Barney Franks and his squad began the whole thing by lessening regulations and putting pressure on financial services to increase loans to the under served. Then the bankers corporate greed came in and started to even falsify and in some cases fraudulently manipulate loans and then packaged these together to sell to the Twins and even other countries funds.
I still remember the articles of Las Vegas strippers that didn’t have enough provable income and yet they bought not one or two but three or more homes for rental properties with little down.
When the slow down came, quess who couldn’t pay their payments? So, with little skin in the game they just up and walked away from their homes and rentals and left them on the investment banks books. In turn the bankers tried to dump their loans on Fannie and Freddie to get out from underneath them. They were summarily denied!
Fannie and Freddie had just passed a major stress test yet in denying the banks bad loan portfolios the financial system froze with all the bad debts on the banks books they couldn’t move money or make loans because now they were severely under capitalized! Which in turn caused massive panic in the markets!!
Now the Treasury was having massive problems with foreign countries largest of which was China. These countries were nervous about the bonds and investments that they carried in U.S. securities. Hank Paulson the treasury Secretary at the time saw that the entire U.S. financial system could collapse! Also, Russia was trying to get China not to play along and just let the U.S. system implode!
The solution then came to let Lehman and Baer Sterns collapse along with Washington Mutual and Country wide and others and to have the remaining JP Morgan’s and such take them over but the dilemma still remained, what to do with the bad loans on the books?
Enter the recently golden stress tested GSEs with hundred billion in their coffers. Paulson had to make them look weak so he manipulated the numbers and pressured the board of directors with jail time if they didn’t go along. He then forced them into a fraudulent and unconstitutional conservatorship the likes of which the world has never seen! There in lies a synopsis of the beginning of the end of the Twins!
With the takeover accomplished . Treasury used the GSEs to buy the bad debt off of the corrupt banks balance sheets by borrowing more money from China at 3% and loaning it to the GSEs at 10 %. The GSEs then took that and bought up the majority of bad debt on those balance sheets.
Thus the entire U.S. Financial system was saved!!
This does not take in to account the 2012 switch from 10% interest to the Obama Net Worth Sweep of all of the GSEs earnings and future earnings! That we can save for another day.
To add , Moodys and other rating companies also stirred the pot by giving high ratings when they shouldn’t have!
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