akapital

Did Fannie and Freddie Cause the Mortgage Crisis?

FNM and FRE are no more cause of the mortgage crisis than SLM or FMD are part of the student loan crisis.

Certainly in both cases these companies were mechanisms, albeit perhaps opportunistic ones at that, that facilitated the American dream - the housing and education boom. Indeed, the phenomenon itself took place in the larger context of the American Dream paradigm - housing and education are the best investments that you can make.

Just so happens that the American dream became a borrowed one - an education and owning a home would be one that most would have to be willing to go into debt for and spend the rest of life paying off and more and more people seemed resolved to do this and the mechanisms were there to facilitate it.

If oversight and regulations were in place to limit access to credit (to housing and education) we would not have experienced the economic boom that seemingly benefited everyone.

Perhaps regulation and limits might have kept both housing and education costs in check (vis-a-vis supply demand) and in effect we would have seen more moderate growth in both the cost of housing and education. But most would cry fowl and say let the markets do their thing. So the market has done its thing and the pendulum swings wildly....now back to the other side...and thus the current crises in the credit markets - limited access to credit