go figure the right wing gets it wrong...

Former Housing CEOs: Poor People Did Not Cause The Current Financial Crisis

Krugman on Fannie and Freddie

But here’s the thing: Fannie and Freddie had nothing to do with the explosion of high-risk lending a few years ago, an explosion that dwarfed the S.& L. fiasco. In fact, Fannie and Freddie, after growing rapidly in the 1990s, largely faded from the scene during the height of the housing bubble.

Partly that’s because regulators, responding to accounting scandals at the companies, placed temporary restraints on both Fannie and Freddie that curtailed their lending just as housing prices were really taking off. Also, they didn’t do any subprime lending, because they can’t: the definition of a subprime loan is precisely a loan that doesn’t meet the requirement, imposed by law, that Fannie and Freddie buy only mortgages issued to borrowers who made substantial down payments and carefully documented their income.

So whatever bad incentives the implicit federal guarantee creates have been offset by the fact that Fannie and Freddie were and are tightly regulated with regard to the risks they can take. You could say that the Fannie-Freddie experience shows that regulation works

Dean Baker

While Fannie and Freddie, as huge actors in the mortgage market, certainly contributed to the bubble, it is absurd to point to them as principle culprits. Their market share actually fell as the bubble grew to ever more dangerous levels, dropping from 50.1 percent in 2002 to just 34.8 percent at the peak of the bubble in 2006.

Fannie and Freddie deserve blame for failing to recognize the bubble (this is their job), but clearly they were not the primary cause.