... During the peak years of the housing bubble, Fannie and Freddie were largely off the scene. Everything else — every complicated calculation coming out of AEI or wherever — is an attempt to obscure this simple fact.
That’s not a defense of F&F. As Smith says, they’re creepy and unsavory. But they didn’t commit this particular crime.
The blubbering and ranting coming from the right about Fannie Mae and Freddie Mac being largely responsible for the housing bubble is just plain wrong, according to Paul Krugman, and now he has the numbers to prove it from an analysis done by Karl Smith. Smith writes: "Fannie and Freddie lost market volume during the boom...."
... That is, during the boom not only did the fraction of loans securitized by Fannie and Freddie fall, but the absolute number fell. At the same time the absolute number of private-label securitizations rose.
There is a simple and obvious reason for this. The development of structured products meant that for many consumers the free market offered a more attractive loan than the government subsidized one.
