Blame Fannie and Freddie

March 05, 2011

Heather H. Murren's conclusion that Fannie Mae and Freddie Mac are being criticized unfairly for their role in the recession of 2007 ("Don't blame Fannie or Freddie," March 4) is half-baked. Ms. Murren grossly understates the real impact these government-sponsored enterprises have had on the economic crisis our country is going through.

She concludes that since only 37 percent of all mortgages obtained just before the meltdown began in 2006 were sponsored by Fannie and Freddie, government-sponsored enterprises did not provide the lion's share of mortgages and therefore should not be blamed for causing the meltdown.

However, the facts are that over 95 percent of all mortgages currently on the books are backed by Fannie and Freddie. The $5 trillion in mortgages through GSEs reflects that.

Fannie and Freddie are the securitization arm which provides our government's guarantee to the investment community. Once these loans are securitized, they can be traded as financial instruments.

Congress was responsible for the policy decision to make subprime mortgages available to spur home ownership, thus forcing lenders and financial institutions to make risky loans.

These policies began with Jimmy Carter and escalated in 2005-2007 until the housing market collapsed. By then the financial markets had made trillions of dollars trading these mortgages.

Fannie and Freddie were at the center of all this due to Congress' misguided political policies and the financial markets' greed.

Dan Raspa

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