When whistle-blower Ed Dodson warned that a financial crisis was emerging, he was told that “the market” controlled America’s destiny. In fact, argues Fred Harrison, governments are to blame, because they fail to learn from past mistakes. Politicians are schooled into ignorance by a culture of greed.
As Fred Harrison would certainly agree, the combination of vested interest and ignorance are self-reinforcing. Near the end of my 20-year tenure at Fannie Mae, I was working with our chief economist to put together a conference on land markets for bank and industry economists. He was quite aware of the problems caused by land speculation and land hoarding but had not to that point publicly expressed these concerns. A conference might have provided the appropriate opportunity for gathering the statistics and engaging with other economists. Unfortunately, at just this time the regulars challenged how Fannie Mae had been accounting for its income and expenses, the result of which was curtailment of almost any activity except compliance with Regulator and Congressional demands.
Working with our Research group, I made the recommendation that Fannie Mae request an amendment to the Home Mortgage Disclosure Act, which requires mortgage originators to provide certain information regarding mortgagors (i.e., borrowers) and the property involved. The act made provision for submission of the value assigned by the property appraiser. I suggested that one data element be added to the submission requirement: the value of the underlying land value. This information would have provided the GSEs, the regulators and others with highly reliable statistics on residential land price trends. As the attention of our Research group moved internally, the matter was never pursued.”