Matt Philbin of the Business & Media Institute, which aims to expose the anti-free-enterprise bias of the mainstream media, finds fault with my list of the 12 things and people most to blame for our current financial mess. Here’s what seemed to bother Philbin most:
According to Time’s Justin Fox, the financial crisis and the recession can be blamed on a mixture of phenomena (good times, too much money) and people (Alan Greenspan, Wall Street executives, the ratings agencies). But ultimate culpability for the recession lies with the free market and – wait for it! – Republicans.
George Bush came in No. 9 on my list of the most blameworthy. No. 10 was the Commodity Futures Modernization Act, which was passed by a Republican Congress (and signed into law by Democrat Bill Clinton). That, and I failed to blame Fannie Mae and Freddie Mac as much as Charles Calomiris and Peter Wallison do.
Calomiris and Wallison have actually failed to make any kind of convincing case that Fannie and Freddie caused the housing mess. What they’ve shown is that the two mortgage giants made things worse by buying subprime and Alt-A mortgage securities in the latter days of the housing bubble. But this does nothing to explain why subprime and Alt-A lending exploded in the first place, given that Fannie and Freddie weren’t doing any of it. Other scholars have speculated that it was the late-2003 sidelining of Fannie and Freddie—which for all their faults did stick to pretty conservative mortgage underwriting standards—that set off the insanity.
Then there’s the thing about picking on the Republicans. The Republican Party controlled the White House for the last eight years, and Congress for most of that time. That, and it has been the dominant party at the national level for most of the past 28 years. If there is to be any accountability in American political life, then the Republicans have to accept much of the blame for what has gone wrong. The only way to get out of accepting that blame is to claim that Republican elected officials were so ineffectual that they played no significant role in steering economic policy over the past three decades (this seems to be Rush Limbaugh’s view), or to argue that economic policy just doesn’t have much impact.
I have some sympathy with the latter point—the global economy is awfully complex, making it really hard to know what the economic effect of a particular government action is. But is that an argument Philbin really wants to be making?