This piece in the Huffington Post makes it appear that the Gang of Four are out to protect Wall Street by, for example, manipulating the language in the ultimate report. Further, the Gang of Four don't like the idea that the FCIC is not meeting its December 15 deadline, and have chosen to issue a kind of pre-report, which is available on the American Enterprise Institute web site, with a statement about the intent of the group here.
In case you don't know what the FCIC is up to, the FCIC web site tells us that its mission is to "examine the causes, domestic and global, of the current financial and economic crisis in the United States." Hearings have been held, various experts and officials consulted, the relevant economics brought to bear, etc., and the FCIC is supposed to tell us what happened and why.
I read the Republican Gang of Four pre-report, and it looks quite innocuous to me. This is a 9-page description of what happened during the financial crisis. The economics seems sound, and the document is written in accessible language. Blame appears to be spread around. For example, the authors state:
Put simply, the risk of a housing collapse was simply not appreciated. Not by homeowners, not by investors, not by banks, not by rating agencies, and not by regulators.The government gets a good share of the blame, but gets credit for its response to the crisis:
These were the best of a series of bad options, and policymakers had extremely limited information to work with. While we believe that the government deserves quite a lot of the blame for getting our financial system and our nation into trouble in the first place, we applaud the quick and decisive actions taken by our nation’s leaders during the panic.What seems to have bothered some people about the pre-report is the focus, early in the document, on Fannie Mae and Freddie Mac as key players in the runup to the crisis. Now, why anyone would want to defend the GSEs is beyond me. In the United States, the securitization of mortgages may be a necessary component of the financial system, as it promotes diversification in a banking system which still has many small banks. However, there is no reason why that securitization cannot be accomplished by the private sector (appropriately regulated of course), without government guarantees or subsidies. Fannie and Freddie, are currently under federal government conservatorship, and each continues to operate at a loss, with Fannie losing $1.3 billion and Freddie $2.5 billion in the third quarter of 2010 alone. The Dodd-Frank Act neglected to come up with a Fannie/Freddie solution, but we need one, and badly. My suggestion is that asset purchases and the issue of liabilities by Fannie and Freddie be suspended, with the assets ultimately sold off.