Hidden in Plain Sight: What Really Caused the World's Worst Financial Crisis and Why It Could Happen Again

by Peter Wallison

The 2008 financial crisis-like the Great Depression-was a world-historical event. What caused it will be debated for years, if not generations. The conventional narrative is that the financial crisis was caused by Wall Street greed and insufficient regulation of the financial system. That narrative produced the Dodd-Frank Act, the most comprehensive financial-system regulation since the New Deal. There is evidence, however, that the Dodd-Frank Act has slowed the recovery from the recession. If insufficient regulation caused the financial crisis, then the Dodd-Frank Act will never be modified or repealed; proponents will argue that doing so will cause another crisis.A competing narrative about what caused the financial crisis has received little attention. This view, which is accepted by almost all Republicans in Congress and most conservatives, contends that the crisis was caused by government housing policies. This book extensively documents this view. For example, it shows that in June 2008, before the crisis, 56 percent of all US mortgages were subprime or otherwise low-quality. Of these, 76 percent were on the books of government agencies such as Fannie Mae and Freddie Mac. When these mortgages defaulted in 2007 and 2008, they drove down housing prices and weakened banks and other mortgage holders, causing the crisis.After this book is published, no one will be able to claim that the financial crisis was caused by insufficient regulation, or defend Dodd-Frank, without coming to terms with the data this book contains.

Genres: History, Economics, Nonfiction, Business, Politics

431 pages, Kindle Edition

First published January 13, 2015

Reviews

[Letitia Todd Kim · Rating 4 out of 5]

Very persuasive read on what Wallison and others believe is the true cause of the 2008 financial crisis: HUD’s aggressively pushing Fannie Mae and Freddie Mac to buy tens of millions of low quality mortgages, so the government could be seen as the virtuous champion of affordable housing. The evidence of the government’s guilt is robust and compelling, making one marvel at how the FCIC got away with its gallingly wrong, politically motivated, and CYA conclusion that the culprit was the evil banks. Sadly, when the populace can’t be bothered to inquire, political expediency usually wins.

[m · Rating 3 out of 5]

3½ stars.

Good book. I read the FCIC Report and thought it very good. Before I read Wallison's FCIC dissent, I was disposed to disbelieve it because of the universal denunciation it garnered (from pundits, who in hindsight, I don't believe read it).

But Wallison's FCIC dissent (41,000 words) struck me as a reasonable interpretation of the historical record.

Hidden in Plain Sight is a thorough elaboration of the case that Wallison first argued in his FCIC dissent.

Wallison's persuaded me to believe that HUD/GSE policies were the root cause of the housing bubble. But I disagree with the case he marshals (chapter 12) for eliminating mark-to-mark accounting, even though MTM may have indeed exacerbated stockmarket selling—a disagreement I'd love to discuss with Wallison.

In the ongoing battle of ideas regarding what caused the financial crisis, Wallison puts forth in these pages a credible compelling case that far exceeds that put forth by his many opponents.

This is a good book I'll someday almost certainly reread.

[Henry · Rating 5 out of 5]

- Central government had no idea how bad the suvprime mortgage was, and the author argues the root cause was simple: bad data. The mainstream media, as well as the government administration kept using the data that severely underestimate the degree of the problem of the mortgage default

- However, the fascinating part about the bad data is that how prevalent people believe in those data (and it's still evident to this day, for instance, both CPI data and unemployment data are absolutely flawed but they're constantly cited as the truth)

- People wouldn't bet against the flawed number even the odd is with them - herd mentality makes the majority believe what other tells them and impair them from making their own judgements

[Thomas P. · Rating 3 out of 5]

Since I bought this book thru Amazon, I did not flip through it beforehand. When it arrived, I saw that it was loaded with graphs and charts, hence I thought it would be an academic type read, and I guess it is somewhat so, but still, even though the financial crisis of '08 is presented slanted toward a view from the right, it is an ok work. 2 1/2 stars out of 5, rounded up to 3 for a good writing effort by the author.

[Memkaveq · Rating 4 out of 5]

This book is a nice expansion of Wallison's absolutely irrefutable lone dissent from the Financial Crisis Inquiry Report. In particular, the chapter on problems with mark-to-market valuation is quite interesting, and the many examples of lies disseminated by economists, journalists, and government officials are very revealing.

[Sandi · Rating 4 out of 5]

This was explaining the Financial crisis of 2008 and was written so as understand the many factors that causes and how it could happen again. Fairly easy to understand . I guess we see if it happens in the future