Opinion

Wolves in watchdogs’ clothing

The Angelides Commission report — the result of a 15-month, $10 million government “investigation” of the housing collapse — is already selling at a brisk pace on Amazon. Released last week, the 633-page report pins the blame on Wall Street and lax regulation, while recommending criminal prosecution of bankers.

Problem is, those findings serve the political interests not only of the Democrats who set up the “bipartisan” Financial Crisis Inquiry Commission — but also of the key staff.

The report, heavily shaped by panel chairman Phil Angelides, cites nine causes of the crisis, none of which is federal housing policy — the actual main culprit. In 19 hearings, the commission called to testify not a single government official responsible for crafting the reckless housing policies behind the crisis.

“This report was cooked from the beginning,” commissioner Peter Wallison told me. “It was never close to an objective investigation.” The former Reagan Treasury official was so disgusted by the findings he refused to appear at Thursday’s press conference with Angelides and penned his own dissenting report.

Angelides had no business running this important investigation.

As California state treasurer from 1999 to 2007, he actually contributed to the crisis by investing more than $3 billion in public funds in the same kinds of risky mortgage-backed securities that caused the mess. He even got government-sponsored Freddie Mac to securitize them.

This marked the first time a state had bought securities based on subprime and other nonprime home loans. “There’s a first time for everything,” Angelides blithely noted at the time. He insisted the investment was sound, despite warnings from private economists that the state was taking on undue risk.

Now, by whitewashing government’s role in the crisis, he covers his own tracks, too.

Angelides wasn’t the only one with conflicts. Chris Seefer, the staff director of investigations, is a San Francisco trial lawyer whose firm donated big bucks to Angelides’ campaign for governor and is now suing Goldman Sachs for securities fraud. Goldman was a major target of the Angelides Commission, which has referred evidence against Goldman and other bankers to the Justice Department for prosecution. One of the other Democratic commissioners also works for the same law firm.

There are other conflicts of interest. Angelides’ real-estate development companies, for example, have benefited from federal Community Reinvestment Act projects. Naturally, Angelides acquitted it as a major culprit in the crisis.

Yet the CRA — which pushes banks to invest in poor urban areas — plainly fed the subprime bubble, after President Bill Clinton toughened it a decade before the crisis.

Following the goals of the CRA, then-Housing Secretary Andrew Cuomo plunged Freddie and Fannie Mae into dangerous subprime lending, while insisting they ease their “rigid” credit requirements. He also authorized them to buy subprime securities to earn credits against his drastic Affordable Housing Goals.

But Fannie and Freddie strained under the tougher mandates. Fannie complained in one internal report that it had to “absorb significant costs to meet the HUD purchase money goals.” Meanwhile, HUD buffaloed Countrywide Financial and hundreds of other mortgage lenders into signing so-called Fair Lending Master Agreements targeting minority communities with subprime loans.

In fact, the disastrous mistakes wound up being bipartisan: Under President George W. Bush, HUD continued almost seamlessly the Clinton housing policies.

And don’t think the mortgage meltdown taught Washington any lessons: Several Clinton-era architects of these disastrous policies are back at HUD, making Obama housing policy.

Much remains at stake in the debate over the cause of the financial crisis, including the final shape of new financial regulations and the fate of federally chartered Fannie and Freddie. Democrats will no doubt use the Angelides Commission report to justify more regulations, while protecting Fannie and Freddie from reform.

But new House Oversight and Government Reform Committee Chairman Darrell Issa plans to investigate the Democrats’ investigation — including Angelides’ conflicts of interest — and the role of Fannie and Freddie in the crisis.

Let’s hope he’s not afraid to use his subpoena power.

Paul Sperry, a Hoover Institution media fellow, is author of “The Great American Bank Robbery: The Unauthorized Report About What Really Caused the Great Recession.”