From the beginning, the report's conclusions were tilted, placing much, if not most, of the blame on Wall Street, greedy lenders in the private sector and the lack of adequate federal regulation. Notably, it played down the government's central role in the mortgage scandal that drove the economy into a deep recession.
The Financial Crisis Inquiry Commission's six-member Democratic majority approved the report, while all four of the Republicans on the panel opposed it. The chief point of contention was the key role that Fannie Mae and Freddie Mac -- the government-created mortgage giants -- played in the financial collapse that toppled banks, shook Wall Street to its foundations and flattened the housing market.The six Democrats maintained that while Fannie and Freddie played a role in the financial disaster, the major cause was Wall Street and the failure of government regulators and policymakers to do their jobs. The panel's Republican members said the facts showed that the two government-created agencies were in fact the chief cause of the crisis that led to their bankruptcy and federal takeover, costing the Treasury more than $130 billion to date.
In a strongly worded dissenting report from the GOP side of the commission, Peter J. Wallison of the American Enterprise Institute sharply criticized the Democratic majority for the way it conducted the inquiry -- overlooking key factors in government policies that led to much lower mortgage-lending standards for minority, low-income home buyers. Such policies burst the subprime mortgage bubble and led to the gargantuan number of home foreclosures that continue to this day.
"From the beginning, the commission's investigation was limited to validating the standard narrative about the financial crisis -- that it was caused by deregulation or lack of regulation, weak risk management, predatory lending, unregulated derivatives, and greed on Wall Street. Other hypotheses were either never considered or were treated only superficially," Wallison wrote.
It wasn't Wall Street banks that led to the crisis, but government housing policy -- charted by Democratic leaders in Congress -- that pressured the Department of Housing and Urban Development and mortgage giants Fannie and Freddie to buy up massive numbers of high-risk, subprime mortgages provided to low-income and minority borrowers who couldn't afford them.