Why Republicans Are Wrong About Wall Street And The Financial Crisis
In the four years since the housing bubble burst, triggering a collapse in global financial markets whose value had been propped up through the repackaging and trading of home loans via complex financial instruments, there's been plenty of blame to go around. The Occupy Wall Street protests have called new attention to the root causes of the crisis, and led Republicans to reiterate their claim that government-backed lenders Fannie Mae and Freddie Mac were the primary villains.
The facts about the subprime mortgage market prove that claim false: Private firms dominated the subprime market boom of 2004-06, and were not even subject to the 1977 Community Reinvestment Act (CRA) some Republicans vilify. Thanks to decades of financial deregulation, capped by President Bush's decision to appoint Wall Street regulators who believed their job was to help banks rather than curb banking abuses, financial giants were able to turn the mortgage market into a high-stakes casino. As investigative reporters and Congress' Financial Crisis Inquiry Commission (FCIC) have shown, it was deregulation mixed with irresponsible and potentially illegal practices by private firms on Wall Street that caused both the bubble and the collapse.
Although these facts have been widely reported for years, conservative Wall Street defenders like House Oversight Chairman Darrell Issa (R-CA), Speaker John Boehner (R-OH), and the U.S. Chamber of Commerce have attempted to muddy the waters with misinformation. If they have real evidence to support their explanation of the crisis, they should take up Bailout Nation author Barry Ritholtz's offer of $100,000 to anyone who can prove to him in a debate that Fannie, Freddie, and the CRA fueled the crisis.