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Fannie Mae and Freddie Mac were victims, not culprits.
There’s a dangerous — and misleading — argument making the rounds about the causes of our current credit crisis. It’s emanating from Washington where politicians are engaging in the usual blame game but this time the stakes are so high that we can’t afford to fall victim to political doublespeak. In this fact-free zone, government sponsored mortgage giants Fannie Mae and Freddie Mac caused the real estate bubble and subprime meltdown.
It’s completely false. Fannie Mae and Freddie Mac were victims of the credit crisis, not culprits.
Start with the most basic fact of all:
Virtually none of the $1.5 trillion of cratering subprime mortgages were backed by Fannie or Freddie.
That’s right — most subprime mortgages did not meet Fannie or Freddie’s strict lending standards.
All those no money down, no interest for a year, low teaser rate loans? All the loans made without checking a borrower’s income or employment history? All made in the private sector, without any support from Fannie and Freddie.