The Angst of Phil Angelides

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Subprime Scandal: Democrats thought they'd dammed up the truth about government's role in the financial crisis. But the levies are breaking, thanks to a spate of rogue new books on the subject.

The latest, "Reckless Endangerment," shreds the narrative carefully constructed by Democrats and the liberal media that Fannie Mae and Freddie Mac were only bit players in the crisis and followed Wall Street into subprime lending.

It details how the federally chartered mortgage giants in fact led the way in relaxing underwriting standards for the entire industry - thanks to relentless pressure from Democrats, who used them as off-budget piggy banks to fund their social crusade to boost minority homeownership (and shore up their voting base).

Though it largely repeats what conservative books like "The Great American Bank Robbery" and "The Housing Boom and Bust" have said, "Reckless" is written by a New York Times business writer. And that's got Rush Limbaugh touting it as a weapon Republicans can use against Democrats in the next election.

Suddenly, the debate over the causes of the epic housing crisis - which has plumbed Great Depression depths and only appears to be worsening - has reopened. And that's got Democrats nervous.

Earlier this week, Phil Angelides, the Democratic hack who ran the Financial Crisis Inquiry Commission's sham investigation, felt compelled to write a column for the Washington Post to try to plug the holes in the dike before it can spring any more inconvenient facts.

He insists his final report proves the crisis was caused by "the recklessness of the financial industry," and that the history books should be closed on the subject - period, end of story. But Angelides' report is a 550-page cover-up.

For starters, it glosses over the affirmative-action quotas HUD used to drive Fannie and Freddie deep into the subprime market. And it fails to cite any of HUD's statements about its efforts to reduce underwriting rules at Fannie and Freddie.

The historical record is clear. Yet instead of documenting it for the public, which lost $14 trillion in the crisis, the Angelides Commission rewrites it.

What's more, the hundreds of "fair lending agreements" HUD strong-armed private mortgage bankers like Countrywide Financial into signing, aren't even mentioned in his artifice. The pledges, which committed bankers to targeting credit-poor minorities for loans, ensured a continuing flow of funds into riskier and riskier mortgages.

Also missing from the report: quantifiable evidence that the government was responsible for more than two-thirds of the 27 million subprime and other bad mortgages that were outstanding when the market crashed in 2007.

In his column, Angelides railed against "Wall Street's conflicts of interests," but his own are legion.

In fact, Angelides ran a dirty investigation. He fixed it so trial lawyers who donated more than $225,000 to his political campaigns in California could leverage banks for class-action settlements for union pension funds that invested in bad subprime securities.

As IBD first reported, Robbins Geller Rudman & Dowd - the country's dominant plaintiffs law firm for class-action securities lawsuits - ran the crisis inquiry through chief investigator Chris Seefer (a Robbins Geller partner) and FCIC commissioner Byron Georgiou (a Robbins Geller counselor).

Last September, months before the FCIC had closed its "investigation," Georgiou and Angelides spoke at a conference in Laguna Beach, Calif., hosted by Robbins Geller. Congressional investigators are probing whether the two violated ethics rules when they talked about their ongoing commission work.

Talk about unfair advantage: The commission essentially provided a massive discovery operation and service for trial lawyers at public expense.

Angelides dumped millions of pages of subpoenaed confidential bank documents on the FCIC website so his trial lawyer pals could get a multibillion-dollar payday.

Angelides and his cronies pinned the crisis on banks to justify more bank regulations, while protecting the real culprits - Democratic politicians who pressured banks to make "predatory" multicultural loans.

They also did it to help trial lawyers and regulatory agencies shake them down for billions in class-action settlements (ironically, for doing too well what those agencies and Democrats ordered them to do prior to the crisis to close the racial "mortgage gap").

Through this vaunted, blue-ribbon, bipartisan commission supposedly set up to get to the bottom of the worst financial calamity since the Great Depression, banks were set up - not just by Democratic politicians looking to cover their "affordable housing" rears, but by sleazy trial lawyers and their cronies looking to line their own pockets with their own profiteering.

We include Angelides in that club. As we also recently revealed, Angelides has been a partner in an offshore hedge fund - Canyon Value Realization Fund (Cayman), Ltd. - that shorted more than $1 billion in subprime mortgage securities before the crisis.

All this explains the commission's anti-bank agenda, and why it went gunning for banks from the opening gavel. That agenda included using government subpoenas - not to mention $10 million in taxpayer funding - to dig up dirt on banks - including documents and testimony that trial lawyers are now citing in their class-action lawsuits to strengthen their cases against those very same banks.

A spokeswoman for House Oversight and Government Reform Committee chair Darrell Issa tells us that the panel is actively investigating the Angelides Commission and its fraudulent investigation. Hearings may start late this summer.

Getting to the bottom of the subprime scandal and its ongoing cover-up matters because the same politicians are repeating the same reckless mistakes that got us into this mess. The Obama administration is still monitoring Fannie and Freddie "to ensure that policies are being followed to progress toward an increase in the numbers of minority homeowners."

According to its website, "HUD continues to promote efforts to increase the number of minority and low- to moderate-income families working to achieve homeownership. HUD is engaged in a special effort to boost the minority homeownership rate since the rate for black and Hispanic Americans lags behind that of others."

The truth about the crisis could derail this Democratic crusade. That's another reason Democrats are so worried about the focus shifting from Wall Street to Washington. When their dam of lies finally breaks, the public will see that it was racial politics - not derivatives or deregulation - that really caused the Great Recession.

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