The types of securitizations and leverage that really caused the parabolic moves in the housing market involved the private market, almost exclusively. The CDOs and CDS markets were largely run by private enterprise. Fannie and Freddie backed off significantly in 2003 and 2004 due to the accounting issues. It was the private market which took over from there, with the derivatives really exploding in 2005-2007. Fannie and Freddie were brought back in (and their capital requirements and lending standards lowered) AFTER the private market began failing — IMHO, all by design, as they were already trying to off-load the bad debt onto F&F before housing prices really began dropping. They knew what was coming, but couldn’t get the private money out fast enough. They knew F&F would be taken over by the govt well before it happened, IMHO. They were talking about conservatorship in 2003/2004 already.
