Peter Wallison was on the Diane Rehm show recently telling in no uncertain terms how the current economic crisis is the result of bad government regulation and cannot be laid at the feet of Wall Street. Wallison is one of the most powerful Washington insider lawyers, a former general counsel to the Treasury (under GHWBusch) and for years, a champion of deregulation.
One thing about a lie… if there is any truth to it, it is easier to sell… and there is certainly some truth to Wallison’s claim about the housing crisis. The Clinton Administration espoused a policy of making money more available to low income people to buy houses and encouraged FannieMae and FreddieMac to support those efforts. The housing industry loved the idea and pushed for more of the same. George W. Busch promised poor people houses (“really nice houses”) and got Freddie AND Fannie to lower their approval standards. This meant very little supervision of the quality of housing loans. To grease the skids, deregulation of banking lead to the creation of instruments that guaranteed every loan regardless, and so everyone thought there was no risk in making loans to unqualified buyers because the loans were insured.
All these bad government-generated policies created the bubble that burst in 2008. HOWEVER, in the 30 years that Peter Wallison has been a prominent Beltway insider you have never heard him speak out about the dangers of relaxing these regulations and the potential mess that could happen if Freddie and Fannie lowered standards. In fact, what you will find is Peter Wallison out on the playing field, funded by a pile of Wall Street lobby money, working to deregulate banking and fighting hard against the handful of responsible legislators and government bureaucrats who sought in vain to put on the brakes.
Wallison is using a typical GOOP tactic. Claim that government does not work, then prove it by putting in place a government that does not work. Hamstring government by putting incompetent dumbasses (Dubya) on the job. Weaken government by under-funding it and refusing to approve presidential appointments.