Wake up America: Financial Crisis Revisited

By Edward E. Mills

This book will severely challenge every element of the consensus explanation for the Great Recession. In fact, a book like this, although not necessarily this one, is urgently needed to counter the massive disinformation spread by the Majority Report of the Financial Crisis Inquiry Commission that Congress created in 2009 to investigate the financial crisis of 2007-2009 that led to the Great Recession. Congress handed the Commission a list of 19 directives, including the directive to examine “the global imbalance of savings, international capital flows, and fiscal imbalances of various governments; [and] monetary policy and the availability and terms of credit.” The Commission chairman clearly steered the Commission toward the goal of shifting the blame for the financial crisis from government onto the backs of the private mortgage finance industry consisting not only of banks but including mortgage bankers, insurance companies and the mortgage giants popularly known as Fannie Mae and Freddie Mac.

The Commission chairman specifically refused to consider any evidence linking the financial crisis and consequential Great Recession that struck the United States but impacted the global economy as well!

This book has no agenda other than to present a complete, factual history of the events, conditions and policies that led to the Great Recession. The history will demonstrate that the seeds of the financial crisis were sown during the administration of George Washington and the economic theories spawned during the Great Depression. The overarching thesis is that the Global Financial Crisis and the resulting Global Recession was a perfect superstorm composed of the merger of separate storm systems; notably aggressive welfare activism, the Nation’s “affordable housing” crusade, the zigs and zags of the Federal Reserve’s monetary policies, and the $.9 trillion trade deficit the U.S. accumulated between 1997 and 2007 which former Federal Reserve Chairman Ben Bernanke dubbed the “Global Savings Glut” and others labeled the “Global Dollar Glut!”

• Language: English
• Publisher: LifeRich Publishing
• Release date: Oct 13, 2021
• ISBN: 9781489738271

Edward E. Mills

I graduated from Bates College and obtained an MBA in economics and finance from New York University and a law degree from Pace University Law School. And I have a CFA (Chartered Financial Analyst} certification, the highest certification in the investment field. I was a Wall Street securities analyst for 30 years, specializing primarily in the oil and gas industry and, for a while, managed a mutual fund invested in Canadian equities. I was the only analyst to spot either the devastating 1973 oil crisis or the equally damaging 1978 gasoline crisis and I spotted both of them well in advance. ater I was also employed as an attorney specializing in legal research and the writing in memoranda of law, motion papers and appellate briefs. I have had some 30 or more letters and articles published in various newspapers, including the NY Times, on a variety of topics. I also served on a special “citizens committee” to evaluate a proposal to form a county owned public utility to serve Westchester (NY) county that would have replaced the investor owned utility; my detailed analyses of the facts and issues were instrumental in the rejection of the proposal by the voters.

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PROLOGUE

This Book in a Nutshell; Its Genesis, Gestation and Birth

T his book does not have an agenda: political, ideological, personal, or otherwise. Rather, this book is on a mission - a crusade, actually - to present an authoritative history of the events, conditions and policies that led to the housing meltdown and the ensuing financial crisis that culminated in the Great Recession that began in late 2007 - and to do so completely, accurately and fairly.

The existing literature concerning the financial crisis and consequential Great Recession that struck the United States beginning in the 2007 to 2008 years has essentially ignored the Global Financial Crisis and the Global Recession that impacted the developed economies in Canada, Western Europe and as far away as Australia. In addition, this book will introduce evidence that not only did the United States experience a boom in the housing market following by a bust but there were also housing booms and busts in Canada, all across Europe and as far away as Australia. By ignoring the global scope of the housing and financial crises that preceded the global recession the existing literature has made the unstated but fundamental assumption that there was no connection between events that occurred in the United States and the global housing and financial crises and the resultant Global Recession. That assumption screams for a closer scrutiny. In fact, this book will demonstrate that there was a distinct connection between the housing and financial crises and resultant Great Recession that occurred in the United States and the Global Financial Crisis, the Global Recession and the global scope of the housing booms and busts. This book will also demonstrate that linkage was the Federal Reserve’s delusionally insane ultralow monetary policy it pursued from about 1993 through 2006 along with the $4.9 trillion trade deficit the United States accumulated between 1997 and 2007.

Accordingly, this book will embark on a Voyage of Discovery to discover what REALLY, ACTUALLY that not only caused the housing and financial crises of 2007-2008 that culminated in the Great Recession in the United States but triggered a Global Financial Crisis that ended in a Global Recession!

The facts will, however, demonstrate beyond dispute that had Bill Clinton not been president the housing boom and subsequent bust almost certainly would have been significantly milder than what actually occurred. Accordingly, a fair part of the blame for the housing and financial crisis that occurred during 2007-2008 must be laid on President Clinton’s doorstep! But Congress and the Federal Reserve must also share the blame, at least equally if not more so!

But the facts will also demonstrate that the housing crisis and both the Great Depression and the Great Recession almost certainly would not have been as severe as each turned out to be BUT FOR decisions made during the administration of President George Washington. Therefore, the roots of the Great Recession will be traced back to the very founding of the United States as a Republic, demonstrating the eternal wisdom of Shakespeare’s witty observation that The evil that men do lives after them; The good is oft interred with their bones!

But, it must be emphasized that a book like this, although not necessarily this one, is urgently needed to offset and to correct the massive, unbelievable fraud on the American people perpetrated by the Phillip Angelides, the Chairman of the Financial Crisis Inquiry Commission who was appointed jointly by Congresswoman Nancy Pelosi, the then and now (as of 2020) Majority Leader of the House of Representatives, and Senator Harry Reid, Senate Majority Leader.

To criticize another, individually or collectively, is normally far outside my comfort zone. However, I must venture outside my comfort zone now to focus attention on a fraud that has wreaked unmeasurable damage on the American body politic and which is contributing mightily to hammer the wedge that is forcing a monstrous rift in American political and cultural life.

The majority report of the was such a massive fraud that it cries out for exposure. To simply describe the Commission’s Majority Report as a colossal fraud would itself be a colossal understatement. It was a fraud clearly intended to shift the blame for the housing and financial crises of 2007-2008 and the consequential Great Recession from the backs of Congress, the Federal Reserve and President Clinton onto the backs of the private mortgage industry which consists not only of the banks but which also includes the mortgage giants the Federal National Mortgage Association (commonly known as Fannie Mae) and the Federal National Mortgage Association (commonly known as Freddie Mac), and mortgage bankers. In fact, the importance of mortgage bankers to the run-up to the housing crisis is the least understood element among the events, conditions and policies that created the housing crisis.

