Corruption, incompetency, but, the attack on the institutions created to assist homebuyers is unwarranted. This is proof.

...“Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was,” Robert Khuzami, the head of enforcement for the S.E.C., said in a statement. “These material misstatements occurred during a time of acute investor interest in financial institutions’ exposure to subprime loans, and misled the market about the amount of risk on the company’s books. All individuals, regardless of their rank or position, will be held accountable for perpetuating half-truths or misrepresentations about matters materially important to the interest of our country’s investors.”...


This does not diminish the fact the American Dream was treated as a commodity that could be traded in bundles for profit, leaving homeowners floundering to whom owned their mortgages.  It also does not absolve the fact the five banks drove their companies over a cliff in anticipation of being covered by insurance at AIG.


There was gross mismangement and corruption everywhere.  No one is a scapegoat for the others.  Wall Street investment banks are suppose to come to understandings of risk based on their ability to assess companies and markets.  That wasn't happening at all.  They were playing with risky tools of investment and on margins.  


...The complaint alleges, for instance, that Fannie Mae executives described subprime loans as those made to individuals “with weaker credit histories” while only reporting one-tenth of the loans that met that criteria in 2007. The S.E.C. complaint contends that Freddie Mac executives falsely proclaimed that certain businesses had virtually no exposure to ultra-risky loans....


The facts were simple, the housing market was saturated with artificial price inflation and no one was minding the store.  The fact the equity market of home loans was out of control was ASSESSABLE other than the descriptions of Fannie and Freddie, but, everyone was enjoying the fun and games more than they did their jobs across the board, be it investment banks or qualifying agencies.  There is nothing wrong with the programs that aren't right with the programs, it was gross negligence of the responsibility of investment banks to accurately track the data regardless of the jazz coming out of the agencies.  It was far to easy to throw down the gauntlet and bank on AIG carrying the load.

Fannie Mae (click here) 




Freddie Mac (click here)