Ritholtz trotted out the Time Lapse Rule once again in response to my New York Times Op-Ed on Fannie Mae , Freddie Mac , and the Federal Housing Administration.
"Fannie was created in 1938, and Freddie was created in 1968," Ritholz writes. "Now explain to me why in 2008 — 70 and 40 years later respectively — they somehow caused the crash & crisis?"
Stated in this way, the Time Lapse Rule has the trappings of a sensible point. But those trappings vanish in the presence of thought. It only makes sense if you close your eyes to the profound changes that Fannie and Freddie underwent in the recent past—changes that led them to take on more risk and encourage riskier mortgage lending.
Importantly, even Ritholtz doesn’t really believe in the Time Lapse Theory. It’s easy to see this just by looking ath who Ritholtz does want to blame for the financial crisis. He’s helpfully provided a list of 25 culprits, so this isn’t a difficult assignment. What happens when we apply the Time Lapse Rule test to Ritholtz’s list?