The full scope of the fraud committed by the Financial Crisis Inquiry Commission, popularly referred to as the Angelides Commission, did not hit this writer with full force until the remainder of this book was completed. Accordingly, these paragraphs and Chapter 1 were inserted at the very tail end after the remainder of this book was completed - after I had lain awake many nights stunned by the unbelievable scope of the fraud and by the sheer gall with which it was perpetrated. The record will show that Angelides asserted full control of the Inquiry Commission’s proceedings and did so either deliberately or with an incompetence on an unimaginable scale! The full scale of that fraud will be the subject of Chapter 1 but its magnitude demands that it be emphasized whenever and wherever possible.

Now, back onboard our Journey of Discovery! It is impossible to shout loudly enough or often enough that the Financial Crisis of 2008 and its associated housing crisis and Great Recession was an event within history that cannot be understood outside of history. We will, for example, trace the seeds of the financial crisis all the way back to certain decisions made during George Washington’s presidency concerning the structure of the banking system.

Moreover, the Financial Crisis was not the outcome of any single event or even a simple combination of events but was a multi-causal event in history that was the culmination at a point in time of the political, economic, cultural and global history that preceded it. For example, the 2008 housing crisis as experienced in the U.S. almost certainly would not have happened BUT FOR the practice of grading neighborhoods according to their perceived riskiness of lending - a practice that led to what is known as redlining that was instituted by certain federal housing agencies in response to horrific losses they had experienced.

However, while the emphasis and focus will be on the historical facts - the facts, ALL the facts and nothing but the facts - attempts at humor and sarcasm will be freely employed for emphasis and as wake-up calls.

The purpose of this Prologue is to provide an overview of the history of the events, conditions and events that led to the housing and financial crises of 2008 and the consequential Great Recession. It will provide a road map as we embark on a voyage of discovery to uncover the REAL, ACTUAL causes of the assorted crises of 2007-2008. Parts 1, 2, and 3 will simply expand on the points highlighted in this Prologue. Part 4 will present my concluding observations and remarks.

In particular, Chapter 1 will provide an overview and will address the question, why this book! In the process Chapter 1 will unveil a massive fraud perpetrated by the Majority Report of the Financial Crisis Inquiry Commission {FCIC} which Congress appointed in 2009 to "investigate the causes, DOMESTIC AND GLOBAL, of the current [as of 2009] financial and economic crisis in the United States." (Bolding and capitalization added for emphasis!) We shall learn that the Commission’s Majority Report was so massively fraudulent that to describe it simply as a colossal fraud would be a colossal understatement. The Majority Report cast in bronze the BIG LIE that banks, subprime mortgages and derivatives, the mortgage giants Fannie Mae and Freddie Mac, mortgage bankers, Wall Street, or the insurance giant AIG (American Insurance Group), singly or in any combination, as the devils¹ that caused the housing and financial crises of 2008.

Chapter 2 will fully and conclusively demonstrate that none of the standard explanations for the assorted crises can possibly be correct and are, in fact, dead wrong!

Accordingly, this book will embark on a voyage of discovery to map the actual chain of conditions, events and polices that led to the assorted crises that struck not only the United States but, in fact, clobbered the global economy with typhoonic force.

The underlying, foundational thesis is that the Great Recession was an event within history that, accordingly, cannot be explained or understood outside of history. The title, however, is intended as a wake-up call to the very major roles that President Clinton, Congress and the Federal Reserve played in the events that ultimately caused the collapse of the housing market, the onset of the global financial crisis and the ensuing Great Recession that left the global economy crippled, resulting in an exceptionally - and painfully - slow recovery.

Our Journey of Discovery Will Revolve Around Two Statutes and a Single Document, CRA Commitments

The Statutes. While the emphasis of this book is on history it will revolve around two statutes and a single document. The statutes are the 1977 Community Reinvestment Act and the 1992 Housing and Community Development Act (HCDA). We could also include a third statute, the 1989 Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA).

Particular emphasis will be placed on the HCDA which contained certain provisions, sometimes dubbed the Government Sponsored Enterprises Act, an overwhelmingly important statute that has been totally overlooked or ignored by the housing crisis/financial crisis/Great Recession literature! The HCDA, among other provisions, mandated that the two Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac allocate 30 percent of their mortgage purchases or guarantees to affordable housing, a prettified, politically correct phrase for subprime mortgages. Simple, kindergarten level logic would clearly indicate that if a home buyer can afford a conventional mortgage the issue of affordability does not arise. Affordable housing only becomes an issue for households that cannot qualify for a conventional mortgage or where the rent is excessive relative to income.

President Clinton raised the GSE mandates in stages, reaching 50 percent for the years beginning in 2001, meaning that Fannie Mae and Freddie Mac had to devote 50 percent of their business to subprime mortgages. The clear intent of the GSE percentage-of-business mandates was to create a market for subprime mortgages. Thus, those who would blame the banks, Wall Street or even Fannie Mae or Freddie Mac for the subprime mortgage mess MUST explain away the role of Congress’ and Clinton’s 50 pct. mandates.

And it is critically important to bear in mind that Fannie Mae was created during the Great Depression specifically to create a market for mortgages. Previously, mortgage lenders wrote mortgages for their own portfolios. For that reason, commercial banks, as distinct from the various forms of thrift institutions, were not significantly involved in mortgage lending, if they were involved at all. The creation of Fannie Mae, later joined by the 1970 creation of Freddie Mac, made it possible for savers of all stripes and colors - including both individual savers as well as pension funds - to include mortgages as part of their investment portfolio, thus enabling many more Americans to purchase a home.

But by the same token, as they say, mortgage lending standards had to be set high enough to qualify as suitable investments for savers because, after all, most savers are significantly concerned with risk. In other words, those who advocate for affordable housing must, of necessity, address the issue, who bears the risk of loss? Government or the mortgage lenders?

However, we shall learn on our journey of discovery that the more extreme liberals in Congress have long advocated requiring financial institutions of all stripes to allocate a portion of their assets toward the redevelopment of the inner-cities, primarily through homeownership on the the assumption that homeownership would encourage more inner-city residents to take a greater interest in their communities. The mortgage finance industry was pressured to lower its lending standards while other financial institutions were expected to invest a portion of their assets for inner-city development, including investments in subprime mortgages. In 1992 then presidential candidate Bill Clinton’s campaign platform included a promise to require ALL financial institutions to invest in the redevelopment of the inner-cities, thus assuming the risk of subprime lending!

