Wall Street Vs. Government Responsibility for Economic Crisis

According to Investor's Business Daily, the percentage of responsibility for the subprime and nonprime mortgage crisis is pretty clear. Out of 27 million such mortgages, the government held 19.2 million: 12 million by Fannie & Freddie, 5 million by FHA, and 2.2 million with HUD and CRA loans. Wall Street held 7.8 million.

That would mean Wall Street bears 29% of the responsibility, while Washington bears 71%.

In a related piece, Gretchen Morgenson at the NYT notes a recent speech on needed financial reforms by Paul Volcker, former head of the Federal Reserve:

THE other area that cries out for change, Mr. Volcker said, is the nation’s mortgage market, now controlled by Fannie Mae and Freddie Mac, the taxpayer-owned mortgage giants.


“We simply should not countenance a residential mortgage market, the largest part of our capital market, dominated by so-called government-sponsored enterprises,” Mr. Volcker said in his speech. “The financial breakdown was in fact triggered by extremely lax, government-tolerated underwriting standards, an important ingredient in the housing bubble.”

 

2008 Financial Crisis Link Dump

Kenneth Anderson at The Volokh Conspiracy talks about a new book on Fannie and Freddie's role in the crisis. In the post, he links an NPR interview with Gretchen Morgenson, one of the authors, and a review at the Washington Post. Anderson's post is well worth reading in full, BTW.

The book is Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon, by Gretchen Morgenson and Joshua Rosner.

These reviews led me to Wikipedia's entry on George Stigler, a Nobel-winning economist and originator of the idea of 'regulatory capture,' which describes very well one aspect of my own impression of how the US government has, in large part, been corrupted.

Stigler, in turn, led me to the Mont Pelerin Society:

... an international organization composed of economists (including 8 winners of the Nobel Memorial Prize in Economic Sciences), philosophers, historians, intellectuals, business leaders, and others who favour classical liberalism. Its founders included Friedrich Hayek, Karl Popper, Ludwig von Mises, George Stigler, and Milton Friedman.

The society advocates freedom of expression, free market economic policies, and the political values of an open society.

I feel like I've been admitted to a higher (lower?) circle of the Vast Right Wing Conspiracy ...

Anyway, interesting stuff. I look forward to reading the book.

PS On a somewhat related note, this is hilarious.