The SEC Doing Wall Street’s Bidding Robert Kuttner

In the right-wing revisionism of what caused the financial collapse, Fannie Mae and Freddie Mac are leading villains with the federal Community Reinvestment Act in a supporting role. Supposedly, Fannie and Freddie lowered their standards, purchased lots of subprime mortgages, and were major contributors to the housing bubble and crash. In this fable, government pressured banks to make unsound mortgage loans to meet the goals of CRA.

On November 28, hundreds of students from Brauch College linked arms and protested outside a City College of New York board meeting in which members authorized, by a 15-to-1 vote, a $300 annual tuition increase until at least 2015. The protest was so disruptive that, according to The New York Times, Brauch canceled classes after 3 p.m. and stopped regular foot traffic going in and out of the building where the meeting was taking place. Three people were arrested.

The New Yorker's James Surowiecki argues that Elizabeth Warren is in fact a friend of capitalism:

The core principle of Warren’s work is also a cornerstone of economic theory: well-informed consumers make for vigorous competition and efficient markets. That idea is embodied in the design of the new agency, which focuses on improving the information that consumers get from banks and other financial institutions, so that they can do the kind of comparison shopping that makes the markets for other consumer products work so well.

Perhaps the best response to last week's Republican "presponse" to the Financial Crisis Inquiry Commission comes from the New York Times' Joe Nocera, who focuses on commission member Peter Wallison:

The only problem with Mr. Wallison’s theory is that it’s not, as they say, reality-based. Anyone who has looked at the role of Fannie and Freddie will discover they spent most of the housing bubble avoiding subprime loans, because those loans didn’t meet their underwriting standards. (Indeed, for most of their existence, Fannie and Freddie didn’t so much meet their affordable housing goals as gamed them.)

Amar Bhide has produced a compelling Hayekian argument about underwriting efficiency and financial regulation, summarized here. His essential insight is that lending is not a process that is conducive to mechanization and centralization, suggesting that efforts to do so are at the heart of the subprime mortgage bubble and the current foreclosure fraud calamity. It’s certainly the best argument I’ve heard against retail bank concentration.

Your Friday political reading is this Washington Post profile of Florida Senate candidate Jeff Greene, a billionaire who dropped into the state to challenge Rep. Kendrick Meek for the Democratic nomination and the right to face Republican Marco Rubio and Republican-turned-Independent Charlie Crist for the open seat. The Washington Post profiled Greene today, and his campaign appears to be making the case that, as a billionaire, he's immune to influence from the special interests.