In fact, a major cause of our recent downturn was a housing crisis created by reckless government policies.
You’d think that by 2013 Republicans might have abandoned the long discredited position that Fannie and Freddie or some ill-conceived “big-government solution” was the root cause of the mortgage crisis, or that the party’s anointed savior might more carefully consider the use of such disingenuous rhetoric. Paul Krugman is only among the latest to set things straight:
Look, this is one of the most thoroughly researched topics out there, and every piece of the government-did-it thesis has been refuted. … No, the [Community Reinvestment Act] wasn’t responsible for the epidemic of bad lending; no, Fannie and Freddie didn’t cause the housing bubble; no, the “high-risk” loans of the [government sponsored enterprises] weren’t remotely as risky as subprime.
How long ago was this contention already being shot down? Rubio’s remark had me returning immediately to a faithfully referenced story, bookmarked years ago mainly to prepare for a family gathering at which several excited peddlers of the tale would be in attendance: “Private Sector Loans, Not Fannie or Freddie, Triggered Crisis.” It’s from October 2008, but unlike the myth dutifully propounded by Rubio, it never really gets old, while also having the benefit of being true.
It’s important to keep these facts in evidence, because, as Krugman concludes:
[Rubio] and his party are now committed to the belief that their pre-crisis doctrine was perfect, that there are no lessons from the worst financial crisis in three generations except that we should have even less regulation. And given another shot at power, they’ll test that thesis by giving the bankers a chance to do it all over again.