And in 2009, in the wake of the 2008 housing and financial crises, certain Democratic Congressmen and Congresswomen introduced legislation that would have made the 1977 Community Reinvestment Act applicable to ALL financial institutions.

Note very, very, very carefully that according to a Congressionally enacted 1992 Housing and Community Development Act, a statute, neither Fannie Mae nor Freddie Mac could purchase a single dollar of conventional mortgages without purchasing a corresponding dollar’s worth of subprime mortgages. In fact, according to the statute Fannie and Freddie could allocate 100 pct. of their mortgage purchases to subprime mortgages but not less than 50 pct.

The Document. The document that inspired this book is the 64 page document CRA Commitments, once posted on the website of the national organization representing over 600 local and regional housing activist organizations, the best known of which is ACORN. That document, dated September 2007, reported that, beginning with the passage of the 1977 Community Reinvestment Act, housing activists had negotiated 446 agreements with banks in which the banks agreed to make $4.56 trillion of minority lending commitments, primarily mortgages for low-and-moderate income households that could not qualify for a conventional mortgage. A mortgage that cannot qualify as a conventional mortgage is, by definition, a subprime mortgage which conventional wisdom blames for the housing crisis.² NUFF SAID?

$4.51 trillion of the $4.56 trillion of CRA Commitments were negotiated after 1994 which raises a series of questions: (1) Why were banks negotiating with community (housing) activists in the first place? (2) How did community (housing) activists attain so much negotiating power? And (3) What occurred after 1994 to cause banks to commit to $4.51 trillion of CRA Commitments.

What is most significant - and thoroughly disconcerting - has been the failure, with only a few notable exceptions - of the existing literature to mention, let alone examine, either the statutes or the document CRA Commitments. In fact, this book will point to a host of very relevant facts that the existing literature has either ignored or paid so little attention as to raise serious questions as to the state of scholarship in this country.

A closer examination of the document CRA Commitments reveals that the $4.51 trillion of the $4.56 trillion were negotiated after 1994 followed in the wake of what will be described as President Clinton’s blitzkrieg assault on the mortgage finance industry - banks, mortgage bankers and the government sponsored enterprises, Fannie Mae and Freddie Mac - to finance the redevelopment and revitalization of decaying inner cities. For comparison, total mortgages held by all banks in 1997 were only $1.3 trillion and total bank assets were only $4.8 trillion.

In 1994 total bank assets were slightly less than $4 trillion and total mortgages were only about $1.2 trillion. Accordingly, the $4.51 trillion of post-1994 CRA Commitment implies that housing activists possessed enormous control over the banking system. This book will examine the historical forces that culminated in the federal government handing effective control of the banking system over to housing activists who then proceeded to milk the banking system for $4.51 trillion for post-1994 inner-city redevelopment lending.

But there were two factors that ignited the housing bubble and subsequent housing crash. The first was the historical structure of the banking industry designed to favor the yeoman farmer. State and federal statutes of varying severity limited the right of banks to open branches. Federal law prohibited a bank from operating in more than one state. The essential purpose of the state and federal statutes was to prevent city banks from competing with rural banks.

The community bank structure of the banking industry was clearly out of date for an increasingly industrialized economy and national markets. By 1990 the states had largely if not totally repealed their limitations on bank expansion and the pressures mounted on the federal government to repeal its prohibition against interstate bank operations. President Clinton refused to sign any such legislation unless interstate expansion was made subject to the Community Reinvestment Act. As we shall discover, such a requirement effectively handed control of the banking system over to community (housing) activists since no interstate expansion was permitted without the approval of all intervening activist organizations.

Activists were encouraged to intervene in all regulatory proceedings as representatives of the community. The federal regulations effectively instructed any bank filing for approval to expand interstate to first go into a corner and duke it out with the activist interveners and then come back. The record indicates that the regulators imply rubber-stamped any agreement made between an intervener and the applicant bank without any consideration for the {safety and soundness of the banking system, thus answering the oft-asked question, where were the regulators? Answer: they were busy enforcing the law imposed by Congress and the regulations instituted by President Clinton.

The effect was to hand control of the banking system over to housing activists since no bank could expand without their approval - and the activists fully understood that fact which eluded the minds of the ‘educated elite’ who would blame the banks and subprime mortgages for the housing and financial crises of 2008!

The second development triggering the housing and financial crises of 2008 was, as we shall discover on our journey of discovery, the insanely and delusionary monetary policies of the Federal Reserve when it plunged its key federal funds rate from 6.5 pct in 2000 down to 1 pct by mid-2003 and then back up to 5.25 pct by mid-2006. The effect was, first, to convert a red-hot housing market into a raging inferno and then to pull the trap door, causing the bottom to fall out from under home prices, causing home prices to collapse, encouraging many under-water homeowners to default.

In addition, the Federal Reserve’s monetary policies significantly impact the value of the dollar internationally, a factor generally ignored by both the Federal Reserve in particular and the economics community in general. In fact, by plunging its federal funds rate to the 1 pct level the Federal Reserve altered the global flow of dollars so significantly as to cause the Euro to nearly double in value with a corresponding halving in the international value of the dollar. The impact was to, first, trigger a global housing boom and global economic boom followed by a global housing collapse, a global financial crisis and a global recession!

The Housing Crisis Was All About the Allocation of Credit: A Review of the Book, Fragile by Design: The Political Origins of Banking Crises and Scarce Credit"

In conjunction with this book readers are also urged to read the book Fragile by Design: The Political Origins of Banking Crises and Scarce Credit because it devotes an entire chapter to the role of the document, CRA Commitments. An important message of the book is that each country’s banking laws are influenced by political considerations concerning the allocation of credit.

As noted, historically state and federal laws in the United States were designed to favor the yeoman farmer. However, beginning in the 1960s urbanists, a term coined by the authors of Fragile by Design to describe activist groups concerned with the status of the poor and the decay of the inner-cities, began turning the screws on the body politic to force the body politic to focus on the plight of the inner-cities of which the lack of access to affordable credit was blamed for the decay. Urbanists particularly succeeded in winning the hearts and souls of what this book will label the "educated elite’ to their cause, paving the way for Congress and President Clinton to join their cause and begin the process of enacting legislation and regulatory policies that forced banks, mortgage bankers and the Government Sponsored Enterprises Fannie Mae and Freddie Mac to lower their lending standards.

