[quote=briansd1]The GSEs and CRA were not the causes of the bubble. That is misinformation being spread by partisan hacks and ignorant people.
Here is Barry Ritholtz’s intelligent explanation of the causes of the bubble.
As I have said repeatedly, Fannie and Freddie were cogs in the great housing machinery, and they bear some responsibility for the current debacle. But to argue they were the most significant factor misses the true tale of the Housing and credit debacle.
Fannie has been around since 1938, Freddie since 1968, the CRA has been around since 1977 — suddenly, all of housing goes to hell in 2005, and then credit collapses 2 years after — and the best explanation some people can come up with is Fannie, Freddie and CRA? Gee, isn’t that rather odd — especially after 70 years?
Update: Then there is the international issue: If Fannie and Freddie and the 1977 CRA are to blame for the US boom and bust, how did the rest of the world end up with a housing boom too? Why did prices and sales go skyward in the UK, France, Spain, Ireland, Australia, etc.? They had no CRA, or a Fannie Mae, or a Freddie Mac, — so then what caused their housing boom?
The short answer: Ultra low rates, securitization, and perhaps some of our homegrown, innovative lending standards.
While I understand that reducing the complexities of economic history into bumper sticker phrases is politically expedient, it does not help us understand the root cause of the problems. And, it gets in the way of helping us fashion a solution for the future. Hence, why I hold the weasels who are attempting to obscure reality and rewrite history in such disdain.
Update: For the non-partisan, non hacks amongst you, for the policy makers and academics and economists who are truly interested in how this came to pass, and what we can do to fix it, the bottom line remains: The CRA was irrelevant to the current crisis, and Fannie Mae and Freddie Mac are mere cogs in a complex machine.
But the primary cause of the mess? Not even close . . .
Subprime SuspectsThe right blames the credit crisis on poor minority homeowners. This is not merely offensive, but entirely wrong.
By Daniel GrossPosted Tuesday, Oct. 7, 2008, at 2:08 PM ET
Not sure if this was discussed somewhere and I missed it, but thought this was interesting. Again, the popular trend is to blame the GSEs for the housing bubble…they were not the problem — at least, not until they were brought in to save the private market by buying up all the “toxic” loans (via refis).
Stats on GSE loan performance vs. private-lable MBSs:
Key Findings:
[Okay, for some reason, I’m not able to copy it over. Please check out the news release from September 13, 2010 regarding Fannie/Freddie stats vs. private-lable MBSs.]
