"Karl Rove’s Factually Challenged Housing Revisionism"

Karl Rove's historical revisionism concerning Fannie and Freddie and their role in the financial crisis, which is an attempt "to save the President’s legacy and clear his own name," prompts this response from Barry Ritholtz:

Karl Rove’s Factually Challenged Housing Revisionism, by Barry Ritholtz: As the saying goes, you are entitled to your own opinion, but not your own facts. The instant historical revisionism by Karl Rove in today’s WSJ — mythmaking writ large — contains an egregious combination of false statements, crucial omissions and misleading assertions.

A few thoughts are required to correct Rove’s attempt to create a false and deceptive narrative. Consider these few corrections:

1. “Fannie Mae and Freddie Mac were among the principal culprits of the housing crisis” Wrong. Fannie and Freddie were cogs in the giant mortgage machine, but they had nothing to do with the abdication of lending standards from 2002-07. That was a function of the Lend-to-Securitize business model of the sub-prime mortgage originators. THAT was the primary cause of the housing boom and bust, along with Ultra-low rates and a lack of Fed regulation of these sub-prime lenders.

2. “Fannie and Freddie were too large and overleveraged” True. This had been pointed out by many people, before Bush and afterwards, that Fannie was a problem. ...[This] was ignored by Alan Greenspan. ...

3. Democrats controlled the Congressional Debate on GSEs: Rove somehow fails to note the GOP controlled Congress from 1994-2006, including the first 6 years of the Bush Presidency. If the President wanted to rein in the GSEs, he needed only make it a major priority, and not a footnote in the 2001 budget.

4. “largely unreported story is that to fend off regulation, the GSEs engaged in a lobbying frenzy.” WTF? This has been widely reported in the media for sometime now.

5. GSEs bought $ trillion of subprime debt and “liar loans,” almost all bought between 2005 and 2007. This bulk-up in risky paper made it possible for banks to lend imprudently on a massive scale. Facts are correct, conclusion is wrong. By 2005, the die was set. The GSEs were very late to the party, buying sub-prime at the top of the market. ... From there, it was all downhill. By the time the GSE’s were buying sub-prime debt, it was all over but the crying.

6. OMISSION: Bush thwarted attempts to make lenders behave responsibly: Gee, somehow Mr. Rove forgot this one. Bank regulators had proposed new guidelines for writing risky loans. These were internal administrative rules; had they been enacted, the worst of the housing and credit crisis might have been avoided. The Bush administration backed away from proposed crackdowns on the subprime, no-money down, interest-only mortgages that were critical contributors to the credit and housing crisis. According to the Associated Press, pressure from banks (many of whom have since failed) was the reason...

What was so damning was these proposals were all stripped from the final administrative rules by the Bush White House. None required congressional approval; they did not even require the president’s signature.

Note — these rules were proposed in 2005 — the same year as FNM/FRE began buying subprime mortgages. If that was, as Rove asserts, the cause, than why wasn’t this a primary cause as well?

I am passionate about getting the factual cause of the current housing and credit crisis correct. If we don’t understand how this all came about, we cannot possibly cure it. In attempting to save the President’s legacy and clear his own name, Mr. Rove does the nation a terrible disservice.

I usually don’t bother fisking WSJ Op-Ed pages, as their respect for such things as objective fact or “Truth” can be lacking But this one was so egregious, it demanded an answer.

Comments

[kthomas]

Let him write his lies. This man is lucky to be alive and still breathing.

[Patricia ShannonP]

A few days ago, I heard a debate on the radio on whether Bush is the worst U.S. president we have had. They had people respond over the internet before and after the debate, whether they agreed, disagreed, or were undecided. Rove was one of Bush's defenders. I know enough to be aware of his lies and misrepresentation, but I wondered whether that would be true of the listeners in general. Before the debate, most people agreed with the proposition, that Bush is the worst president we've had. After the debate, even more agreed, even though I felt the defenders of the proposition (i.e., critics of Bush), did not make as good a case as they could have.

Several times Rove got applause from some members of the audience. But when he defended the doubling of the national debt under Bush by pointing out that it was due to the cost of the war in Iraq, and by arguing that an achievement of Bush was that he cut back greatly on domestic spending, there was no applause at all, just laughter.

[evagrius]

He needs to be laughed at constantly, till the door hits his large behind.

[Bruce Wilder]

Should we connect dots with Ezra Klein on PARTISAN SELF-DECEPTION?

[TigerPaw]

It's the megaphone principle and the right-wing excels at it like no one else. Say anything loud enough and long enough and people will believe it.

How many still think Saddam caused the war, had weapons, wouldn't let the UN inspect, blah blah blah. It's the megaphone at work.

Goebbels still lives. Sad but true.

[Dickeylee]

Murdoch's litter liner of a paper has become the Pravda of Capitalism. How Paul Gidot kept his job is obvious to any who read his editorials.

[Peter Schaeffer]

For a quite good article on this subject, see "Fannie Mae’s Last Stand" (http://www.vanityfair.com/politics/features/2009/02/fannie-and-freddie200902). F&F didn't cause the housing crisis. However, they weren't innocent bystanders either.

The article is long but well worth it.

[calmo]

Time to recall a previous post
http://economistsview.typepad.com/economistsview/2007/06/paul-krugman-th.html
I'm hoping that GWB's real legacy will be in those wiretaps illustrating with the same efficacy as Nixon...and not the Pentagon.

[run75441]

Peter:

Thanks for the link. After reading kitov and Brookings, this is not long.

[reason]

Why are we taking time out to debunk the WSJ Opinion page again. Isn't it sufficient to say it is consistently rubbish once a month or so?

[John M 307]

I've said it before, and I'll say it again. The likes of Karl Rove, Rush Limbaugh, Ann Coulter, et al. will continue to spew their lies until they're actually hurt. Mere refutation is insufficient.