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Today comes news that the four Republican members of the nine-member congressional panel to investigate the causes of the financial crisis have defected from the group over a linguistic dispute: the Democrats wouldn’t accept their proposal to eliminate the phrases “Wall Street”, “shadow banks” and the words “deregulation” and “interconnected” from their official autopsy report on the crisis. Naturally the angry left, and also Ezra Klein, dubbed the move “Orwellian”, but I find that a bit disingenuous, especially in Klein’s case, following the news with this improbable question, “Whose interests does this even serve?” as if soon-to-be Financial Services Committee chairman Spence Bachus did not just tell his hometown newspaper:
In Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks.
The Republican agenda could not be more transparent: they want to re-“deregulate” the powerful financial engineers we know as “Wall Street.” But they know that agenda carries a slight risk, because the same voters who elected them into congressional control last November told exit pollsters they blamed the deregulated “Wall Street” for the nation’s economic decay. So they have been busily rewriting the history of the financial crisis, as they’ve done with such great success with regard to the Great Depression, the Civil War and Thanksgiving before it, crafting a narrative that better serves the interests of the banks and shadow banks that comprise the Republican Party’s most important constituents by assigning the preponderance of blame for the devastation on the government-sponsored mortgage giants Fannie Mae and Freddie Mac, and their fuzzy, well-intentioned but ill-conceived and ultimately ruinous Democrat-driven mandate to dole out mortgages to losers who can’t afford the payments.
This narrative has already been accepted practically as scripture by millions of Dittoheads and Fox News viewers even as its mendacity has surely been laid comprehensively bare by hundreds if not thousands of bloggers before me, but revisiting it again today what strikes me most is how much truer it rings in 2010 than it did in 2008. Back then, as blog Naked Capitalism just pointed out, Fannie and Freddie only controlled about 40% of the market to buy mortgages. Today, they are virtually the only players in the market at all. In industry parlance, the “private label” mortgage market has “dried up,” in large part because private sector buyers of mortgages—banks and shadow banks and funds—no longer trust that the collateral that always made mortgage bonds such a safe investment won’t be hijacked by the banks who collect fees “securitizing” (pooling the mortgages into bonds) and later “servicing” the loans. They don’t trust the servicers and the securitizers because millions of homeowners have been thrown out of their houses over the past three years by sheriffs ordered around by lawyers at dubious mass-foreclosure mills purporting to represent an anonymous outfit called MERS, an entity it now appears was concocted in flagrant violation of hundreds of state and local law by a conspiracy of servicers and securitizers with the sole intention of raking in fees. No one knows who actually owns the deeds to all those homes, but it largely doesn’t matter because banks are raking in billions of dollars in fees foreclosing upon them, fees that at the end of the day will most likely be footed by Fannie and Freddie, which guarantee more than half the outstanding mortgages in this country. Without Fannie, Freddie and MERS, banks would have some sort of incentive to work out loan modifications with borrowers. But as it is, the government keeps the foreclosure mill in operation. Then yesterday we learned that Tim Geithner had personally blocked efforts to use his disastrous loan modification plan HAMP to help homeowners retain legal counsel to fight the foreclosure machine in court. Mercifully, the attorney general of Iowa seems to be a slightly less corrupt sorta guy. Not that you will hear much about any of this in national newspapers like the Post, which beat Spence Bachus and his cronies to the crisis revisionism punch long ago in the name of “bipartisanship” and “balance.” “Shadow banks” has appeared 14 times in the Post over the past year, “MERS” only twice. At least Spence Bachus has the decency to tell the truth some of the time; no one else seems to be saying anything at all.