Fragile by Design is part of the Princeton University Press series on the Economic History of the Western World which, as of this writing, consists of some 39 books. The series has its own editor who selects the books for the series. As such, Fragile by Design is intended as a reference. It compares the histories of banking in five countries: the United States, Great Britain, Canada. Mexico and Brazil. It was published in 2014 after I had completed Parts 1 and 2.

As the title suggests, the authors begin with the acknowledgment of the economic fact that credit is a scarce commodity. There simply aren’t enough sources of credit to meet the needs of everyone who desires access to credit. In a free market the allocation of credit would be priced according to traditional supply and demand analysis with interest rates reflecting investor assessments as to risk and reward.

But as the full title of Fragile by Design suggests, politics invariably intervenes to favor the allocation of credit in the direction of select groups. This book, as does Fragile by Design will trace the history of the housing crisis back to the administration of George Washington and a conflict between then Treasury Secretary Alexander Hamilton and then Secretary of State Thomas Jefferson over the structure of the banking system and the allocation of credit with Hamilton favoring a national banking system and Jefferson advocating for a banking structure that favored the yeoman farmer. Hamilton, of course, ended up on the losing end of a gun duel and Jefferson’s views ultimately prevailed.

Accordingly, the United States ended up with a rural banking structure characterized by community banks that favored the yeoman farmer and rural communities, a banking structure that was fragile by design and which a NY Times reviewer headlined his review as Failure by Design. The authors of Fragile by Design credit the banking structure as responsible for some 14 national banking crises including the Great Depression and the Great Recession.

Politics that favored a rural banking structure began a glacial shift after World War II as the U.S. economy shifted from one that had a strong agricultural sector to one that was predominately industrial. The states gradually repealed their laws favoring rural, community banking to allow for consolidation of their banking structures which allowed banks to grow to a size more suitable to lending to both local and national businesses.

In addition, President Lyndon Johnson’s Great Society programs spawned an activist movement that focused on the problems of the decaying inner-cities that gave rise to the battle cry of welfare rights, a program driven by the belief that low income household have a right to a certain threshold of income and consumer buying power. As described by Wikipedia, the online encyclopedia, welfare rights advocates demanded decent jobs with adequate wages for those who can work [and] adequate income for those who cannot work. Welfare rights advocates "also sought the right of poor people to fully participate in American society, as consumers beyond the bare necessities.

As a consequence of welfare rights advocacy, government policy concerning the structure of the banking system shifted, under pressure from urbanists (a term coined in Fragile by Design), from favoring rural communities to one favoring the inner-cities.

This book will describe the process by which the allocation of credit shifted from a community focus to one that favored low-income inner-city households. That shift culminated in President Clinton effectively handing control of the banking system over to urbanists - community (housing) activists. What should become clear is that the housing crisis would, as described above, been a mere blip on the radar screen of the economy BUT FOR the policy actions undertaken by President Clinton.

The qualifier blip signifies that it was the Federal Reserve’s insanely delusional monetary policies from 1994 through, say, 2008 that set the stage for the Great Recession and it was the plunge in the Federal Reserve’s federal funds rate from 6.5 percent in 2000 all the way down to 1 percent in mid-2003 that effectively poured gasoline onto a red-hot housing market, converting the housing market into a raging, blazing inferno that incinerated all too many homeowners.

In addition, this book will demonstrate that not only did the Federal Reserve’s looney monetary policies ignite the housing market is the U.S. but ignited a global housing boom and bust as well.

To summarize, the reader is urged to pay attention to the issue of credit allocation - how do we, as a body politic, allocate credit among competing groups - as we embark on our journey to discover what REALLY, ACTUALLY caused not only the housing and financial crises and the consequential Great Recession that impacted the United States but also created a housing and financial crisis and a Great Recession that was global in scope.

A Nutshell Summary of How the Housing Crisis and Great Recession Happened

A study, Reconstructing the Great Recession, published by the Federal Reserve Bank of St. Louis in its July/August edition of its Review, long after this prologue was first finalized for publication, asked [h]ow much can a downturn in construction hurt the rest of the economy? and then proceeded to note that [n]ew research suggests that during the Great Recession, the downturn in construction may have caused over 50% of the decline in output and 35% of the decline in employment. So clearly, it is critical to get one’s facts straight in order to fully understand what ACTUALLY, REALLY caused the housing crisis of 2008 and the consequential Great Recession. As it has been long noted, According to one version of the adage, those who fail to learn from history are doomed to repeat its mistakes!

First, it is critical to understand and appreciate the role of activists in driving the housing crisis! After World War II Hippie activism dominated the scene. Then came the anti-war, anti-draft activism followed by welfare rights activism that arose out President Johnson’s Great Society program and its underlying premise that everyone was entitled to a basic standard of living. And out of Welfare Rights activism sprang a host of organizations whose objectives were the redevelopment of the inner-cities with particular focus on housing.

Beginning in the 1960s housing activists successfully bamboozled the body politic into accepting the big lie that the banking industry had engaged in a purposeful discriminatory mortgage lending practice known as relining, a policy that was actually created by federal housing agencies, notably the FHA and the Federal Home Loan Banks.

Having successfully pinned the redlining tail on the banking donkey, activists then succeeded in lobbying Congress for passage of the 1977 Community Reinvestment Act (CRA) as an anti-redlining statute. The CRA requires that any bank applying for regulatory approval to expand in any fashion must first demonstrate to the regulators that it is meeting the needs of the entire community, including low and moderate income households, consistent with safe and sound operations.

The CRA was essentially toothless until 1994 due to state and federal limitations on bank expansion. The 1927 McFadden Act forbade outright banks from expanding across state lines and, of course, the 1933 Glass-Steagall which separated investment banking activities from commercial banking activities. However, the prohibition against interstate banking was repealed in 1994 and Glass-Steagall in 1999. Banks were now free to merge - BUT ONLY ON THE CONDITION that any bank applying for permission to expand first demonstrate that it was making a satisfactory quantity of inner-city investments, primarily for subprime mortgages. Housing activists had the right to intervene and argue the banks were not writing a satisfactory volume of subprime mortgages and, therefore, could hamstring a bank’s merger application indefinitely until the bank caved in to its demands. The result? Activists succeeded in milking the banks for $4.51 trillion of inner-city redevelopment loans, primarily for subprime mortgages, after 1994. For comparison, total home mortgages in 1994 were only $3.3 trillion of which banks held a mere $1 trillion!

