WASHINGTON (March 17, 2016) – Five renowned financial experts offer a look back at the financial crisis of 2007 to 2009, and the Financial Crisis Inquiry Commission that Congress created in its wake, in a new colloquy from the R Street Institute.
In “Sizing up the FCIC report five years later,” experts from across the ideological spectrum offer short essays examining the commission, its purpose and its disparate findings.
“Economics is not a science,” writes editor Alex Pollock, distinguished senior fellow of the R Street Institute. “It can’t be used by governments to manage economic and financial affairs to some preordained outcome. Not only is it rather poor at predicting the future, but its practitioners often are unable to agree even on how to interpret the past.”
Douglas Holtz-Eakin, an FCIC commissioner and currently president of the American Action Forum, laments the over-politicized nature of the commission and the fact that it was never intended to inform legislation or regulation. He does note a few positive developments however, including greater oversight of credit rating agencies.
Thomas H. Stanton, fellow at the Center for Advanced Government Studies at Johns Hopkins University and a staff member to the commission, examines the differences between firms that weathered the crisis and those that ultimately did not survive it. Successful firms shared information throughout the company, while at unsuccessful ones, information was bottled up in the lower and middle levels.
Philip Wallach, senior fellow in governance studies at the Brookings Institution, reflects that even almost a decade later, political motivations continue to drive the narratives about the crisis most prevalent in the public and among policymakers.
Peter J. Wallison, an FCIC commissioner and now Arthur F. Burns Fellow in Financial Policy Studies at the American Enterprise Institute, blames the crisis on the affordable housing goals placed on Fannie Mae and Freddie Mac in 1992 – more than a decade and a half before the bubble burst. These goals put pressure on Fannie and Freddie to offer more and more mortgages to homebuyers at or below the median income.
Finally, Edward V. Murphy, specialist in financial market issues for the Congressional Research Service, offers a summary of the questions and differing viewpoints in the context of hindsight. Ultimately, he concludes, the FCIC provided invaluable detail to Congress, which will continue to be the subject of conflicting interpretations and debates.