My list is here. For example,
Of the journalistic accounts of the crisis, my favorite is Bethany McLean and Joe Nocera, All the Devils are Here. I think that it helps to bring out two important aspects of the crisis. One aspect is the lack of awareness that many senior executives at financial firms had about the complex risks embedded in their firms’ portfolios. Another aspect is the role played by lobbying by Wall Street firms and Fannie Mae in shaping the mortgage finance system as it evolved in the decades leading up to the crisis.
The most unconscionable decision by the regulators was on the risk-rating of mortgages in the Basel II framework. In their quest to favor mortgage lending they reduced they weighting , presumably reflecting the lower risk characteristics of these loans. However, the lower riskiness was already accounted for in the PDs and LGDs. In effect, they double-dipped thus encouraging lenders to plow huge sums into mortgages because of the excessively favorable capital treatment. This made submarginal loans look profitable when they weren’t.
Peter Wallison?
Good lord.
Never in the history of economics has there been anyone so wrong about anything than Wallison about the crisis. Using bs “data” from Ed Pinto he comes up with “facts” to support a theory, the only problem is that there are actual facts that make him look the fool he is.
This article has six solid points to show Wallison’s Folly, including:
“1. Private markets caused the shady mortgage boom: The first thing to point out is that the both the subprime mortgage boom and the subsequent crash are very much concentrated in the private market, especially the private label securitization channel (PLS) market. The Government-Sponsored Entities (GSEs, or Fannie and Freddie) were not behind them. The fly-by-night lending boom, slicing and dicing mortgage bonds, derivatives and CDOs, and all the other shadiness of the mortgage market in the 2000s were Wall Street creations, and they drove all those risky mortgages.
Here’s some data to back that up: “More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions… Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.”
As Center For American Progress’s David Min pointed out to me, the timing doesn’t work at all: “But from 2002-2005, [GSEs] saw a fairly precipitous drop in market share, going from about 50% to just under 30% of all mortgage originations. Conversely, private label securitization [PLS] shot up from about 10% to about 40% over the same period. This is, to state the obvious, a very radical shift in mortgage originations that overlapped neatly with the origination of the most toxic home loans.”
2. The government’s affordability mission didn’t cause the crisis: The next thing to mention is that the “affordability goals” of the GSEs, as well as the Community Reinvestment Act (CRA), didn’t cause the problems. Randy Krozner summarized one of the better studies on this so far, finding that “the very small share of all higher-priced loan originations that can reasonably be attributed to the CRA makes it hard to imagine how this law could have contributed in any meaningful way to the current subprime crisis.” The CRA wasn’t nearly big enough to cause these problems.
I’d recommend checking out “A Closer Look at Fannie Mae and Freddie Mac: What We Know, What We Think We Know and What We Don’t Know“ by Jason Thomas and Robert Van Order for more on the GSEs’ goals, which, in addition to explaining how their affordability mission is a distraction, argues that subprime loans were only 5 percent of the GSEs’ losses. The GSEs also bought the highly rated tranches of mortgage bonds, for which there was already a ton of demand.”
https://rooseveltinstitute.org/rortybombsix-rebuttals-argument-congress-or-fannie-and-freddie-caused-crisis/
And most telling was Wallison himself, babbling:
“In the words of Peter Wallison in 2004: “In recent years, study after study has shown that Fannie Mae and Freddie Mac are failing to do even as much as banks and S&Ls in providing financing for affordable housing, including minority and low income housing.”
Funny how that changed in Wallison’s mind. He is a paid toady, and Pinto is his sidekick.