The big lie of the financial crisis is that troubling technique used to try to change the narrative history and shift blame from the bad ideas and terrible policies that created it.
Consider the causes cited by those who’ve taken up the big lie. Take for example New York Mayor Michael Bloomberg’s statement that it was Congress that forced banks to make ill-advised loans to people who could not afford them and defaulted in large numbers. He and others claim that caused the crisis.
Here are key things we know based on data. Together, they present a series of tough hurdles for the big lie proponents.
- The boom and bust was global.
- Nonbank mortgage underwriting exploded from 2001 to 2007, along with the private label securitization market, which eclipsed Fannie and Freddie during the boom.
- Private lenders not subject to congressional regulations collapsed lending standards.
Beyond the overwhelming data that private lenders made the bulk of the subprime loans to low-income borrowers, we still have the proximate cause issue. If we cannot blame housing policies from the 1930s or mortgage tax deductibility from even before that, then what else can we blame? Mass consumerism? Incessant advertising? The post-World War II suburban automobile culture? MTV’s “Cribs”? Just how attenuated must a factor be before fair-minded people are willing to eliminate it as a prime cause?
I recognize all of the above as merely background noise, the wallpaper of our culture. To blame the housing collapse that began in 2006, a recession dated to December 2007 and a market collapse in 2008-09 on policies of the early 20th century is to blame everything — and nothing.