In the four years since the housing bubble burst, triggering a collapse in global financial markets whose value had been propped up through the repackaging and trading of home loans via complex financial instruments, there's been plenty of blame to go around. The Occupy Wall Street protests have called new attention to the root causes of the crisis, and led Republicans to reiterate their claim that government-backed lenders Fannie Mae and Freddie Mac were the primary villains. The facts about the subprime mortgage market prove that claim false: Private firms dominated the subprime market boom of 2004-06, and were not even subject to the 1977 Community Reinvestment Act some Republicans vilify. Thanks to decades of financial deregulation, capped by President Bush's decision to appoint Wall Street regulators who believed their job was to help banks rather than curb banking abuses, financial giants were able to turn the mortgage market into a high-stakes casino. As investigative reporters and Congress' Financial Crisis Inquiry Commission have all shown, it was deregulation mixed with irresponsible and potentially illegal practices by private firms on Wall Street that caused both the bubble and the collapse.
...From 2004 To 2006, Fannie And Freddie's Share Of Subprime Market Fell From Almost Half To Just Under One-Quarter. As reported by McClatchy: "But these loans, and those to low- and moderate-income families represent a small portion of overall lending. And at the height of the housing boom in 2005 and 2006, Republicans and their party's standard bearer, President Bush, didn't criticize any sort of lending, frequently boasting that they were presiding over the highest-ever rates of U.S. homeownership. Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication." [McClatchy, 10/12/08, emphasis added]
Fannie And Freddie Faced Tougher Regulatory Standards Than The Private Firms. As reported by McClatchy: "One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble." [McClatchy, 10/12/08]
2006: Private Firms Issued About Six Out Of Every Seven Subprime Mortgages. As reported by McClatchy:
Federal Reserve Board data show that:
More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics. [McClatchy, 10/12/08, emphasis added]
2008: The 15 Largest Subprime Servicers Were All Private Companies, Despite Large Drops In The Volume Of Their Subprime Business Compared To 2007. McClatchy prepared a graphic based on Inside Mortgage Finance data showing the 15 largest subprime service companies in 2008:
The conservative narrative that blames Fannie, Freddie and working class Americans is all about not admitting that free markets are not perfect. Free markets only work when properly regulated and that regulation enforced. Blaming anyone and any institution that was not pure free market is away to shift blame from the real constituency of the Anti-American conservative movement - the financial elite.
