Hidden in Plain Sight
What Really Caused the World’s Worst Financial Crisis and Why It Could Happen Again(amazon)
Peter J. Wallison (View Bio)
Hardcover: Encounter Books, 2015.
The 2008 financial crisis—like the Great Depression—was a world-historical event. What caused it will be debated for years if not generations. The conventional narrative about the financial crisis is that it was caused by greed on Wall Street and insufficient regulation of the financial system. That narrative produced the Dodd-Frank Act, the most comprehensive regulation of the financial system since the New Deal. There is evidence, however, that the Dodd-Frank Act has slowed the recovery from the recession. If insufficient regulation caused the financial crisis, then the Dodd-Frank Act will never be modified or repealed; proponents will argue that doing so will bring back another financial crisis.
However, there is a competing narrative about what caused the financial crisis that has received very little attention in the mainstream media. This view, which is accepted by almost all Republicans in Congress and most conservatives and conservative intellectuals, contends that the financial crisis was caused by the government’s housing policies. This book provides extensive documentation of this view. For example, it shows that in June 2008, before the crisis, there were 32 million subprime or other low quality mortgages in the US financial system—58 % of all US mortgages. Of these, 76% were on the books of government agencies such as Fannie Mae and Freddie Mac. When these mortgages defaulted in 2007 and 2008 they drove down housing prices 30-40% and weakened banks and others that held these mortgages, causing the financial crisis.
After the publication of this book, no one will be able to claim that the financial crisis was caused by insufficient regulation, or defend the extensive government regulation in Dodd-Frank, without coming to terms with the data this book contains.
"Peter Wallison’s important, engaging and alarming Hidden in Plain Sight is the definitive work on the financial crisis and a must-read for policymakers, the commentariat, and citizens wanting to pierce the populist anti-Wall-Street, anti-bank fog. Wallison makes a cogent case that 'the 2008 financial crisis would not have occurred but for the housing policies of the U.S. government between 1992 and 2008.'" — Eric Grover, The Washington Times
"Anyone interested in the financial crisis should read this book. It is extensively documented and well-written." — Mark A. Calabria, Cato Institute