Some are attempting to scapegoat Fannie Mae and Freddie Mac, economist Dean Baker recently stated that while Fannie and Freddie “got into subprime junk and helped fuel the housing bubble,” they were “trailing the irrational exuberance of the private sector” and actually lost market share to private subprime lenders in the years 2002-2007, when “the volume of private issue mortgage backed securities exploded.” -
In a 2006 Securities and Exchange Commission filing (available here) covering its activities in 2004, Fannie Mae stated: “We did not participate in large amounts of these non-traditional mortgages in 2004 and 2005.” In the report, Fannie Mae also noted the growth of subprime lending and reported, “These trends and our decision not to participate in large amounts of these non-traditional mortgages contributed to a significant loss in our share of new single-family mortgage-related securities issuances to private-label issuers during this period.”
- Additionally, Lehman Brothers CEO Richard Fuld testified before the House Committee on Oversight and Government Reform on October 6, 2008, that Fannie and Freddie’s failure played a minimal role in Lehman’s demise.
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In short, while Fannie and Freddie were completely irresponsible in their lending practices, the claim that they were responsible for the financial disaster is absurd on its face -- kind of like the claim that the earth is flat.
Free market conservatives know that the claim that Fannie and Freddie were responsible is ridiculous. They just say it because they know that news outlets like Market Place will treat it as a serious proposition and thereby muddy the waters in the mind of the public.
It is bad enough that Market Place repeats such an outlandish claim without giving its listeners any background information. It should not pass along the additional misinformation that conservatives actually believe such nonsense.
Dean Baker
Dean Baker is co-director of the Center for Economic and Policy Research in Washington, DC. He is a frequent guest on National Public Radio, Marketplace, CNN, CNBC and other news programs.
