moneyhouse.jpgI've not seen it getting much play in the blogosphere, but the Center for Public Integrity unveiled a hefty new web site tracking the subprime efforts, lending standards, and lobbying dollars of the major banks. The point of the report is simple: They meant to do this. Not "this" insofar as it means getting their compensation capped and falling into insolvency. But "this" insofar as it means popularizing subprime loans. As CPI writes, "These big institutions were not only unwitting victims of an unforeseen financial collapse, as they have sometimes portrayed themselves, but enablers that bankrolled the type of lending that has threatened the financial system." There's even a widget. (The widget broke the blog. The widget is evil. The widget hates you. Beware!)

It's a convincing presentation. But the piece that got front page play in The Financial Times is the lobbying bit: "The top 25 US originators of subprime mortgages -- the risky assets that sparked the global financial crisis -- spent almost $370 million in Washington over the past decade on lobbying and campaign contributions as they tried to ward off tighter regulation of their industry."

When people read these numbers, they tend to try and think of legislation that wasn't passed but should have been. Like cramdown. That's probably not the right way to understand it. Rather, this sort of sustained lobbying and financial support from Wall Street changes what the political system is interested in. Senators, after all, are busy people with lots of problems that they're being asked to worry about. If Wall Street is giving them a lot of money and seems to be doing pretty well, they don't spend a lot of time trying to find problems and trying to craft preventive regulations. When they meet these lobbyists and attended fundraisers with these bankers, they all seem like smart, capable, people who know a whole lot more about finance than do the members of Congress. And so it goes that reports suggesting subprime mortgages are going to blow up do not get pushed to the top of the paper pile. The money creates an environment where no one wants to find problems in the mortgage market, and so no one does.

What's galling about that is the premises. The bankers, we agree, know something about making money. They are pumping $370 million into lobbying and influencing members of Congress. That's a lot of money. Clearly they thought they were getting something. But no one found this state of affairs particularly scandalous, or even all that questionable. After all, you couldn't point to a bribe or anything.