JK’s. Sorking is tolerated only because he takes all the dumb BS from Kernan without raising a fuss. And Sorkin is no genius either, he just looks like one compared to JK and MCC.

    At least I’m happy to see others who share my feelings of really hating to have to listen to incredible BS when I’m up at 3:00am pacific time and just want to see what’s happening overnight. The 1am-3am pacific time international market update show is non-political and quite decent. Once the cnbc crew come on at 3:00am, it’s invasion of the idiots for the rest of the day…I’m PO’ed that this is the only business new channel my cable provider choose to package.

  56. norcal_steve says:

    Barry, sorry for just sort of reposting my earlier post. I’m traveling in Japan and it’s hard to adjust local time here to eg the timestamps on the comments. I thought my earlier reply got deleted, did not see till now that it was there and i didn’t see it on the page because i was confused about whether it’s Sat 05 am or Friday 04 pm :).

    btw I totally agree with you that the bloomberg’s idiocy is far more important! It’s just that the cnbc idiots have annoyed the heck out of for so long. I’m insomniac and often wake up in the 3-6am pacific slot and turn on cnbc just to check the futures and any news headlines, so I often suffer listening to those idiots because of wanting a news fix and some talking voices to lull me back to sleep on the couch. Instead sometimes they just make my blood boil instead of lulling me…..This is the first forum where I’ve seen lots of people who share my ire esp at Kernan’s idiotic politicization of everything based on his nitwit idology. And don’t get me started about MCC – at least Joe had a brain once (he got into MIT).

  57. Frilton Miedman says:

    norcal_steve Says:
    November 4th, 2011 at 1:18 pm
    ” inthewoods,

    if Sorkin challenged JK or MC-C everytime they said some dumb stuff, there would be no program only arguing. ”

    Hell, look up the video of the infamous “Santelli rant” to observe an excellent example of your point.

    While Santelli goes off on a rant about how “I shouldn’t have to pay for those losers”, calling Americans who were duped by the banks “losers”…Steve Liesman repeatedly tried to stop him as he made false claim after false claim about a bill he later admitted he hadn’t even seen yet.

    All the while, Koe Kernen was cheering him on.

  58. Bomber Girl says:

    BR – I will certainly read it.

    Although I will add one more quote from Volcker, on Bloomberg TV of all places, then go away:

    “it’s evident that Fannie Mae and Freddie Mac were not a good idea in the first place. I think when it goes back to this hybrid public/private thing, sooner or later it’s going to get you in trouble, and it sure got us in trouble big-time, so I hope we don’t go back to that model. ”

    Amen.

  59. ToNYC says:

    @mf
    “I only mentioned Joe for the fact that although Mike Bloomberg is a good example of this ignorance, morons like Joe, Michelle C-Cabrerra, Kudlow, Santelli…”

    Putting Rick in the same box as Joe is an outrage as extreme as instantly losing your credibility, built up over 20 years, in a second transgression of a speeder.

  60. gman says:

    Every time Sorkin appears with Kernan and DOES NOT contest the BS, Sorkin confers a tacit agreement to the wing nuttery! It is a lose/lose for Sorkin if he really cared about objective reality.

  61. ToNYC says:

    “@gman
    It is a lose/lose for Sorkin if he really cared about objective reality.”

    Please show some compassion for the new guy in the media GEbully space

  62. gman says:

    O.K… he is the tallest midget!

  63. csainvestor says:

    CNBC is worse than fox news- they spout pure propaganda- no more no less.

    They believe in the free market times 10x. capitalism can do no wrong, regulations are to blame for everything that is wrong in the US, only the rich pay taxes etc etc.

    They despise democrats, and believe that tax cuts for the wealthy will bring about world peace.

    CNBC has gone so far to the right, that they are card carrying fascists, call them lovers of corporatism if you prefer.

    They adhere to an extreme ideology, all extreme ideology’s are, well- extreme.
    No one calls them out on their BS- so they get on their mics and proceed to worship at the alter of Ayn Rand.

  64. Frilton Miedman says:

    ToNYC Says:
    November 4th, 2011 at 2:17 pm
    ” @mf
    “I only mentioned Joe for the fact that although Mike Bloomberg is a good example of this ignorance, morons like Joe, Michelle C-Cabrerra, Kudlow, Santelli…”

    Putting Rick in the same box as Joe is an outrage as extreme as instantly losing your credibility, built up over 20 years, in a second transgression of a speeder. ”

    Please ‘scuse my odd lack of concern for my internet “cred” with a complete stranger, that said -

    They’re both categorically the same.

    Brilliant with their understanding of minute market mechanics and trends in treasuries, bonds, commodities and all things here and now, complete dolts when it comes to the macro picture.
    (Both stand firm on the tax, regulatory policies of the last 30 years that have done wonders for stock valuations, but indebted the consumer And government at the same time…which has now come to a head)

    Steve Liesman, on the other hand, is an economist, fully aware of the BIG picture (metaphor intended), not so lost behind the surrounding tree’s to the extent he can’t find the forest, always willing to listen to counterpoints in a discussion without having to talk over the other. (Kudlow, Santelli both do this constantly, shutting out any counterpoint in discussions to the extent I change channels when they’re in debates)

    Where people like Joe K, Rick S, Kudlow, Caruso-Cabrera fail, is their glaring refusal to consider the possibility their viewpoints are not perfect.

