Hidden in Plain Sight Reviewed

The lion's work of my multi-year project reviewing all of the post-financial crisis books which I felt warranted review is long past, and my focus now is on my own work on the subject, targeting a 2017 release.  The high volume of post-2008 books came between 2009 and 2011, and a few relevant stragglers entered the fray since then.  Certainly the most noteworthy of the "latecomer" books on the crisis are the 2015 work of Peter Wallison, Hidden in Plain Sight: What Really Caused the World's Worst Financial Crisis and Why it Could Happen Again.  I refer to the work as noteworthy because it is a fine book with a highly valid contribution to the study of the crisis' causation, but also because Wallison was an actual member of the government's Financial Crisis Inquiry Commission, a preposterous waste of taxpayer money assembled by Congress in July 2009 to thoroughly investigate the crisis and its causes.  It was not just a waste of money because the commission's findings got everything wrong (Wallison admirably was the sole dissenter from the commission's pre-baked conclusions), but also because the whole pre-text for the inquiry was to guide changes in policy that could stem the tide in the future.  The Obama administration's remedy to the financial crisis - the Dodd-Frank legislation - was rammed through Congress into law before this commission had even completed its work or submitted its findings.  It was a show pony of an investigation, but it did nevertheless contain one Peter Wallison, and now several years later he has come out to give us his thesis on what really caused the crisis, and why he could not go along with the Congressional farce.His thesis is, in a nutshell, that it was government housing policy that caused the financial crisis.  No shocker there.  He essentially uses data point after data point after data point to incontestably prove that (a) 31 million "non-traditional" mortgages came into the American economy by 2008 (NTM being the more important classification than the media's love of the term "subprime", as it combines where the real toxicity proved to be - in the combination of subprime with "Alt-A" -  'alternatives to agencies', or loans that didn't mean the underwriting standards of Fannie/Freddie; these 31 million NTM's were at the heart of the crisis; and (b) They were the direct result of government housing policy which created them into being; and (c) The mere existence of this massive bloc of troubled mortgages was bad enough, but the extensive effort to cover up their existence - to hide or suppress the real number of NTM's in the system, - led to a very faulty climate for risk-taking; and (d) Efforts to continue legislating social mandates via government housing policy will continue to lead to economic instability and even repeated crises.That may have been a mouthful.  It was certainly a mouthful to read his 361 pages of substantiation.  But the basics of his conclusions are simple enough, and if left alone, not really problematic.  There would have been no financial crisis without aggressive government mandates to increase lending where it did not belong, and that misguided belief that social policy could be administered through the economic experimentation of various lending mandates created an intensely malignant culture in the world of mortgage lending.  Wallison further proves beyond any shadow of any doubt that Fannie Mae and Freddie Mac did not merely get "caught up in the pursuit of ill-gotten gains," as is often alleged, mostly as an attempt to even blame free market greed for Fannie/Freddie's decidedly non-free market troubles.  Rather, Wallison proves, Fannie and Freddie got heavy into the NTM world because they had no choice if they were o meet their government mandates.  I have read a dozen critiques of Wallison's work, and none of them dispute his raw data in this regard.So with a useful book on misguided government social/housing policy as a core piece of the financial crisis, why do I need to find fault at all?  The problem I have with this mostly fine work is that Wallison is not content to trust his own contentions about the crisis; he decides to conclude something more than the truth of his own thesis requires him to conclude.  For Wallison, it is not just that government housing policy was a key piece, or the key piece, or a sine qua non in this crisis.  For whatever reason, Wallison felt the need to additionally conclude that all other contributors to what became the 2008 crisis were not contributors at all - not in a complementary way, not in a supplementary way, not in a toxic accelerant way - they simply should be dismissed out of hand.  This conclusion is frustrating to a thoughtful reader, for it is highly unnecessary for one also convinced of Wallison's underlying work, and because it is simply preposterous on its face.  The lengths Wallison goes to in order to claim that Federal Reserve monetary policy played no role in fertilizing the 2002-2006 housing bubble is cartoonishly silly.  Perhaps no segment of the book is more disappointing than his completely indefensible supposition that there was no material inter-connectedness in the financial system, and that the CDS problem (credit default swaps) were easily remedied by one financial institution just replacing the CDS from one defunct firm (say, Bear Stearns) with a CDS from another healthy firm (he goes so far as to say a homeowner just needs to replace a bankrupt fire insurance company with another, never stopping to consider that in 2008 the entire business of this "fire insurance" was dead on arrival, since all of the companies were in over their heads with them, no one trusted each other's marks, and surely no one wanted to write what had just brought down another firm (Bear, Lehman, etc.).  My frustration with Wallison's reckless conclusions that essentially all was well in Bear and Lehman land is not just how completely and empirically wrong they are, but how unnecessary they were for this book.  He decided to throw out the "perfect storm" hypothesis about the crisis - the one that says it was the cocktail of government housing policy, Fed monetary policy, Wall Street leverage, rating agency corruption, and all other such assembled theories - and rather than conclude that nearly every problem which has been diagnosed in the financial crisis autopsy has some validity to it, even if some more culpability than others, he decides to discard all the others in their entirety.  And in doing so, I fear, he loses incredible legitimacy for his very legitimate basic thesis.The financial crisis would have never happened without the accelerated attempt of Washington D.C. to legislate social policy through housing policy.  One of the results of this fatal government initiative was a non-traditional mortgage glut that surpassed 31 million in number.  The accompanying and unsurprising problems that these non-traditional mortgages created were the source of the financial crisis, and to the extent that Wallison's book carefully and academically defends everything the prior three sentences say, his book was a helpful and needed work for students of the crisis (and a society that says they don't want it to happen again).  But the story as told in the preceding three sentences is not the whole story, as those 31 million NTM's were the critical mass of an inter-connected financial system that levered up on insanity.  They levered up on human greed, and I don't mean the Wall Street banker kind of greed that wanted a bigger bonus.  The financial system levered up on the greed of Main Street, that a covetous purchase of a home you could not afford was a good and noble thing, and it was our financial system's bet on Main Street that proved fatal.  Lehman's collapse did not cause the financial crisis; it was caused by the financial crisis.  After reading Wallison's book readers will understand that crisis even more, but they will not understand it completely.