June 3, 2010
Early this morning I watched a replay as the Oracle of Omaha testified before the Financial Crisis Inquiry Commission, which is charged with investigating the cause of the global financial crisis. It was very interesting. One of the questioners attempted to get Mr. Buffet to blame Fannie Mae and Freddie Mac for the mortgage meltdown. He refused. Instead he indicated that Fannie and Freddie were doing what the Congress charged them to do. From the perspective of civil and human rights advocates who supported expanded home ownership, this is a very important point.
Some (mostly arch-conservative Republicans) in Congress and (laissez faire capitalists in) the marketplace have tended to blame efforts to expand home ownership for the meltdown. Instead, Mr. Buffet indicated that with mortgage loan payments reaching 50% of homeowner income, marketers and regulators should have known that the mortgage boom was not sustainable. He also cited sudden and drastic credit tightening as an important contributing factor to the credit crisis.
Because the conclusions of the Financial Crisis Inquiry Commission will be used to inform public policy for decades to come, it is critical that we get the right answers now. Today, we take the FDIC for granted. Just as the FDIC was created in 1933 in response to the thousands of bank failures that occurred in the 1920s and early 1930s, the Great Recession will also have a legacy. Whether that legacy will be permanently tightened credit for consumers or more robust regulation of capital depends largely upon how we interpret the causes of the crisis.
It is not surprising that the mainstream financial media will focus on Mr. Buffett’s ideas about compensation of credit rating agencies (they should have some skin in the game to keep them honest) but glosses over his opinions about the culpability of individual homeowners. The Street is not known for its concern about Main Street. But those of us who know Main Street well must make sure that the voices of everyday Americans are not drowned out as we search for causes and cures.
We need your help to make sure the policy makers and pundits hear your voice. Donate to Rainbow PUSH today. Visit www.rainbowpush.org. $25.00 will help us make the voices on Main Street heard.