The LAT’s Richard Schmitt knows how to write a startling lede:
WASHINGTON — Long before the mortgage crisis began rocking Main Street and Wall Street, a top FBI official made a chilling, if little-noticed, prediction: The booming mortgage business, fueled by low interest rates and soaring home values, was starting to attract shady operators and billions in losses were possible.
"It has the potential to be an epidemic," Chris Swecker, the FBI official in charge of criminal investigations, told reporters in September 2004. But, he added reassuringly, the FBI was on the case. "We think we can prevent a problem that could have as much impact as the S&L crisis," he said.
Wait, we didn’t need mortgage regulation to prevent the current mess, the FBI alone could have prevented it, if only it had been a bit more on the ball and hadn’t moved thousands of agents off the crime beat and onto the terrorism beat?
Actually, not really. Schmitt’s article presents no evidence that Swecker’s optimism as to the FBI’s abilities was remotely justified. And in fact while there was undoubtedly criminal behavior going on during the mortgage boom, both the boom and the bust would have been pretty much the same size in its absence. There’s more than enough blame to be spread around for the mess we’re currently in; you can’t place it all on criminals.
I have a feeling that the "epidemic" that Swecker was worried about was decidedly smaller than what eventually ensued, and that his billions in losses were very much in the single-digit range, caused by overinflated valuations rather than falling national house prices.
But still, at least the FBI diagnosed that there was something rotten in the mortgage market, as early as 2004. Which is more than you can say for any other arm of the US government.
(HT: Campbell)