Probably not many people were watching because of all the Greece and stock-market drama, but this afternoon, the congressionally created Financial Crisis Inquiry Commission heard from representatives of Pimco, State Street, and GE Capital. Pimco's Bill Gross, unlike Lloyd Blankfein, got away with sending an underling to testify. A Pimco managing director, Paul McCulley, boasted that in 2005, sensing a bubble in the housing market, his firm sent teams "on the ground" to 20 American cities for what he called old-fashioned, shoe-leather research that involved interviewing mortgage brokers and real estate agents.
One of the members of the commission then acutely asked, if Pimco's shoe-leather research was so good, what was it doing holding all that Fannie Mae and Freddie Mac debt during the financial crisis. Mr. McCulley could barely avoid a smirk as he replied, "We fully expected that our government, if push comes to shove, would wrap its arms around Fannie and Freddie. And that's precisely what happened."