Dissenting View On The Financial Crisis

See What Caused the Financial Crisis?: Congress's inquiry commission is offering a simplistic narrative that could lead to the wrong policy reforms by BILL THOMAS, KEITH HENNESSEY AND DOUGLAS HOLTZ-EAKIN. From the WSJ, 1-27-11, page A21.

They aim to avoid any simplistic explanation like it was all the fault of Fannie Mae and Freddie Mac or that it was all greedy bankers. Their version has 10 parts. Here are their last two paragraphs:

"We agree with our colleagues that individuals across the financial sector pursued their self-interest first, sometimes to the detriment of borrowers, investors, taxpayers and even their own firms. We also agree that the mountain of government programs supporting the housing market produced distorted investment incentives, and that the government's implicit support of Fannie Mae and Freddie Mac was a ticking time bomb.

But it is dangerous to conclude that the crisis would have been avoided if only we had regulated everything a lot more, had fewer housing subsidies, and had more responsible bankers. Simple narratives like these ignore the global nature of this crisis, and promote a simplistic explanation of a complex problem. Though tempting politically, they will ultimately lead to mistaken policies."