Fannie and Freddie were not the causes, they were merely facilitating vehicles.
The Fed’s loose money policy, the federal government’s debt accumulation policy, and the decision of governments on all levels to permit industrial-scale fraud by banks -without penalty even when they are caught - are the causes.
A more recent example of the incentives that were in play: When Wells Fargo was caught fraudulently creating millions of accounts, not a single person spent a single day in jail, and the fine was less than the profits gained from the fraud.
That’s the environment we’re talking about. No penalties for crimes, all risk offloaded to the taxpayer, so the finacaticists (I just invented that word thank you thank you) are unleashed to take any amount of speculative risk they please with no consequences whatsoever.
I’m still not sure how Wells Fargo accomplished that (opening accounts without customers’ knowledge); if these accounts were opened to generate fees, where did the funds come from to do so? Who didn’t notice the withdrawal on their real account large enough to open a new account that would just be bled for fees each month?
He who invents a word is duty bound to explain the derivation and meaning of said word. In other words I don’t have a clue.
You are spot on 100% correct. I worked for ABN AMRO, one of this country's largest mortgage providers and mortgage servicing providers from 2003 - 2007.
Fannie & Freddie were under pressure to buy every single loan that was presented to them due to regulatory requirements and the prevailing "wisdom" in Washington D.C. that "everyone deserved a home."
It wasn't just banks that wrote all these bad loans (that they KNEW were bad loans) and then bundled them with good loans (a process called "mixing") to package and sell to Fannie & Freddie or as "investment vehicles", Mortgage Brokers were much bigger bad actors. They knowingly not just wrote bad loans, they pursued bad loans because they were the easiest to make and the highest profit margins for them. Nearly 100% of those loans went straight to Fannie & Freddie within days of loan closure, lest the mortgage brokers get stuck holding paper they knew was bad.
It's important to paint the whole picture here. It wasn't just the bankers. An entire cottage industry sprang up to take advantage of bad government policy which helped create the housing bubble and subsequent crisis.
Fanny and Freddy made the rules for lending to low income for the congress..
Fannie and Freddy bundled the housing mortgages and sold them to wall street. Who thought they were backed by the government..