"...the facts lose." - Paul Krugman

Paul Krugman got that right, "...the facts lose." 

As Chester Riley used to say on the old radio/TV sitcom, The Life of Riley, "My head is made up.  Don't confuse me with facts." 

I would propose that we pass a law to order all Republicans to have this slogan tattooed on their foreheads. 

 

Curious Carl

 

 

Wall Street Whitewash
By PAUL KRUGMAN
When the financial crisis struck, many people - myself included - considered
it a teachable moment. Above all, we expected the crisis to remind everyone
why banks need to be effectively regulated.

How naïve we were. We should have realized that the modern Republican Party
is utterly dedicated to the Reaganite slogan that government is always the
problem, never the solution. And, therefore, we should have realized that
party loyalists, confronted with facts that don't fit the slogan, would
adjust the facts.

Which brings me to the case of the collapsing crisis commission.

The bipartisan Financial Crisis Inquiry Commission was established by law to
"examine the causes, domestic and global, of the current financial and
economic crisis in the United States." The hope was that it would be a
modern version of the Pecora investigation of the 1930s, which documented
Wall Street abuses and helped pave the way for financial reform.

Instead, however, the commission has broken down along partisan lines,
unable to agree on even the most basic points.

It's not as if the story of the crisis is particularly obscure. First, there
was a widely spread housing bubble, not just in the United States, but in
Ireland, Spain, and other countries as well. This bubble was inflated by
irresponsible lending, made possible both by bank deregulation and the
failure to extend regulation to "shadow banks," which weren't covered by
traditional regulation but nonetheless engaged in banking activities and
created bank-type risks.

Then the bubble burst, with hugely disruptive consequences. It turned out
that Wall Street had created a web of interconnection nobody understood, so
that the failure of Lehman Brothers, a medium-size investment bank, could
threaten to take down the whole world financial system.

It's a straightforward story, but a story that the Republican members of the
commission don't want told. Literally.

Last week, reports Shahien Nasiripour of The Huffington Post, all four
Republicans on the commission voted to exclude the following terms from the
report: "deregulation," "shadow banking," "interconnection," and, yes, "Wall
Street."

When Democratic members refused to go along with this insistence that the
story of Hamlet be told without the prince, the Republicans went ahead and
issued their own report, which did, indeed, avoid using any of the banned
terms.

That report is all of nine pages long, with few facts and hardly any
numbers. Beyond that, it tells a story that has been widely and repeatedly
debunked - without responding at all to the debunkers.

In the world according to the G.O.P. commissioners, it's all the fault of
government do-gooders, who used various levers - especially Fannie Mae and
Freddie Mac, the government-sponsored loan-guarantee agencies - to promote
loans to low-income borrowers. Wall Street - I mean, the private sector -
erred only to the extent that it got suckered into going along with this
government-created bubble.

It's hard to overstate how wrongheaded all of this is. For one thing, as I've
already noted, the housing bubble was international - and Fannie and Freddie
weren't guaranteeing mortgages in Latvia. Nor were they guaranteeing loans
in commercial real estate, which also experienced a huge bubble.

Beyond that, the timing shows that private players weren't suckered into a
government-created bubble. It was the other way around. During the peak
years of housing inflation, Fannie and Freddie were pushed to the sidelines;
they only got into dubious lending late in the game, as they tried to regain
market share.

But the G.O.P. commissioners are just doing their job, which is to sustain
the conservative narrative. And a narrative that absolves the banks of any
wrongdoing, that places all the blame on meddling politicians, is especially
important now that Republicans are about to take over the House.

Last week, Spencer Bachus, the incoming G.O.P. chairman of the House
Financial Services Committee, told The Birmingham News that "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."

He later tried to walk the remark back, but there's no question that he and
his colleagues will do everything they can to block effective regulation of
the people and institutions responsible for the economic nightmare of recent
years. So they need a cover story saying that it was all the government's
fault.

In the end, those of us who expected the crisis to provide a teachable
moment were right, but not in the way we expected. Never mind relearning the
case for bank regulation; what we learned, instead, is what happens when an
ideology backed by vast wealth and immense power confronts inconvenient
facts. And the answer is, the facts lose.




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