October 29, 2008
Dean Baker
TPMCafé (Talking Points Memo), October 29, 2008
See article on original website
I was on the Bill O’Reilly show last night and placed in the position of defending Barney Frank against the charge that he was largely responsible for the housing bubble and crash. I have occasionally had bad things to say about Frank myself, so I don’t mind O’Reilly or anyone else criticizing him, but this one seemed more than a bit over the top.
O’Reilly blamed Frank for protecting Fannie Mae and Freddie Mac in their unsound lending practices. I made the obvious points that Fannie and Freddie were followers, not leaders in this mess (they lost market shares to the private sector whiz kids). More importantly, Frank didn’t even take over the Financial Services Committee until January of 2007, after almost all the bad loans had already gone out the door.
O’Reilly then responded that, even in the minority, Frank could have been a Paul Revere, warning of the dangers of the housing bubble and the inevitable collapse. Indeed he could have, but Bill O’Reilly also could have been the Paul Revere of the housing bubble.
In fact, I think that we should blame Bill O’Reilly for the housing bubble. Imagine that he charged up his followers about the bubble back in 2002 or 2003, pointing out that house prices were way out line with historic levels. Imagine he called attention to declining loan standards and rising leverage ratios.
Mr. O’Reilly could have also attacked the liberal media for ignoring these impending dangers. For example, he could have mocked the Washington Post for relying on David Lereah, the chief economist for the National Association of Realtors, as its most often cited expert on housing. He could have ridiculed the Post and other mainstream news outlets for missing the housing bubble just 2 years after they managed to completely miss the stock bubble.
And of course, O’Reilly could have been beating up on Alan Greenspan for his bubble promotion as well as his neglect of regulation of the mortgage market and banking sector.
If O’Reilly had produced a steady drum beat of shows warning about the housing bubble, it might well have had an impact. News outlets like the Post may have been forced to take his complaints seriously and start asking real questions about the housing market. This may have forced the hand of Greenspan and other regulators. At the very least it might have injected the appropriate levels of fear into the market for housing, as well as the market for mortgage backed securities and various derivative instruments.
So, there you have it. Bill O’Reilly is responsible for the housing crash, the financial crisis, and the recession.
Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer. He also has a blog on the American Prospect, “Beat the Press,” where he discusses the media’s coverage of economic issues.
