Lenders were writing and pushing subprime mortgages, and packaging them into securities, before the FMs got involved. Fannie and Freddie made the problem worse, but they didn't create it.
Here's a liberal response to the Republican charges. I object to this article's attempt to whitewash Democratic responsibility for large portions of the crisis, but it at least acts as a counterweight to the RNC's talking points memos.
Here's a somewhat more balanced commentary.
My point on the other is that the structural problems caused by the deregulation of investment banks would have emerged one way or another, even without the mortgage crisis. You had a number of large companies writing out large "insurance policies" without adequate capital backing, and without any form of regulation. In any time period, that is a recipe for disaster.
It's pretty hard to be fully responsible for something that was happening before you arrived in the marketplace.
Fannie and Freddie made things worse, but focusing on them to the exclusion of serious structural problems in our financial system is like slaughtering Mrs O'Leary's cow to fix the Chicago building codes.
Financial markets need transparency and accountability, and that only comes about through responsible regulation. We need CDS transparency and probably a regulated exchange. The size of the CDS overhang dwarfs any other structural problem in our financial system. If we don't take care of it, we will be fighting fires until we do the right thing.
The easy answer is seldom the right one.
--SCC
