On How Fannie Mae and Freddie Mac (More than Likely) Contributed to the Financial Collapse

1) Fannie and Freddie purchased billions of risky loans (nearly 3/4 of new mortgages were going through F & F by 2008) and bundled them to investors. The money that went to these banks allowed them to make even more risky loans. The end-result was that a lot more mortgage lending than would have otherwise taken place DID take place (the bubble argument, in other words).............2) Being that Fannie and Freddie were at least quasi governmental entities, most investors and lenders (justifiably, as it turned out) took for granted that the lines of credit would more than likely be unlimited....AND that they (Fannie and Freddie) would probably be bailed out if necessary.............3) Fannie was deeply involved in the highly political move of lowering lending requirements in an attempt to more adequately meet the needs of disadvantaged groups. They specifically eased the credit requirements on the mortgages that it was purchasing from banks - the end-point being (this, according to the New York Times, September 1999) to encourage banks to extend home mortgages to individuals whose credit hadn't been good enough to qualify for conventional homes......So, no, me-buckos, nobody was "holding a gun to these bankers' heads" (and, yes, there were in fact some very questionable practices - no doubt), but if the government is a) enabling you and b) encouraging you AND you're more than likely going to get bailed out in a worst case scenario, wouldn't you also (in the words of Congressman Frank) be willing to "roll the dice a little"?