CDOs and CDS probably wouldn’t have gotten so popular if the Federal Funds and Discount Rates weren’t so low for so long. It only crossed 2% in November 10th, 2004 and ratchet up in 2005, which is about when the bubble start popping. Also, I remember Greenspan were encouraging people to take out ARM instead of 30 year fixed in 2004. The FED is hardly what you called private. Also, if FNMA and FRE backed off significantly in 2003 and 2004 and didn’t “participate” much in this subprime stuff, then why did we end up having to to nationalize them? Were they that poorly run that even w/out participating much in the “causes” (CDO and CDS) of the bubble, they still fail?
