By Arnold Kling
After the hearing on Freddie and Fannie, my wife said, “You know, after I was finished with jury duty, I was feeling pretty patriotic. I wasn’t feeling patriotic after this.”
C-span took this photo.
The hearing covers two c-span videos, and I only appear on part of the second one. Most of the time was taken by the panel that included the former CEO’s. The first video, which includes only them, is here.
The second panel is where I appear. My panel starts about 2/3 of the way through here. [UPDATE: a commenter found a file with just my panel here. For me, the flash video works poorly.]Not surprisingly, there was a lot of posturing going on. My wife got tired of hearing Congressmen probe into the the salaries received by the former CEO’s.
The chutzpah award goes to former Fannie Mae CEO Franklin Raines, who complained that regulators did not do enough to stop Freddie and Fannie from buying high-risk mortgages. I don’t know where to begin on that one. I would say it’s like a teenager who insists that you let him go to a party, then after he gets drunk and gets put in jail complains that you needed to give him more supervision. But it’s even worse than that, considering all the lobbying Fannie did under Raines with the main purpose of emasculating regulation.
Richard Syron and Donald Mudd, the CEO’s at Freddie and Fannie, respectively, when they dove into subprime, performed poorly at the hearing, in my opinion. During our panel, Ed Pinto, who now does consulting in the mortgage industry, completely devastated their attempts to claim that they mostly stayed out of subprime. [UPDATE: The New York Times agrees with me that Pinto was the star.]
I can imagine a consensus emerging to take Freddie Mac and Fannie Mae back under the government and use them to try to modify troubled loans. That would be the worst possible outcome. I spoke out against loan modifications, but I’m sure that I am a voice in the wilderness. The more we try to do loan mods, the longer the crisis will last and the more it will cost taxpayers. Other than that, they are a wonderful idea.
The room was basically empty when my panel spoke. The press had gone. All but three of the Congressmen had gone. My wife and daughter stayed, and I felt sorry for them, considering that the CEO panel ran at least two hours longer than expected, with few good questions asked and zero good answers given.
I’m glad they invited me, and I’m glad that I went. My father would have been proud. But it’s hard not to come away thinking that I have more influence blogging.