If there’s one fundamental trait that connects every analysis for the main cause of the financial crisis, it's bad mortgages.

At least, that’s what Rep. Scott Garrett, R-N.J., reiterated — twelve times — in his testimony Wednesday during a hearing on Fannie Mae and Freddie Mac’s "failures" at the U.S. Housing Financial Services Committee

"No matter what part of the financial crisis is discussed it always comes back to bad mortgages," Garrett said. 

He added, "My friends on the other side of the aisle love to discuss a wide variety of other reasons that they believe led to the financial crisis." 

However, for each instance, the underlying similarity is, you guessed it, bad mortgages. 

Garrett even went as far as to say that his Democratic colleagues favorite things to highlights are "opaque and complicated derivatives, incompetent and over-relied upon credit rating agencies, off-balance sheet and synthetic securitizations, pro-cyclical accounting standards, and greedy Wall Street banks."

However, all of these things are classified as symptoms and not the actual 'disease.' The disease is – can you take a guess? Bad mortgages.

Here is a snapshot of what Garrett said:

"The derivatives were written on Bad Mortgages.

The Ratings Agencies were rating Bad Mortgages.

The Securitizations had collateral of Bad Mortgages.

The Accounting standards marked to market Bad Mortgages.

Failing Wall Street banks were holding Bad Mortgages." 

The striking question that was brought up during the hearing and the main topic of conversation amongst members of Congress is "How did we allow Fannie Mae and Freddie Mac take over 90% of the housing market and moreover, where do we go from here in this existence?" 

Garrett claims his Democratic colleagues did not take the appropriate time to accurately diagnose the appropriate causes of the financial crisis. 

Instead, "they rushed forward with the 3,000-page Dodd-Frank Act, which includes a liberal wish list of the policy changes they had pent up over the previous 12 years that had absolutely nothing to do with the crisis and that are not strangling the economy and negatively impacting job creation," Garrett noted. 

Many of the interest groups that directly benefit from large subsidizations in the housing market continue to claim that both government-sponsored enterprises fell victim to the private market participants.

Garrett believes this suggestion is erroneous.

"It was government housing policy, coupled with loose money from the Federal Reserve, that caused the housing bubble and those are the areas where we must focus reform," he argued.

While we can spend hours pointing fingers playing the blame game, the majority battle the market faces is figuring out what exactly needs to happen with the GSEs.

Some are calling for a reversal and taking both Fannie Mae and Freddie Mac back to their former years, while others – like Garrett – are calling, "off with their heads."

"Fannie Mae and Freddie Mac are the essence of Crony-Capitalism and if we recreate them in some form or fashion as so many in the industry and across the aisle are recommending, we are doomed to repeat the same terrible outcomes that our nation has experienced over the last four years," Garrett said.

So I leave you, dear reader, with this final question: would you like to relive the last almost five years of the housing market?

cmlynski@housingwire.com