Sorry Dean, your wrong again. Their BIGGEST failing was ignoring your astute, extremely tight argument on housing prospects in 2002!!!!!!!
We KNOW they read your early work on housing, why doesn't anyone ask any of them WHY they ignored it?
And, while we're on the subject, why not ask them why they were silent on Boskin Commission's huge downward revisions to our principal inflation measurement & why they didn't think to ask for new regulatory controls to accompany the total repeal of Glass-Steagall.
Shameful, simply shameful.

OK, Dean or someone else in the comment section, help me out: didn't Fannie and Freddie start blowing up shortly after everybody else? Seemed to me at the time like when the Bush Adminstration was actively encouraging people to renegotiate their mortgages, they were encouraging them to get Fannie and Freddie mortgages.

Am I wrong in thinking that the increase in bad debt associated with this push was a big reason the F-Squared went in the crapper so suddenly? I mean I realize everybody's talking about structural crap and reform, but was that really the problem?

DragonFlyEye, Fannie and Freddie became led by the same Reaganite/Bushite pigs whose prime directive was the biggest short-term bucks for themselves and their ilk.

Hey, it wasn't just Elvis. After he shacked up incognito with Marilyn Monroe the two of them have been planing this.

What steps might have led to deflating the bubble?

The efforts by right-wingers to revise history and blame the CRA are similar to what happened a decade ago, when the Asian "miracle" economies fell into financial crisis.

For years before the Asian financial crisis, conservative economists had lauded Korea and the other Asian economies for adopting free market principles and growing rapidly. When the party was over, the same conservatives suddenly said the problem was that the Asian economies had not really been applying free market principles.

If no matter what the reality is, you say your model is right, then you aren't applying social science. You're simply wearing ideological blinders.

Well said, Michael.

As for the housing problem, Fred Harrison is the only person I know of that correctly identifies the true underlying cause. As far back as 2005, he was not only predicting a world-wide collapse of the RE (land) market, but was predicting it would happen in 2008. Everyone should check out his excellent article in Money Week from August of '05:

http://www.moneyweek.com/investments/property/bust-will-follow-boom---but-when.aspx

And the follow up from last year:

http://www.moneyweek.com/investments/property/house-prices-expect-the-worst.aspx

Stanley Kurtz in the NY Post discusses how CRA and ACORN used intimidation to influence politicians to lower lending standards for almost all mortgage-granting institutions.

http://www.nypost.com/php/pfriendly/print.php?url=http://www.nypost.com/seven/10132008/postopinion/opedcolumnists/spreading_the_virus_133375.htm

Too bad the world-wide RE meltdown proves that that was, at best, an exacerbating factor.

If a publication quotes Phil Gramm and takes it seriously, or presents it as a rational opinion, that publication has a serious problem in terms of understanding history and or it is corrupt. Phil Gramm has been crucial in some of the most damaging financial legislation in recent memory and he and his wife are absolutely corrupt. Its very simple, if Phil Gramm says the sky is blue, assume the opposite.

The comment by Robert Hume quoting Stanley Kurtz is typical of the "line" that is being pushed by the right wing. Dean, you have stated the facts clearly but much too briefly. It is ESSENTIAL that we all understand that it is impossible for the Community Reinvestment Act (and ACORN and all those "affirmative action borrowers") to have caused this. MOST of the loans were but NON-CRA regulated lenders -- NOT by traditional banks.

When we move on the Fannie Mae and Freddie Mac, we must remember that they didn't ORIGINATE a single loan -- AND, even more important, according to Floyd Norris in the NY Times on Monday, September 30 most of those special derivative style packages of morgages were snapped up by private sales BYPASSING Fannie Mae and Freddie Mac -- that's why their share actually declined as the bubble was heating up.

Kurtz's point is that CRA and ACORN applied political pressure so that all lenders had to defend themselves against charges of racism by not enforcing strict lending criteria.

Once the criteria were liberalized for any institution, all lenders had to join in for two reasons: (1) to participate in the bubble or be thought stogy and (2) If you were not participating it must be because you were racist; so you had to participate.

And if the criteria were liberalized for minorities they had to be liberalized for everyone else since otherwise it would be too transparent and would be discrimination against everyone else. Standards were lowered universally and con men and bubble chasers contributed gladly.

Commentators might also want to read a similar analysis by Stan J. Liebowitz "Anatomy of a Train Wreck, Causes of the Mortgage Meltdown"

"This report concludes that, in an attempt to increase
home ownership, particularly by minorities
and the less affl uent, virtually every branch of the
government undertook an attack on underwriting
standards starting in the early 1990s. Regulators,
academic specialists, GSEs, and housing activists
universally praised the decline in mortgage-underwriting
standards as an “innovation” in mortgage
lending. This weakening of underwriting standards
succeeded in increasing home ownership and also
the price of housing, helping to lead to a housing
price bubble."

http://www.independent.org/pdf/policy_reports/2008-10-03-trainwreck.pdf

It's noteworthy that within the subprime market, nonwhite borrowers suffered the same discrimination as they do on other purchases. Mortgage brokers routinely exploited borrowers by signing them up for costlier mortgages than that for which they were qualified. It was the same kind of hidden-camera discrimination as when a black car buyer is quoted a higher price than a white buyer, or a black job applicant is offerred a lower starting salary than a white applicant with a similar resume.

This makes it all the more annoying to blame the housing crash on minority borrowers; the people who are doing so supported the even more overt discrimination where a black man would walk into an open house and immediately be told, "sorry. It just sold."