    Hell Caruso-Cabreera wrote a book declaring her arrogant insistence on sticking to fixed idea’s “You know I’m right…so shut up” or something to that effect.

  65. Frilton Miedman says:

    csainvestor Says:
    November 4th, 2011 at 3:21 pm
    ” CNBC is worse than fox news- they spout pure propaganda- no more no less.”

    ****
    -Though you have a point, I could debate this, Fox has a documented history of editorial censorship, such as Roger Ayles having Frank Luntz counsel all on-air personnel to use the words “government takeover” in place of “healthcare reform”….they call that “fair and unbiased”.
    ****

    “They believe in the free market times 10x. capitalism can do no wrong, regulations are to blame for everything that is wrong in the US, only the rich pay taxes etc etc.

    They despise democrats, and believe that tax cuts for the wealthy will bring about world peace.

    CNBC has gone so far to the right, that they are card carrying fascists, call them lovers of corporatism if you prefer.

    They adhere to an extreme ideology, all extreme ideology’s are, well- extreme.
    No one calls them out on their BS- so they get on their mics and proceed to worship at the alter of Ayn Rand.”
    ****

    I agree, I agree, I agree…it’s surprising how few have been apt to figure out that by Musolini’s defintion, America has become a near Fascist state, the point where corporations and the elite take priority over Democracy, or as one of the founders of Fascism once stated –

    “Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power.” – Benito Musollini

  66. ToNYC says:

    It doesn’t matter what a man calls himself; what matters is what he does to the matter at hand.

  67. 873450 says:

    A favorite alternative blame narrative floated and promoted during the bailout debate around 10/08 was Hank Paulson’s attempt to spin the financial crisis into some sort of unforeseen natural disaster that happens once or twice in 100 years. – This disaster is nobody’s fault, so let’s all join hands and save this civilization together! – For a while, Jamie Dimon, Lloyd Blankfein and others adopted and ran with Paulson’s hundred-year storm talking points. Tens-of-millions of angry, confused, ripped-off American citizens, who still don’t realize how much the U.S. standard of living they take for granted is financially threatened, watched in disbelief as the bailed out, TBTF, bank CEO’s they unwillingly rescued repeatedly referenced earthquakes, tsunamis and storms while testifying before congress.

    Of course, this all took place months after an infamous cell phone video went viral around 04/08. The video depicts President Bush ordering TV cameras switched off in a room of major GOP fundraisers in Texas before telling them, “There’s no question about it. Wall Street got drunk — that’s one of the reasons I asked you to turn off the TV cameras — it got drunk and now it’s got a hangover. The question is: How long will it sober up and not try to do all these fancy financial instruments?” Only “W” could nail it like that.

    Suggestion: On the article publication date post these unedited excerpts with notes under some sort of “Cutting Room Floor” or “Out Takes” headline on TBP.

  68. kcowan says:

    Barry thanks for a great column. I appreciate your candor in this blog. It enables me to quickly capture the essence of big issues. I am an insomniac so I get to watch CNBC and reruns of O’Reilly on FNC. It can make my mind mush.

    I love the graphs and flowcharts (like Groupon IPO) that you collect. Keep it up!

  69. Jim67545 says:

    @Bomber Girl
    I believe the phrase “lax, government-tolerated underwriting standards for those mortgages” was a general condemnation of the entire mortgage origination industry – not necessarily the GSEs. I can’t recall the exact statistics but the majority of the Alt-A and sub-prime mortgages originated were NOT packaged and sold by the GSEs. The GSEs were very late to the game compared to Lehman, GS, Countrywide and others. I don’t know how Volker thought the government could interfere with a private unregulated company, such as Lehman, and dictate underwriting standards.
    On the issue of the GSEs being a bad idea, if you will note they are still functioning for one reason: nobody can think of a better alternative. I’m not supporting the GSEs but if you rely on the private market to finance housing you would see a material, negative, change in that market. You could start by kissing fixed rate mortgages goodbye.

  70. louis says:

    “I’m quite frankly much more concerned about the *next* financial crisis than the one we “survived” in 2007 – 2009. ”

    Really? You dont see a clear pattern forming in our financial history? Are you sure about the “survived” part?

    Why is the truth so hard for some to grasp regarding this topic?

  71. flocktard says:

    Flocktard thanks you!

  72. amboycharlie says:

    You still have it spelled wrong, Barry. Now it’s finacial. And you edited out the part of my comment that called it to your attention.

  73. [...] The print and online versions had the same headlines: What caused the financial crisis? The Big Lie goes viral. (You can see the excised bits that did not make it to the final version here). [...]