Don’t blame Fannie and Freddie

I am appalled that many reasonable people believe that Fannie Mae and Freddie Mac caused the mortgage crisis of the late 2000s.

While President Bush requested these agencies make it easier for people to get mortgages, neither agency touched subprime mortgages. These risky mortgages had to be bundled together in groups with regular mortgages to get anyone to touch them.

Moody and S&P had to, with somebody’s knowledge, over rate them and AIG, with somebody’s knowledge, had to agree to insure them for the issuing agencies to unload them at enough profit to make the schemes of those unscrupulous mortgage providers, who knowingly issued mortgages to folks who couldn’t possible afford to make the payments, profitable.

It was these schemes, by private businesses, with essentially criminal intent or gross incompetence, by some at each level, that precipitated the crisis. When somebody blew the whistle and smart investors called in their notes and refused to trade in these bogus bundled mortgages, it became common knowledge that they were near worthless and the house of cards collapsed and AIG had to be bailed out or they would have failed, like Goldman Sachs, and precipitated a worldwide depression.

Bob Lambert

Lake in the Hills