—Federal Reserve Board data show that:

•More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.—

Fannie Mae and Freddie Mac DON’T ISSUE mortgages. They buy mortgages from private lenders that do, thereby increasing liquidity and reducing risks for private lenders.

Countrywide, the largest issuer of mortgages in the US before it went bankrupt, for example, had as the biggest purchaser of its mortgages, Fannie Mae.

You linked to a Federal Reserve Governor’s speech about the CRA, pulled a quote to justify your position, yet the Governnor’s assessment was completely different than yours. He cited the fact that the CRA loans were doing no worse than other subprime loans. Then he stated:

“Putting together these facts provides a striking result: Only 6 percent of all the higher-priced loans were extended by CRA-covered lenders to lower-income borrowers or neighborhoods in their CRA assessment areas, the local geographies that are the primary focus for CRA evaluation purposes.”

Now maybe you can explain how loans that make up 6% of the total, and are failing at the same rate could possibly be a reason for the crisis? You can’t, because it is nonsensical. I suggest you re-read the speech you linked and the facts provided.

As to Fannie Mae, etc.. Fannie Mae had two percent of its portfolio in subprime loans. 2%.

http://www.reuters.com/article/governmentFilingsNews/idUSN2346745220070223

Not only that, but Fannie and Freddie were only doing about 15% of the subprime business, according to the Federal Reserve.

Federal Reserve Board data show that:

•More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.

http://www.mcclatchydc.com/251/story/53802.html

# More than 84% of the subprime mortgages in 2006 were issued by private lending institutions.

# Only one of the top 25 subprime lenders in 2006 was directly subject to the CRA;

As to purchases by Fannie and Freddie buying junk, well you can blame the prior administration for that. This happened under the same administration that thought it was a good idea to have a former Lehman executive invest $64 billion of the Pension Benefit Guaranty Corp’s insuring assets in stocks, real estate, and private equity right before the crash. The same administration that decided near 0% short-term interest rates were appropriate on a constant basis. The same administration that shut down the investigations of 22 state atty generals into predatory mortgage loaning practices.

It’s pretty obvious that they were doing anything they could to prop up the markets so they’d collapse on the next guy in office. Looks like they missed by about 14 months.

“The agency [U.S. Department of Housing and Urban Developmen] neglected to examine whether borrowers could make the payments on the loans that Freddie and Fannie classified as affordable. From 2004 to 2006, the two purchased $434 billion in securities backed by subprime loans, creating a market for more such lending.” http://www.washingtonpost.com/wp-dyn/content/article/2008/06/09/AR2008060902626.html