The Mega Scandal Everyone Has Forgotten

[Geee]

National Review:

In Star Wars, Obi-Wan Kenobi used an old Jedi mind trick on Stormtroopers to deflect them from their real quarry: “These aren’t the droids you’re looking for.” It worked.

It looks as if another mind trick, well known in the Congress — delay and deflection — will now work to make Americans forget one of the biggest scandals of our time: the housing collapse that triggered the 2008 financial meltdown we are still suffering from. We shouldn’t just gaze over the fiscal cliff everyone else is scrutinizing; we should also examine the droids who helped set in motion our current economic mess.

Last week, over the holidays, the House Ethics Committee quietly joined its Senate counterpart in finding that no members or staffers — or at least any it claimed jurisdiction over — broke congressional rules while obtaining “VIP” mortgages from Countrywide. This failed lender at one time provided a huge share of the questionable subprime mortgages issued by Fannie Mae and Freddie Mac, the government-backed mortgage lenders that were some of the first players to fall in the 2008 financial collapse.

Fannie and Freddie scooped up Countrywide loans and pooled them and others into mortgage-backed securities that were sold with an implicit taxpayer guarantee that eventually became explicit. The taxpayer guarantee allowed — indeed, encouraged — the lenders to be reckless, creating a moral hazard. In 2008, this set-up helped bring down the whole house of cards built by subprime mortgages.