The regulators, primarily the Federal Reserve, made no effort to supervise, monitor, record or track the CRA Commitments (agreements). The regulators effectively instructed the banks to go into a corner and duke it out with housing activists and then come back. Thus, all of the $4.51 trillion of post-1994 CRA Commitments" were negotiated on the watch and under the noses and with the implicit approval of the federal regulators, chiefly the Federal Reserve.

Moreover, President Clinton drastically overhauled the CRA regulations to exert maximum force on the banks to write subprime mortgages. Banks were reviewed every three years and graded on three tests - a lending test, and investment test and a savings test. Clinton’s pressures were brutal, to say the least.

The stage for the housing crisis was set in 1992 by a Congressional mandate that the Government Sponsored Enterprises Fannie Mae and Freddie Mac allocate 30 percent of their mortgage business to affordable housing. The end result, if not the intent of the mandate was to create a market for subprime mortgages. To accomplish that mandate Fannie Mae and Freddie Mac created the securitized subprime mortgage, mimicking the securitized conventional mortgage market referred to as Asset Backed Mortgage Securities which substantially expanded the source of funding for conventional mortgages without which many Americans would have had difficulty purchasing a home.

All the prongs of President Clinton’s blitzkrieg assault on the mortgage finance industry came together in 1997 and the housing market began its ascent into the stratosphere in 1998.

The final blow came from the Federal Reserve’s delusionally insane, super-loose monetary policies during 2001-2006 when the Federal Reserve pulled the trap door on interest rates, plunging its key federal funds interest rate from 6.5 percent in 2000 to a then all-time low of 1 percent during 2003 to 2004, effectively hosing gasoline onto a red-hot housing market, causing the housing market to burst into a blazing, raging inferno! As a result of ultra-low interest rates the M2 measure of money supply expanded at a compound annual rate of 8.1 percent from 1997 through 2008 which found it way primarily into the housing market. Home prices rose 8 percent annually from 1997 through 2006 and mortgages outstanding nearly tripled.

It is important to note that the forced lowering of lending standards for low and moderate income families soon spread to the conventional market. The combination of lowered lending standards, rising home prices combined with cheap money created a wildly speculative housing market.

Moreover, cheap money led to a steep decline in the value of the dollar, touching off a global credit-fueled economic boom with attendant explosion in commodity prices. Dollars fled the United States, primarily into Europe, in search of higher interest rates, creating a Global Dollar Glut which, in turn, ignited a global housing boom, a global economic boom and a global commodities boom.

Who knows where foolish policies will end up? Soaring commodity prices forced the Federal Reserve to reverse course and jacking its federal funds rate back up to 5.25 percent, thereby squeezing the living daylights out of the money supply, effectively chopping the housing bubble off at the knee caps.

That, in a nutshell, is how it all happened. This book, however, is all about the HOW and why it happened - how it all came to pass. The book is about the history of the events, policies and conditions that allowed housing activists to wrap government around their pinkies and milk the banks for $4.51 trillion of post-1994 minority lending commitments. And we will find that the roots of the housing crisis reach all the way down to President George Washington’s administration and the redlining policies implemented by the assorted housing agencies during the New Deal and to the post-World War II rise of the counter-revolution. From there the United States marched like lemmings toward a housing calamity. And we shall find that a widespread misinterpretation of the root causes of the Great Depression laid the foundation for the Great Recession.

It can’t be emphasized strongly enough that the goal of this book is history, not advocacy. The facts will speak for themselves and they shout to the heavens that the housing crisis and Great Recession were the work of the Washington Beltway and all of the forces that worked to shape public opinion. It will become obvious that the banks were little more than meek sheep with the government and the Federal Reserve as the sheep dogs nipping aggressively at the heels of the mortgage finance industry to herd it into the direction of financing inner-city redevelopment, primarily for subprime loans to allow low and moderate income households to purchase a home and, thereby, help stabilize the inner-cities.

Wall Street is universally caricatured as a collection of Bulls and Bears rampaging wildly about somewhat mindlessly, or perhaps more accurately, as animals operating on instinct - BUT, and this is an important BUT, it is this seeming mindlessness that provides the critical grease that keeps the economy humming. In fact, it should be understood and appreciated that the private economy plays with the cards that have been dealt to them and if the government deals them a set of cards that says the priority of the nation is affordable housing then it should be obvious to all - except of course the ideologically blind intelligentsia defined here as the academics and journalists who collectively shape public opinion. This book will have a lot to say about the intelligentsia.

Finally, it cannot be emphasized strongly enough that the housing crisis and Great Recession was ultimately a product of Federal Reserve monetary policies that have made the rich richer while leaving low and moderate income households - those who did not and do not own stocks or their own home - eating the proverbial dust.!

Tracking the Great Recession as the ‘Perfect Super Storm’

This book is an expansion of an earlier unpublished paper, Tracking the Great Recession as the ‘Perfect Storm’: the Evolutionary Path of the Housing Crisis/Great Recession. The focus of that paper was on the history of the events and conditions that led to the Great Recession.

In fact, it will be demonstrated that the seeds of the Great Recession were sown at the very beginning of the United States as a sovereign, independent nation when banks were chartered by the states and the states fiercely opposed the establishment of national banks - banks chartered by the federal government. It will be further demonstrated that the Federal Housing Administration’s (FHA) response to high mortgage default rates during the Great Depression led to the practice of redlining - the classification of certain neighborhoods as being too risky for mortgage lending - which housing activists, such as ACORN, converted into a propaganda slogan to convince the entire nation that it was the banks - not the federal government agencies - that were engaged in purposeful racial discrimination and, therefore, had to be compelled to write loans for households and businesses that could not afford to repay.

Had the U.S. banking system more closely resembled that of other countries, such as Canada, or had the FHA not adopted redlining, it can be argued that the Housing Crisis would never have happened. But it can also be demonstrated that the Federal Reserve’s easy money policies very well could have resulted in an economic calamity of some sort, all demonstrating that the Great Recession cannot be fully blamed upon any single factor or combination of factors but that all events and conditions must be considered and weighed.

