NO, A MINOR PROGRAM THAT ENCOURAGED HOME LOANS
TO THE POOR DID NOT CAUSE THE FINANCIAL CRISIS

From Paul Krugman's blog:

Today Joe once again goes after the Big Lie — the claim that Fannie and Freddie caused the crisis — and drives home the point that the people advancing this story aren’t just wrong but are acting with intent, engaged in deliberate deception:

In Wallison’s article, he claimed that the charges brought by the Securities and Exchange Commission against six former Fannie and Freddie executives last week prove him right. This is another favorite tactic: He takes a victory lap whenever events cast Fannie and Freddie in a bad light. Rarely, however, has his intellectual dishonesty been on such vivid display. In fact, what the S.E.C.’s allegations show is that the Big Lie is, well, a lie.

And

...what’s going on in the discussion of economic affairs (and other matters, like justifications for war) isn’t just a case where different people look at the same facts but reach different conclusions. Instead, we’re looking at a situation in which one side of the debate just isn’t interested in the truth, in which alleged scholarship is actually just propaganda.

More here.

So, of course, the whole "Fannie and Freddie were forced to give out loans to people who couldn't repay them is what caused the financial crisis" story line is a total lie: the two hybrid federal/private lending institutions dealt with mortgages in the hundreds of millions; the financial meltdown dealt with toxic mortgage securities in the tens of trillions. How could a few hundred million dollars worth of mortgages, many of which weren't even bad loans, result in trillions of dollars in junk securities? Answer: it couldn't.

Indeed, Fannie and Freddie were relatively minor players in the toxic mortgage security scam. Instead, it was the private banking industry, which had found what it thought was a veritable philosopher's stone in mortgage backed securities, that created massively huge demand for what ended up being what economist Duncan Black, who blogs as Atrios over at Eschaton, has been calling for years the "Big Shitpile." Actually, lots of these banksters knew at the time that what they were buying and selling was worthless shit, which is why they bought buttloads of credit default swaps, financial instruments that essentially served as insurance policies against their lousy bets on lousy horses, in order to protect themselves if they weren't able to find a chair in this high stakes cake walk before the music stopped.

So the banks went wild with these mortgage backed securities, literally demanding that more and more and more mortgages be granted to as many people who would sign up for them, whether they were good risks or not, and lenders gave the financial sector what they were screaming for. And then the insurance industry fucking insured these securities for their full purchase value, which, needless to say, had very little to do with their actual value. A bubble worth trillions grew up very quickly. And then it burst.

But that's not nearly as easy to understand as "liberals forced Fannie and Freddie to give home loans to poor people," which is a lie that fits very neatly into the right wing's preexisting narrative about how poor people, poor black people, really, are destroying the country with their shifty and lazy fraudulent ways.

Note to Democrats: in this day and age it is perfectly acceptable, preferable actually, to call Republicans, to their faces, big fucking liars. Because, you know, that's what they are, big fucking liars.

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