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Image: Jay Westcott

At an Aspen Business Lunch in the springtime, Peter Wallison spoke to a riveted crowd about his latest book, Hidden in Plain Sight—What Really Caused the World’s Worst Financial Crisis and Why It Could Happen Again, joining the ranks of Andrew Ross Sorkin (Too Big to Fail) and Michael Lewis (The Big Short), among many other authors, in trying to sort out the cause of the Great Recession.

Wallison’s culprit? Government housing policies. The 1992 affordable-housing goals passed by Congress mandated that 30 percent of the mortgages bought by Fannie Mae and Freddie Mac, the government-backed mortgage giants, go to lower-income families. “It was a politically popular idea in both the Clinton and Bush administrations,” Wallison says. However, by 2008 the quota of lower-income mortgages had increased to 56 percent, forcing Fannie and Freddie to drastically slash their lending standards. “When individuals began defaulting on their mortgages,” Wallison argues, “the wall came tumbling down.”

With undergraduate and law degrees from Harvard, Wallison brings extensive private-sector and government experience to his theories. In between his career as a financial lawyer and a partner at law firms, Wallison was general counsel for the U.S. Treasury Department (1981–85), where he advised on policies surrounding the deregulation of the financial-services industry. Subsequently, he was appointed White House Counsel to President Ronald Reagan (1986–87) and wrote Ronald Reagan: The Power and Conviction and the Success of His Presidency in 2002, one of his six books.

In 1999, Wallison and his wife, Frieda (head of the local Republican Party), moved full time to Aspen. He maintains his Washington ties as the Arthur F. Burns Fellow in Financial Policy Studies at the American Enterprise Institute, where he does what he loves best—crafting policy.

“I wrote Hidden in Plain Sight because I want to change policy in Washington,” he says. “When you focus only on the private sector and not on government policies as well, you slow the economy and run the risk of repeating history.”

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