All symptoms... Who assumed the risk? Not the banks? Why? Freddie and Fannie purchased the Mortgages. They may have used those other organizations to do their dirty work...
” Freddie and Fannie purchased the Mortgages. They may have used those other organizations to do their dirty work...”
Well I don’t deal with make believe so if you’re more interested in blaming Fannie and Freddie than in investigating what happened you’re free to invent your own story.
Fannie and Freddie purchased and sold conforming loans, A-paper, just as they always have. The bubble was fueled by high risk, high yield, non-conforming paper invented and sold by F&F’s private market rivals. F&F had their own problems but they weren’t the source of the high risk mortgages.
“Who assumed the risk? Not the banks? “
Any investor who bought the CDOs assumed the risk. Collateralized debt typically is purchased by investors looking for a reliable rate of return. Insurance companies, pension funds, mutual funds, banks, private investors. The problem for these buyers is that rating agencies had given it a triple A rating when it was really toxic junk.