In short, it was the policies initiated during George Washington’s administration and during the New Deal, together with the actions of Congress during the Civil Rights of the 1960s and 1970s, together with the skillful propaganda campaigns of housing activists plus their influence on President Clinton’s administration, that ultimately produced the housing bubble and subsequent crash. It can be said that BUT FOR the policies of George Washington’s administration, and BUT FOR the policies implemented during FDR’s New Deal, and BUT FOR the policies of the Clinton Administration, the housing bubble would not have happened or would have taken on a totally different character. This explains why no housing crisis or Great Recession narrative can be complete outside of an historical analysis.

This Book Will Ask If It’s Time to Question the Purpose, Structure - and Even the Continued Existence - of the Federal Reserve?

However, the qualification that this book is NOT intended as an attack on former President Clinton³ DOES NOT apply to the Federal Reserve. The facts will raise the question, is it now time to initiate a serious discussion as to whether or not the Federal Reserve has been transformed into a weapon of massive economic destruction?

The facts presented in this book mesh like the proverbial hand in a well tailored glove with a book, Fragile by Design, published in 2014 by the Princeton University Press as part of its reference series on Western Economic History. A New York Times review described Fragile by Design as brilliant and deserves to become a classic. Interestingly, the New York Times review was entitled, Why Banks Fail, Fragile by Design is based on the observation that some countries experience periodic systemic banking crises which impact the entire economy while other countries have few or none - and the differences are attributable to political decisions affecting the allocation of credit. Prior to, say, the 1960s banking policy in the U.S. was oriented toward favoring farmers and rural areas. Then, much like an accelerating locomotive, policies affecting the allocation of credit shifted to favor urbanists, a term coined by the authors of Fragile By Design.

Several commentators have contrasted the U.S. banking experience with that of Canada. Despite the fact the U.S. and Canada share a 3,000 mile border and a common cultural heritage, Canada has never experienced a nationwide systemic banking crisis while the U.S. has had a dozen over a comparable time period. The Canadian banking system survived both the Great Depression and the Great Recession with flying colors. The reason for the Canadian experience is that Canada has not restricted bank expansion and, as a consequence, Canadian banks have diversified their risks against a run on any individual bank or cluster of banks. Funds can be quickly shuffled between their rural branches and their metropolitan branches and from branches on the East and West coasts and the interior. Consequently, Canada has no need for an equivalent to the Federal Deposit Insurance Corporation which came into existence precisely to protect against runs on any individual bank or cluster of banks.

Fragile by Design is a comparative analysis of the banking systems in five countries. The New York Times review was titled Why Banks Fail and observed that the U.S. banking system experiences periodic nationwide banking crises because politics is baked into the system! Banking in the United States has been designed to favor particular political constituencies. Until around the 1970s agriculture was the favored constituency. Then, beginning in the 1970s federal law shifted control of the banking system over to housing activists. Banks were viewed by both housing activists and President Clinton as a huge piggy bank that could be broken open to finance inner-city redevelopment and revitalization - a noble goal with a disastrous outcome, largely because its implementation was not only concealed from the public but had no orderly or organized plan, no supervision, no monitoring, no tracking and no accounting. So, to explain how it all came together and about is the purpose of this book.

The NY Times and others have criticized Fragile by Design for failure to demonstrate precisely how the nation’s politically structured banking system led to the housing crash and Great Recession. For example, readers comments on Amazon rated it 4 on a scale of 5 for that reason alone, otherwise rating the book highly. Such criticism is short sighted because Fragile by Design is concerned solely with the history of banking to illustrate how banking is the outcome of historical forces; it was not intended as a history of the events leading to the Great Recession. The purpose of this book is to fill that gap. But Fragile by Design should be on the bookshelves - after it has been read - of every person seriously interested and concerned as to how our political system actually operates. That book provides an invaluable insight into the root causes of the housing crisis.

Accordingly, this book revolves around the historic events described in Fragile by Design in order to demonstrate the process by which government handed control of the banking system over to housing activists which proceeded to milk the banks of $4.51 trillion of post-1994 minority lending commitments. However, the facts detailed in this book were arrived at independently and, in fact, were described in my earlier paper which predates Fragile by Design.

This book will trace ALL of the events that led to the housing bubble and subsequent housing crash as well as to the Great Recession. In particular, there will be a lengthy discussion of what this book will label as Clinton’s blitzkrieg assault on the mortgage finance industry to compel mortgage lenders to finance the redevelopment and revitalization of decaying inner cities of which subprime mortgages were only one component, albeit a critical component. It is grossly misleading to label the housing crash merely as a subprime crisis because subprime mortgages comprised only a portion, albeit a large portion, of President Clinton’s inner city redevelopment program.

While the authors of Fragile by Design will likely disagree, this book can be considered as an extension of their book.

The facts will demonstrate conclusively that the Federal Reserve contributed substantially to the housing crisis through its super-loose monetary policies, regulatory failures and by actively pushing banks into risky lending. The facts will also demonstrate that the Federal Reserve’s supper-loose monetary policies triggered a global financial crisis, in addition to hosing gasoline onto a red-hot housing market, and the global financial crisis amplified the impact of the housing bubble and subsequent crash.

The failures of the Federal Reserve can be attributed to three ballooning trends. The Federal Reserve came into existence in 1913 in response to a series of bank panics that were the inevitable result of state and federal statutes which severely limited bank expansion, creating an essentially one-bank community hillbilly banking system favoring agriculture.

Thus the banking system was vulnerable to the ups and downs of the agricultural industry, the leading factor that led to the Great Depression. While industrial America was experiencing an economic boom that perhaps was unprecedented, Agricultural America fell into a severe and deepening depression - a depression that was global in scope and scale and which eventually toppled the entire global economy. The history of the Great Depression will be examined in a separate chapter which will outline the economic environment leading to, and surrounding, the Great Recession.

Unlike the U.S., Canada escaped the worst of the Great Depression and Great Recession because it had no restrictions on branch banking. Therefore, the banks were - and still are - able to move funds around to head off a threatened run on any single bank or cluster of banks. The Federal Reserve was initially created to provide the same liquidity that Canada’s branch banking system provides but failed in its core mission during the Great Depression, a fact that former Federal Reserve Chairman Ben Bernanke has acknowledged on several occasions. In fact, the Federal Reserve’s response to the recessionary threats posed by the puncturing of the presume Dot.Com stock market bubble and the 9/11 terrorist attacks on the World Trade Center and the Pentagon cannot be fully appreciated without reference to Bernanke’s revisionist interpretation of the root causes of the Great Depression.

