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Post-Event Summary
For quite some time, most books have blamed the U.S. financial crisis on the vices of Wall Street, often minimizing or ignoring the role of certain government-sponsored enterprises (GSEs). On Wednesday at AEI, however, panelists gathered to evaluate the GSEs Fannie Mae and Freddie Mac as drivers of the subprime lending crisis of 2008, as discussed in Oonagh McDonald’s new book “Fannie Mae and Freddie Mac: Turning the American Dream into a Nightmare.”

McDonald commenced with a keynote address discussing her book’s research on the affordable housing ideology that drove Fannie and Freddie to pursue homeownership targets at the expense of adequate modeling, documentation and credit requirements. AEI’s Ed Pinto went on to describe the gradual politicization of lending, demonstrating how Fannie and Freddie drove never-before-seen leveraging throughout the mortgage market.

Josh Rosner of Graham Fisher & Co. then demonstrated how, as standard setters, Fannie and Freddie  seasoned the markets for subprime lending, the precursor to the great failures of ratings agencies to evaluate collateralized debt obligations. Finally, Lawrence White of New York University’s Stern Business School presented data that shows that while government housing subsidies increased U.S. housing stock by 30 percent, these subsidies prevented over $1 trillion of U.S. gross domestic product growth. White concluded with suggested policy prescriptions for avoiding future bailouts, including greater capital requirements for systemically important financial institutions, a tax on institution size and a removal of government-backed guarantees.
–James Pickens

Event Description
For years, most books about the financial crisis blamed it on Wall Street greed or irresponsibility and — like the Financial Crisis Inquiry Commission — ignored or minimized the role of the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. Now, however, a number of upcoming books will evaluate the GSEs and their activities before the 2008 crisis. The first of these is “Fannie Mae and Freddie Mac: Turning the American Dream into a Nightmare” by Oonagh McDonald, a U.K. scholar of financial regulation, a former director of the U.K.’s Financial Services Authority and a former Labour Party member of Parliament. The book will be reviewed by a trio of authors who have studied and written about the GSEs over many years.

Full video will be posted within 24 hours.


1:45 PM

2:00 PM
Oonagh McDonald, University of Leeds

Edward J. Pinto, AEI
Josh Rosner, Graham Fisher & Co.
Lawrence J. White, New York University

Peter J. Wallison

4:00 PM

Event Contact Information

For more information, please contact James Pickens at [email protected], 202.419.5212.

Media Contact Information

For media inquiries, please contact Véronique Rodman at [email protected], 202.862.4871.

Speaker Biographies

Oonagh McDonald is a director of the Board for Actuarial Standards, and from 1993 to 1998, she was the director of the Financial Services Authority, the body responsible for the regulation of the entire financial services industry in Great Britain. An international financial regulatory expert, she has advised the Russian Federal Capital Markets Commission, introduced the training and competence regulations for the financial services industry in the United Kingdom, and written several books on financial services. McDonald was a Labour Member of the U.K. Parliament from 1976 to 1987 and was for four years the opposition spokesman on treasury and economic affairs. She has been the Gwilym Gibbon Research Fellow at Nuffield College, Oxford University, and a visting fellow at the University of Leeds. Her many publications include “Fannie Mae and Freddie Mac: Turning the American Dream into a Nightmare” (Bloomsbury, June 2012) and “Retail Banking in Europe: A View from the Top” (John Wiley & Sons, 2002). She was awarded the Order of Commander of the British Empire in 1998 for her contribution to financial regulation and business.

Edward J. Pinto is a resident fellow at AEI. An executive vice president and chief credit officer for Fannie Mae until the late 1980s, he has done groundbreaking research on the role of government housing policies in the lead-up to the financial crisis. In particular, his data have revealed striking facts about the contributions of housing policy to the mortgage crisis. Two of his major research papers have been submitted to the Financial Crisis Inquiry Commission: “Government Housing Policies in the Lead-up to the Financial Crisis: A Forensic Study” and “Triggers of the Financial Crisis.” At AEI, Pinto is continuing his work on the role of housing policies in the financial crisis and researching policy considerations and options for rebuilding our housing-finance sector.

Josh Rosner is a partner at independent research consultancy Graham Fisher & Co and advises regulators and institutional investors on housing and mortgage finance issues. Previously, he was the managing director of financial services research for Medley Global Advisors and an executive vice president at CIBC World Markets. Rosner was among the first analysts to identify operational and accounting problems at the government-sponsored enterprises and one of the earliest in identifying the peak in the housing market, the likelihood of contagion in credit markets and the weaknesses in the credit rating agencies Collateralized Debt Oblitations assumptions. He has presented his work internationally to a number of organizations, policymakers, bankers and legislators and has been interviewed by major media outlets including PBS, CNBC, Bloomberg, NBC and CBS. He blogs for New Deal 2.0.

Peter J. Wallison holds the Arthur F. Burns Chair in Financial Market Studies and is co-director of AEI’s program on financial policy studies. At AEI, Wallison researches banking, insurance and securities regulation. Before joining AEI, he practiced banking, corporate and financial law at Gibson, Dunn & Crutcher, in both Washington, D.C., and New York. From June 1981 to January 1985, he was general counsel of the U.S. Department of the Treasury, where he played a significant role in developing the Reagan administration’s proposals for deregulation in the financial services industry. He is a frequent contributor to the op-ed pages of The New York Times, The Wall Street Journal and Financial Times. He has also written a book on campaign finance reform entitled “Better Parties, Better Government: A Realistic Program for Campaign Finance Reform” (AEI Press, 2009).

Lawrence J. White
is Robert Kavesh Professor of Economics at New York University’s Stern School of Business and deputy chair of the Economics Department at Stern. From 1986 to 1989, he served as a member of the Federal Home Loan Bank Board and Freddie Mac, and during 1982 and 1983, he was director of the Economic Policy Office, Antitrust Division, U.S. Department of Justice. He is the general editor of The Review of Industrial Organization and former secretary-treasurer of the Western Economic Association International. White is the author or co-author of numerous publications, including “Guaranteed to Fail: Fannie Mae, Freddie Mac, and the Debacle of Mortgage Finance” (Princeton University Press, 2011, with V. V. Acharya, M. Richardson, and S. Van Nieuwerburgh).

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