aaAARRGGH!!!!

That sums up my post-mortem on the hearing today. You can watch a replay here. The witness testimony begins about 1/5 of the way through, and I am the last witness, so I start about 23 percent of the way through. (My media player does not show minutes.) After that, there are questions/speeches from members of the House Committee.

I left with a sense that it was me against everyone else. Everyone else thought that the problem with withdrawing FHA, Freddie, and Fannie from the mortgage market is that private capital is not ready to take their place. I tried to point out that all of the capital in the mortgage market today is private capital. The real issue is that taxpayers are taking much of the risk in mortgage lending. If taxpayers were not taking that risk, then, yes, interest rates would rise, particularly on 30-year fixed-rate mortgages. But to say that private capital is not ready to come into the market makes it sound as though the consequences of phasing out the GSEs would be much worse than actually would be the case.

Even more frustrating to me were the other three witnesses, who insisted that securitization is necessary for mortgage markets. The guy next to me was particularly insistent on that point, and some of his comments during the Q&A reminded me of the worst of the spokesmen in the Freddie/Fannie propaganda machine. It took a lot of restraint on my part not to yell “baloney sandwich!” at the top of my lungs.

It disgusts me that these witnesses are the people that Congress brings in to “educate” themselves. Interest groups are not the people that you want providing education. They can provide input to people who are educated, but if you are not educated enough to know when they are informing you and when they are spinning you, you should not be listening to them.

This is the Financial Services Committee, and I think they need a basic course that teaches the concept of financial intermediation. After that, they could take my housing finance course, but right now my course would be too advanced for them.

Of course, I should be the last person who is surprised by the knowledge-power discrepancy. But for some reason I was not prepared to be reminded of it, and I walked out of the hearing with a need to scream.

8 thoughts on “aaAARRGGH!!!!

  1. I’m sorry to read about your frustration. It sounds almost as though they used you to add legitimacy to the private interest speakers.

    You still have your blog.

  2. At least this only happens in the financial services industry, and not some really important sector of the economy like healthcare.

  3. I feel the same way watching the current batch of gun control laws being “debated” in the California legislature. Those with the power are ignorant of the very issues they are wielding power over, and they appear to feel absolutely no need to become less ignorant.

  4. Your mistake is to assume hearings like this are for the purpose of discovering the truth about a subject, or to learn what good policy might be. In fact, they are to provide publicity to members, and opportunities for interest groups to make their pitches. They provide a superficial veneer of rationality to the process of creating rents for those groups.

  5. The bulk of bank assets are invested in assets tied to real estate in one form or another. Combining the lobbying efforts of the financial industry plus the NAR ensures that this special interest group will be at the top of the food chain when it comes to government handing out favors. Why wouldn’t the real estate special interest groups prefer/demand that taxpayers pick-up the risk when things go bad?

  6. I sometimes wonder what would happen if:

    1) You made some educated guesses about what the other witnesses would say.

    2) For several of the most egregiously wrong things you expected them to say, prepared a short, pithy explanation of why it was untrue.

    3) When you hear one of those untruths, shout, “Not true” or “B.S.” or something similar, and quickly deliver your prepared response.

    It might have no effect except “we can never have dinner at the Four Seasons again” or it might help get a little debate going (as well as turning you into a minor celebrity).

  7. Your discussion begins at approximately 41 minutes, for those players that show time.

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