In this recent post, I suggested that Wallison and Pinto were wrong in their relentless arguing that Fannie and Freddie caused the financial crisis because of government requirements that F and F buy loans made to low-income borrowers. For one, Wallison and Pinto ignore the role of the investment banks in generating subprime loans and bundling them into mortgage-backed securities. I also pointed out the possibility that Fannie and Freddie seemed to be a lot like the investment banks–maybe they bought up risky loans simply to make money:
One more point–the SEC suit doesn’t really fit the “government made Fannie and Freddie buy up lousy loans” story. The whole point of the suit is that these were secret behaviors by Fannie and Freddie. They were buying a lot of loans that were a lot like subprime–loans with high default risk. But were these to satisfy ever more demanding affordable housing requirements imposed by the government? Who knows? I suspect they were just trying to make money like the other players. They just stayed in too long.
William Black, in this lengthy essay, makes the same point but also provides some evidence rather than just speculating as I did. He takes down Wallison and Pinto as well as critiquing some of those such as Joe Nocera who have dismissed Wallison and Pinto entirely.
