The Kroog Versus The "Savior"

Paul Krugman was merciless with last night's GOP response to the President speech, given by Sen. Marco Rubio.  He punctures my favorite zombie lie:  the dreaded "Community Reinvestment Act forced banks to make loans to broke minorities" load of garbage:

Here’s the passage:

This idea – that our problems were caused by a government that was too small – it’s just not true. In fact, a major cause of our recent downturn was a housing crisis created by reckless government policies.

OK, leave on one side the caricature of Obama, with the usual mirror-image fallacy (we want smaller government, therefore liberals just want bigger government, never mind what it does); there we go with the “Barney Frank did it” story. Deregulation, the explosive growth of virtually unregulated shadow banking, lax lending standards by loan originators who sold their loans off as soon as they were made, had nothing to do with it — it was all the Community Reinvestment Act, Fannie, and Freddie.

Look, this is one of the most thoroughly researched topics out there, and every piece of the government-did-it thesis has been refuted; see Mike Konczal for a summary. No, the CRA wasn’t responsible for the epidemic of bad lending; no, Fannie and Freddie didn’t cause the housing bubble; no, the “high-risk” loans of the GSEs weren’t remotely as risky as subprime.

This really isn’t about the GSEs, it’s about the BSEs — the Blame Someone Else crowd. Faced with overwhelming, catastrophic evidence that their faith in unregulated financial markets was wrong, they have responded by rewriting history to defend their prejudices.

For Republicans to admit that the banks caused the financial crisis would of course destroy the GOP's base:  the banks, and the people who profit massively by them.  They will tell this lie until they are on their deathbeds, and even then it's only 20-80 that they'd recant.

"The government caused the financial crisis" has to be made to be the truth, or the GOP is done forever.  They know that.  It's the only reason we haven't mobbed every banker in the country yet.

And they're damn well aware of it.