However, pressures from Congress, President Clinton and activists and from the Keynesian ideologues who dominate the halls of our universities have converted the Federal Reserve into a schizophrenic monster. In addition to its historic role of ensuring the safety and soundness of the banking system the Federal Reserve has been saddled with the task of ensuring full employment. While the descriptive phrase dual mandate may slide seamlessly off the tongue it is, in reality, a prescription for a stop and go frenzied monetary policy - first the Federal Reserve is expected to step on the money accelerator to stimulate the economy and then slam on the brakes when the economy threatens to careen out of control. True, economists and the Federal Reserve would not express the matter so crudely but logic and the facts reveal that the Federal Reserve functions much like a crane operator high on Flakka, the latest and deadliest hallucinogenic drug. As Keynes himself acknowledged, a stimulative program requires an exit strategy.

In addition, Congress and President Clinton, further saddled the Federal Reserve with the responsibility of enforcing the Congressional mandate that banks had an affirmative and continuing obligation to meet the credit needs of the entire community, including low-and-moderate income households. Through its enforcement of the Community Reinvestment Act and the Government Sponsored Enterprises Act, the Federal Reserve pushed the banks into risky subprime lending. Faced with its schizophrenic tripartite mandates - maintaining moderate inflation with full employment plus enforcement of the CRA - the Federal Reserve ended up emphasizing its role of ensuring the banks were roaring full steam ahead in financing inner-city redevelopment through writing subprime mortgages.

But there are more profound reasons for questioning the purpose, role, structure and continued existence of the Federal Reserve. The full employment mandate assumes that the Federal Reserve at any point in time is fully and accurately appraised of all factors affecting the economic condition at any moment in time and that it can reasonably assess the consequences of its actions. While it can be argued that some slack is necessary for the Federal Reserve to function, the record demonstrates that the unintended consequences of its policies have swamped the results. In particular, until 2016 the Federal Reserve has focused exclusively on the domestic economy, ignoring the potential impacts of its policies on the global economy - and the impacts of its, the Federal Reserve, policies on the global economy have been monumental stretching all the way back to the Great Depression. The Federal Reserve is the 10 ton gorilla swinging its arms and legs wildly throughout the global economy, a factor only recently becoming the focus of scholars.

In addition, modern economic thought is so dominated by the theories of John Maynard Lord Keynes that it seems that the vast majority of economists wake up each money, face toward London and bow down to pay homage to their God, Lord Keynes. Yet, it will be demonstrated that Keynesian economics rests on a foundation of quicksand - a misinterpretation of the nature and causes of the global Great Depression - and that Keynesian inspired policies are sucking the global economies ever deeper into the muck, igniting a global economic boom that collapsed into a global financial crisis which has resulted in a brutally slow recovery and a widening of the inequality of wealth gap. The consequence of the Federal Reserve’s super-loose monetary policies dating back at least to the early 1960s has been a vast build-up of cash that is sloshing around the global economies, wrecking havoc first here, then there and now, everywhere! In fact, that sloshing has a new name - the Global Capital Surplus, a, issue that is slowly creeping forward to the front of minds of scholars and central bankers.

Keynes’ economic theories are founded on the belief that unemployment remained at elevated levels during the Great Depression because of an insufficiency of ‘aggregate’ (total) demand and because consumers and businesses were saving too much which, as of 2016, has led to a War on Savings through zero and negative interest rate policies - policies that pose a severe threat to life insurance companies and pension funds. However, more recent scholarship has demonstrated conclusively that the Great Depression was the direct consequence of a failure to establish a workable system of global exchange rates and to a severe global depression in agriculture. Agricultural America was particularly devastated which led to a cascade of bank panics that spread to the central cities, ending with a steep contraction in the money supply caused by the nation’s banking structure.

Deepening the Great Depression was a punitive tariff system which transmitted the U.S. Great Depression to the rest of the world. The U.S. erected two tariff walls, the 1922 Fordney-McCumber Tariff Act and the 1930 Smoot-Hawley Tariff Act, both of which were intended primarily to aid agricultural America which was suffering from the severe global agricultural depression. Moreover, it is now beyond dispute that actions by Presidents Hoover and Franklin Roosevelt deepened and prolonged the Great Depression. In other words, Keynesian-like policies worsened both the Great Depression and the Great Recession.

Finally, the Federal Reserve actively pushed the banks deeper into risky lending in a nationwide push for affordable housing which was viewed as essential for improving the economic status of minorities and stabilizing inner-city communities. On paper, the Federal Reserve is an independent agency but as Robert Samuelson observed in his book, The Great Inflation and its Aftermath, the Federal Reserve is a creature of Congress and the Federal Reserve’s continued independence is contingent upon its NOT asserting its independence.

In short, the Federal Reserve bends in the direction of the prevailing winds. And the prevailing winds that existed prior to the housing crash that forced banks into risky lending reached frankenstorm force such that the Federal Reserve completely abandoned its historical concern with safety and soundness and effectively handed control of the banking system over to housing activists, such as ACORN, with no regulation, no supervision, no monitoring and no accounting. As a result, as this book is being revised in 2020, there is no evidence that the Federal Reserve has even the teeniest, weeniest awareness of the housing monster it helped create.

The Role of the ‘Educated Elite’

This book will also raise serious questions concerning the impact that the ‘Educated Elite’ played in the runup to the 2008 financial crisis and, in the process, question the role that the ‘Educated Elite’ should play in our political and cultural lives.

During the eight years or so doing the research for this book I was dumbstruck by what impressed me as the collapse of classical Socratic scholarship - the absence of any constructive give-and-take in a Socratic search for the truth. Rather, scholarship seemed to be dominated by GroupThink where each scholar seemed to be playing a game of follow the leader! In addition, there was too much emphasis on correlation analysis with too little attention to basic economic and sociological analysis. In other words, the literature ignores how people actually think and act, a point that will be expanded upon in the next section. Also, there is the maxim that correlation is not causation!

