Bad History, Worse Policy: How a False Narrative About the Financial Crisis Led to the Dodd-Frank Act

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This timely study focuses on how the government-constructed narratives surrounding the collapse of Fannie Mae and Freddie Mac and the 2008 financial crisis shaped the policymaking that led to the Dodd-Frank Act. The book shows that every major provision of the act can be traced directly to that narrative, which ignored the government� s own role and focused entirely on the errors of the private sector. In the next Congress, whether or not the Republicans are in control of the House and Senate, there will be a concerted effort to make changes in ��or even repeal� the Dodd-Frank Act. The essays in this book, originally published by AEI as Financial Services Outlooks, and the accompanying commentary provide a thorough backgrounder for anyone interested in financial policy.

Bad History, Worse Policy: How a False Narrative About the Financial Crisis Led to the Dodd-Frank Act Review

Peter J. Wallison's book is EXCELLENT! Although it may be challenging for the non-Wall Street / Mortgage Banking people to understand everything because he goes into minutia I found riveting (my background is both of the above) but the average person CAN connect the dots with the major theme of the book. What is that theme? The book lays bare the considerable fault of Bill Clinton, Barack Obama, Barney Frank, Chris Dodd, Chuck Schumer and many of the other progressive Democrats who from around 1995 to 2007 FORCED banks to dramatically lower their underwriting standards i.e. subprime loans to people who would predictably default the moment real estate stopped appreciating in value. (No more cash out refinances meant those people could NOT afford homes they should never have been allowed to buy in the first place.)

In the name of "Affordable Housing" aka subprime lending, Democrats force fed quotas for these loans into the financial arteries of the banks and mortgage banks and even then into the financial models of the investment banks and the credit ratings agencies. All of them have fault for this debacle but absent subprime mortgages, there would never have been a meltdown aka The Financial Crisis 2007-20?? and counting.

Bottom line? The progressive side of the Democrats in power created these loans, passed laws, enforced quotas and punished banks that didn't play ball. Then the music stopped and the global economy had been infested with these toxic ticking time bombs and everything imploded. Then in his 2008 Presidential campaign, Barack Obama used this narrative: "It was caused by policies of the previous administration, fat cat bankers and greedy Wall Street companies." The GOP failed to effectively counter that false narrative and America bought into Obama's repetitive lies about where the origins of the Financial Crisis (subprime mortgages) came from.

In fact, as a young attorney, Obama was on a legal team in Chicago that filed a lawsuit in 1995 that was settled several years later and forced Citi to be among the first to make what we now know as subprime loans. Here's the link to that story:

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You might say Obama was like the Little Dutch Boy that pulled his finger from the dike. 12 years later the system was overloaded with non-performing (defaulting) subprime mortgages and the House Of Cards, as CBS's 60 Minutes Scott Pelley called it on December 14th, 2008 in a segment called Mortgage Meltdown, came tumbling down. Here's the link to that 60 Minutes story:

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But... Pelley said the meltdown was "a hole that Wall Street dug" and nothing could be further from the truth! Subprime mortgages blew up creating "the hole" and the economy imploded. Ask yourself then where did subprime mortgages come from? Follow the bread crumbs... they ALL lead back to the people I listed above (and others) and the policies they enacted and enforced. There simply is no amount of Liberal kicking, screaming and denials that can refute those facts. (Any review you read that talk about the false narrative of the banks, Wall Street, the Bush administration, etc., is either written by a Liberal or someone that just refuses to be confused with the facts because of some ideology that inherently feels Wall Street and the big banks intentionally collapsed the economy.

Here's a little tidbit on a 2nd book on this topic that I mention in the next paragraph: In January 2002, a Harvard professor, Howell Jackson, presented a case study on thousands of mortgages he analyzed in the 1997-2000 time frame. He found that at least 75% of all mortgages in that time frame had hidden charges that increased total costs (expressed as the APR on all mortgage loans) to as high as 114%!! Consumers were being egregiously ripped off!! This was of course a violation of RESPA (the law / Act that governs mortgages in all 50 states) and was also a violation of usury laws in all 50 states! Here's a link to that story:

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Had the Senate Banking Committee acted on what they saw and heard in those meetings, there would have been no meltdown... no Financial Crisis! Why? Because more than 75% of subprime loans were piled on from 2004-2007! They could have stopped this debacle but instead, what did they do? THEY BURIED THIS and allowed the music to keep playing. Inexcusable.

There is another book out that I have read: Skullduggery! True Causes of the Financial Crisis by Ted Krager, who lost his mortgage company in the meltdown. He was a state mortgage president / insider and wrote his book as a whistleblower. He tells what he saw and heard from 15 years inside the industry. It's more of a 50,000ft overview whereas Peter J. Wallison's book really gets into the details. Both are excellent and I give both of them 5 Stars!

Let's hope history records the causes of this "Great Recession" properly and places the blame for the meltdown squarely on the shoulders of those people who caused the worst recession since the Great Depression!

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