A long article from the Federal Reserve on the housing bubble and recovery from the great recession doesn’t mention the fed’s role in anything other than generating the recovery. See: Subprime Mortgage Crisis. Absolutely no mention of the massive role played by easy money and Congressional policy pumping up the housing market.
The first part of the article is called How and Why the Crisis Occurred.
The short paraphrase is the runup in housing prices, increased demand for homes, surge in subprime loans, collapse of prices, and mass of foreclosures kinda’ sorta’ just happened.
No cause mentioned, especially no role assigned to the federal government in general or the Fed in particular.
Let’s look at the article in more detail.
Three paragraphs (363 words) describe the runup as something that apparently just happened. No mention of easy money. Nothing about Congress demanding that Fannie and Freddie pump lots of money into subprime loans. Skipping over their success at generating huge amounts of subprime paper. Narry a stat on the explosion in subprime loans. No comment that several administrations (with both R and D labels) made it official policy for people who couldn’t afford a loan to get one anyway.
Paragraph 4 says the market just turned. No particular reason. The only specific mention is New Century’s bankruptcy at which point all the MBS paper dropped in value. Obviously just an accident of nature. Perhaps the fault of the free market.
Paragraph 5 provides the first mention of the federal government when, oppsie, all the paper owned by Fannie and Freddie dropped in value for unspecified reasons.
The next 3 paragraphs (158 words) describe how the housing market turned on itself, collapsed further, and then helped cause the great recession. Four reasons are given for why housing made the whole economy worse.
Cue the sound track for the last three minutes of the William Tell Overture
Then the government appears for the first time in the story, riding to the rescue of the housing industry, banking, the economy, and the American way. (Oops. Sorry. That’s Superman, not the Lone Ranger. Got my music and tag lines mixed up.)
Paragraph 9 (122 words) lists what the federal government did to make everything right.
Paragraph 10 (172 words) describes the wonders accomplished by the Fed in Quantitative Easing I, II, and III. The results were very good. Without a paragraph break, the article continues after describing QE by saying
These moves [antecedent of “those” would be QE I/II/III] and other housing policy actions—along with a reduced backlog of unsold homes following several years of little new construction—helped stabilize housing markets by 2012
And everything is fine now:
By mid-2013, the percent of homes entering foreclosure had declined to pre-recession levels and the long-awaited recovery in housing activity was solidly underway.
There is a total of one brief mention that Congressional or Fed policy had any involvement in any of this anywhere. And that is only to focus on the losses Fannie and Freddie took on their portfolio because they borrowed money at Congressional direction to buy up some of those (magically appearing) subprime loans.
After 1,045 words, the “how and why” of the crisis doesn’t involve the Fed or Congress in any way whatsoever.
Cross-post from my other blog, Outrun Change.