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448 Dissenting Statement

Why Couldn’t We Reach Agreement?
Aft er the majority’s report is published, many people will lament that it was
not possible to achieve a bipartisan agreement on the facts. It may be a surprise
that I am asking the same question. If the Commission’s investigation had been
an objective and thorough investigation, many of the points I raise in this dissent
would have been known to the other commissioners before reading this dissent, and
perhaps would have been infl uential with them. Similarly, I might have found facts
that changed my own view. But the Commission’s investigation was not structured
or carried out in a way that could ever have garnered my support or, I believe, the
support of the other Republican members.
One glaring example will illustrate the Commission’s lack of objectivity.
In March 2010, Edward Pinto, a resident fellow at the American Enterprise
Institute (AEI) who had served as chief credit offi cer at Fannie Mae, provided to
the Commission staff a 70-page, fully sourced memorandum on the number of
subprime and other high risk mortgages in the fi nancial system immediately before
the fi nancial crisis. In that memorandum, Pinto recorded that he had found over
25 million such mortgages (his later work showed that there were approximately 27
million). Since there are about 55 million mortgages in the U.S., Pinto’s research
2
indicated that, as the fi nancial crisis began, half of all U.S. mortgages were of inferior
quality and liable to default when housing prices were no longer rising. In August,
Pinto supplemented his initial research with a paper documenting the eff orts of the
Department of Housing and Urban Development (HUD), over two decades and
through two administrations, to increase home ownership by reducing mortgage
underwriting standards. 3
Th is research raised important questions about the role of government
housing policy in promoting the high risk mortgages that played such a key role in
both the mortgage meltdown and the fi nancial panic that followed. Any objective
investigation of the causes of the fi nancial crisis would have looked carefully at this
research, exposed it to the members of the Commission, taken Pinto’s testimony,
and tested the accuracy of Pinto’s research. But the Commission took none of these
steps. Pinto’s research was never made available to the other members of the FCIC,
or even to the commissioners who were members of the subcommittee charged with
considering the role of housing policy in the fi nancial crisis.
Accordingly, the Commission majority’s report ignores hypotheses about the
causes of the fi nancial crisis that any objective investigation would have considered,
while focusing solely on theories that have political currency but far less plausibility.
Th is is not the way a serious and objective inquiry should have been carried out, but
that is how the Commission used its resources and its mandate.
Th ere were many other defi ciencies. Th e scope of the Commission’s work was
determined by a list of public hearings that was handed to us in early December 2009.
At that point the Commission members had never discussed the possible causes of
the crisis, and we were never told why those particular subjects were important or
were chosen as the key issues for a set of hearings that would form the backbone

2 Edward Pinto, “Triggers of the Financial Crisis” (Triggers memo), http://www.aei.org/paper/100174.
3 Edward Pinto, “Government Housing Policies in the Lead-up to the Financial Crisis: A Forensic Study,”
http//ww.aei.org/docLib/Government-Housing-Policies-Financial-Crisis-Pinto-102110.pdf.