The Role of Greed in Triggering the Housing Crash and Great Recession; The Game of Musical Chairs

Nearly all Great Recession narratives and a vast array of academics, blame the housing crisis and Great Recession on greedy banks and greedy Wall Streeters and/or a greedy Fannie Mae and Freddie Mac. This explanation, however, resembles the childhood game of musical chairs. The banks and Wall Street were the most visible entities left standing After the Music Stopped - the title of a NY Times best seller by Alan Blinder, a chaired (distinguished) Princeton economics professor, economics advisor to President Clinton and a former vice-chairman of the Federal Reserve. A later chapter will describe why Professor Blinder’s book is the worst of the most worthless of the Great Recession narratives!

Like musical chairs, blaming the Great Recession on greed has the distinct advantage that it requires no more than a childish mentality. Out of curiosity I googled greed on the internet, looking for a philosophical/psychological discussion of the nature of greed and found this gem: greed is everywhere and explains nothing! A Nobel Prize winning conservative economist put the matter very succinctly:

Is there some society you know that doesn’t run on greed? You think Russia doesn’t run on greed? You think China doesn’t run on greed? What is greed? Of course, none of us are greedy, it’s only the other fellow who’s greedy. The world runs on individuals pursuing their separate interests. The great achievements of civilization have not come from government bureaus. Einstein didn’t construct his theory under order from a bureaucrat. Henry Ford didn’t revolutionize the automobile industry that way. In the only cases in which the masses have escaped from the kind of grinding poverty you’re talking about, the only cases in recorded history, are where they have had capitalism and largely free trade. If you want to know where the masses are worse off, worst off, it’s exactly in the kinds of societies that depart from that. So that the record of history is absolutely crystal clear that there is no alternative way, so far discovered, of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by the free-enterprise system. [Wikipedia]

Blaming the Great Recession on greed, first of all, fails to identify the source - or the carrot or carrots if you will - of the greed but, more importantly, flies in the face of a Federal Reserve study which found that, for the banks at least, subprime mortgages were only marginally profitable and, at best, were no more profitable than other lending. So why would so many banks go overboard in risky lending unless they were pushed into doing so by the mighty arms and iron fist of the U.S. government?

Furthermore, as several observers have noted, greed is at the heart of the profit motive and the profit motive is at the core of the free world’s economic systems. Attempts to develop utopian systems - such as communism - devoid of the profit motive have generally not been successful and both socialist and communist systems have shifted back to at least a rudimentary system that embodies elements of greed capitalism.

Accordingly, this book will offer an alternative explanation for the housing crisis/Great Recession that does not rely on any concept of greed by banks or by Wall Street. Actually, this book will demonstrate that the underlying cause of the Great Recession was greedy housing activists who engaged in a massive propaganda campaign to convince government, the press and academia that banks were systematically discriminating against minority loan applicants. Activists then succeeded in employing the Community Reinvestment Act of 1977 as a lever to gain control of the banking system and milk it for nearly $6 trillion of minority lending commitments enforced by the federal government. The mess the housing crash created can be described as the debris left on the battlefield over the allegation banks were engaged in purposeful racial discrimination which will be the topic of Chapter 5.

There is an even more fundamental reason why greed is a mindless explanation for the housing crisis and Great Recession. When I studied economics B.C. (Before Computers), economics was, as described in a textbook published by the SSAG (Swedish Society for Anthropology and Geography), the study or social science of human behaviour in relation to how scarce resources are allocated and how choices are made between alternative uses.

Those who persist in blaming the housing crisis and Great Recession on greedy banks are making two implicit assumptions: first, that banks are bottomless pits of money such that banks have to scrounge around for lending opportunities. We shall discover that the assumption that banks were bottomless piggy banks that could be broken open to finance redevelopment of decaying inner cities is at the core of the housing bubble and the inevitable crash that followed; an assumption that even the academic community implicitly made! Moreover, to the extent that banks were ‘bottomless pits of money’ holds any truth then it is the Federal Reserve’s printing press that pours a seemingly endless stream of money into the banking system.

The second assumption is that subprime mortgages were more profitable than conventional mortgages and other lending. That assumption was effectively buried by the Federal Reserve study mentioned previously that revealed, at the top of the housing market, that subprime lending was, at best, no more profitable than conventional lending and often less so. Unfortunately, academia failed to attend the funeral and burial services for the concept that subprime lending was more profitable than conventional lending.

Under normal economic conditions of resource scarcity, banks would seek lending opportunities that offer the highest risk-adjusted returns. And the historical function of bank regulators is to supervise the safety and soundness of the banking system.

Moreover, it must be noted that central banks, such as the Federal Reserve, implement monetary policy essentially through the banking system, although central banks may also purchase government securities and other assets directly from the government or through government agencies such as Fannie Mae and Freddie Mac, but the end result is an increase in bank deposits available for lending. Having long ago abandoned the gold - or silver - standard, the global economies are now on a fiat money system where the central banks can print unlimited supplies of money at the touch of a computer keypad. The most prominent feature of the post-1960 global economy has been a surge in money creation such that there is a huge stash of cash sloshing around the globe ready and willing to create financial havoc world-wide.

Banks could become bottomless pits of money primarily on two conditions: (1) they had the capacity to print money or (2) that the Federal Reserve supplied the funds through its own printing press. If it was the banks that were printing the money then it is the regulatory responsibility of the Federal Reserve to monitor and limit such money creation. However, the Federal Reserve’s own money printing capacity is unlimited and unchecked. Therefore, to blame the housing crisis and Great Recession on greedy banks is to IMPLICITLY acknowledge the key role of the Federal Reserve in supplying the necessary funds for a tripling in mortgages outstanding that occurred between 1997 and 2007 and for failing to properly supervise the banking system. Yet, the academic community has failed to recognize the extent that the Federal Reserve’s super-loose monetary policies provided the funds not only for the global housing market but also for the funds that over-stimulated the global economies, creating an inevitable global financial crisis.

For example, both Nobel Laureate and chaired (distinguished) Princeton Professor Paul Krugman and University of Oregon Professor Mark Thoma, who blogs under the nom de plume of the Economist, labeled as the BSE Crowd (Blame Someone Else Crowd) anyone who attempted to direct attention to the roles played by the Federal Reserve and by the government’s affordable housing policies as contributors to the housing crisis and Great Recession!

Accordingly, a sub thesis of the book is the apparent collapse of classical scholarship and the intellectual bankruptcy of the mainstream academic community. It seems that academics could not, and cannot, connect two dots lying on top of each other, let alone connect two dots standing side-by-side! During the research for this book it seemed that academic scholars - particularly economists and public policy professors - were primarily engaged in hurling spitballs at each other rather than in engaging in a Socratic dialectic search