Question/Comment: Lack of transparency and regulation appear to be at the heart of the current financial crisis. Didn’t the Senate Banking Committee and the Republicans attempt to ward this off with a reform bill in 2005? Is the American dream of home ownership and subsequently loaning money to unqualified home buyers a major cause of this crisis?
Paul Solman: Uh, I don’t think the Republicans have been especially avid proponents of transparency and regulation. Not in my reportorial lifetime, which now spans 31 years on the business beat.
You’re referring to Fannie and Freddie, which many economists hated because they smacked of government meddling in the market. (How quickly things can change.)
F&F appear to have operated with less than optimal candor. But no less than most firms, I bet, and perhaps MORE transparency, I fear, than other financial firms. Who knows what we have YET to uncover?
I agree with your point about the American Dream. And Congress did push F&F to promote home ownership. But they did not cause this crisis. In fact, their share of total home mortgages was DROPPING in recent years. They were playing catch-up, not leading the charge. And remember, they WERE regulated.
One moral of this story may be that not only do you need regulation, you need PROPER regulation. But of course, there’s something tautological about saying that. And something quixotic, perhaps, about hoping for it.