Peter Wallison, one of four dissenting members of the Financial Crisis Inquiry Commission, railed against the report on the cause of the financial crisis, and named the government’s housing policy as the culprit behind the meltdown. Wallison, the Arthur F. Burns Fellow in financial policy studies at the American Enterprise Institute, released his 93-page rebuttal ahead of the FCIC report Thursday. In it, he said the commission merely pursued facts that fit its initial assumptions about “lax regulation, greed and recklessness on Wall Street.” The commission found that the crisis was avoidable had regulators and financial institutions not ignored dramatic increases in household mortgage debt, a viral growth in financial firms’ trading activities, unregulated derivatives and many other red flags. But Wallison said the cause came a decade before. “I believe that the sine qua non of the financial crisis was U.S. government housing policy, which led to the creation of 27 million subprime and other risky loans — half of all mortgages in the United States — which were ready to default as soon as the massive 1997–2007 housing bubble began to deflate,” Wallison wrote. Had the U.S. not pursued this policy, he added, “the great financial crisis of 2008 would never have occurred.” While the FCIC concluded that the government-sponsored enterprises followed Wall Street into the subprime quagmire, Wallison blamed policy developed by Congress in 1992 by the Department of Housing and Urban Development during the Clinton and George W. Bush administrations that sought to increase homeownership in the U.S. Government entities such as Fannie Mae and Freddie Mac, the Federal Housing Administration and insured banks were “compelled” to compete for more mortgage borrowers, causing underwriting standards to decline and swelled a housing bubble for a decade before bursting in 2007. Wallison even questioned why the report was commissioned in the first place if Congress passed and President Obama signed the financial overhaul that was the Dodd-Frank Act six months before the report was completed. “In the end, the majority’s report turned out to be a just-so story about the financial crisis, rather than a report on what caused the financial crisis,” Wallison wrote. Wallison is not the only disagreeing voice in the room. Three other members of the FCIC board also published a joint dissent claiming that financial shock and panicking markets are largely to blame. Write to Jon Prior. Follow him on Twitter: @JonAPrior

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