More from yesterday.
1. Mark Calabria refers to David Min’s critique of the AEI arguments that the GSEs caused the financial crisis as a “CAP-AEI Food Fight.” And from your point of view, this may be the framework that you’d likely use. The conservative think tank says A, the liberal think tank says not A, the answer is probably in the middle somewhere. In a lot of cases, that’s probably a smart approach.
But we aren’t talking about data-mining statistics on an obscure teacher bonus program in rural Wisconsin, or the ideologically-driven hallucinatory dreamscape about all the awesomez innovations that’ll happen once we give Grandma a coupon to go buy health care in the private market. We are talking about one of the biggest and most examined markets in the world – the United States mortgage market. And what do other people who have looked into this issue find? From Min’s recent paper, with a few sources made clear:
“Did Fannie and Freddie buy high-risk mortgage-backed securities? Yes. But they did not buy enough of them to be blamed for the mortgage crisis. Highly respected analysts who have looked at these data in much greater detail than Wallison, Pinto, or myself, including the nonpartisan Government Accountability Office, the Harvard Joint Center for Housing Studies, the Financial Crisis Inquiry Commission majority, the Federal Housing Finance Agency, and virtually all academics, including the University of North Carolina, Glaeser et al at Harvard, and the St. Louis Federal Reserve, have all rejected the Wallison/Pinto argument that federal affordable housing policies were responsible for the proliferation of actual high-risk mortgages over the past decade.”
That’s a lot of sources! Now what does the other side have?
(You can click here to hear cricket sounds on youtube.)
2. What’s even more interesting is that the network of research that does exist on this matter is basically the Pinto analysis redone over and over again. While the paragraph above has all kinds of experts using a wide variety of approaches, the “GSEs did it!” literature is the same exact heavily critiqued data point repeated like a creed.
As Leonard Architect writes in his devastating, very recommended, review of what we’ve just learned, professors who do take the GSE approach simply repeat Pinto’s research:
Professors at Berkeley and NYU have no such excuse for parroting Pinto’s misleading claims. Everyone who follows the mortgage data released by the Federal Housing Finance Agency, or the Mortgage Bankers Association, or Loan Processing Services knows that the loan performance experienced by Fannie and Freddie is exponentially superior to that of the rest of the mortgage market. Anyone who says otherwise is lying.
Berkeley Professor Dwight Jaffee is less than honest when he parrots Pinto’s dubious research in his proposal for privatizing the GSEs. NYU Professor Lawrence J. White is less than honest when parrots Pinto’s research in his book on the GSEs, Guaranteed to Fail. Jaffee, White and Wallison are all colleagues at the Mercatus Center, a right wing think tank founded and funded by the Koch Brothers.
Guaranteed To Fail was written not by one, not by two, not by three, but four NYU professors, who collectively tout Pinto’s deceptive labeling, but have nothing to say about the loan performance of the GSEs relative to that of the rest of the mortgage market.
3. For additional fun, the fact that we now know that Wallison leaked the critique of Pinto’s work creates an important timeline. From Leonard Architect:
“I get this memo criticizing Pinto’s data — what was I supposed to do?” [Wallison] told Huffington Post. “Pinto should be the one to respond to criticism of his data.”
Pinto got the opportunity, but he offered no response. He delivered three additional memos, here, here, and here. But he never responded to core criticism in the FCIC staff memo, which identified the fatal flaw in Pinto’s misguided labeling scheme.
From the oversight report, we know that Wallison leaked the FCIC memo to Pinto so he could address the arguments between August 9th and August 14th, 2010. The three additional memos Pinto submitted to the FCIC linked in the Architect piece above were draft date August 14th, October 10th, and November 4th, 2010. And evidently they didn’t address the argument at all.
Imagine if I say A, and then you point out there’s a really valid critique of A, and I respond by repeating A three more times but louder. What would you make of my argument?