Pondering the Foreclosure Settlement – 2

Previous post discussed the $8.5B settlement with the large banks regarding the foreclosure issues in the last few years.

Seems to me that there are a number of additional questions we need to ask about the housing bubble.

We need to keep asking questions

Here are just a few of the paths for further discussion:

Walter Russell Mead raises a few questions in his post, Banks Settle Bubble Lawsuits for $20 Billion.

He assigns most of the blame for the housing problem to the big banks.

He then suggests the direction for more discussion:

But the banks are not the only culprits here. The regulators and government entities like Fannie Mae that are now suing the banks shouldn’t be let off the hook either. How asleep at the switch could regulators have been as major bank after major bank went off the rails? And Fannie Mae was much more than an innocent victim in the tragedy.

He suggests we need to look at Fannie, the Fed, and other regulators:

Much more investigation is needed to find out why Fannie Mae and regulators like the Fed were so blind. Was it greed? Bad policy guidance from politicians who deliberately subordinated the principles of sound finance to political goals? Neither the Democrats nor the Republicans on Capitol Hill really want to look closely at this horrible mess because both parties bear huge responsibilities for the ethical and legal meltdowns that accompanied the housing bubble.

On that last issue, Congress has looked at its involvement and decided there is nothing to discuss.  John Fund points this out in his article The Mega Scandal Everyone Has Forgotten.

He mentions the House Ethics Committee looked at the issue of many members of the House, many Senators, and many of their staff getting extremely favorable loans from Countrywide. Not surprisingly, the Ethics Committee did not find anything wrong.

Some of the things we ought to be discussing include that an earlier report from the House

…discloses that at least four Capitol Hill staffers in critical positions for Countrywide, including aides on the House Financial Services and Senate Banking panels, obtained VIP loans from the firm. These loans started as early as 1998.

The result? Mr. Fund continues:

Left unsaid is that Countrywide, Fannie, and Freddie were also able to kill attempts to rein in the subprime-mortgage market while it was pumping up the unsustainable housing bubble, starting in the late 1990s, and peaking between 2004 and 2006.

That sentence alone contains tremendous room for a wide range of investigative reporting. The payments, lobbying by private companies, lobbying by the GSE’s, cooperation from congressional members and staff, knowledge of brewing troubles, and lack of efforts to prevent problems all provide lots of room for asking questions.

His conclusion:

Even if lawmakers temporarily avert the fiscal cliff, our fiscal problems will continue until we address the government-directed crony capitalism that is destroying our ability to end the current economic malaise and reclaim our prosperity.

Yes, there are other questions to ask.

Note:  I will return this discussion to my Attestation Update blog, for reasons discussed here.