Big Republican Lie Busted! Lack of Regulation, Not Freddie and Fannie, To Blame For Economic Crisis

Also Regulation was the culprit for the leveraging issue.
In 2004, I-bank regulation was changed to the European Basel II regulation to integrate with international banks.
What did Basel II regulation do?
Permitted the higher ratios of leveraging.

Greenspan did warn of the systemic risk in the GSEs and asked Congress to act to constrain the GSEs but the Democrats blocked the effort.

The Fed and the ACORN-shookdown GSEs created the speculative bubble which investors rushed into seeking higher returns on bonds than Treasuries which caused excessive demand and competitative pressures on Wall Street such that they overtook the GSEs after 2004 just as the bubble reached the speculative spike just before the crash, the classic signature of all bubbles. Some Wall Street firms such as Goldman Sachs saw the warning signs and got out of the mortgage-backed market before the crash.

And the undisputed main cause was the Fed's loose money policy that bloated the mortgage market from $6T in 2000 to $11.3T in 2006 (almost doubled in just 6 years) combined with it's lack of action to counter the loosening of lending standards in the secondary market (due to the ACORN shakedown of the GSEs with Democrat assistance). That would have constrained the primary market lending standards and reduced defaults.

Libs attack the moral hazard of the secondary mortgage market as a root cause yet fail to realize that it's the GSEs that are the titans of the secondary market and thus the biggest cause of the moral hazard.
On top of that is the congressional mandate on the GSEs to have 50% of their portfolio in essence in subprime, thus fueling the subprime bubble.

Libs destroy themselves by showing that they get most of their info from lib propaganda sources, as evidenced by the defense of CRA and the complete lack of understanding of the real facts.
The CRA was the stepping stone for penetrating the mortgage titans: the GSEs.
It was ACORN shaking down CRA banks as the stepping stone to subprime penetration of the GSEs!!!
That opened the subprime floodgate to the secondary market with big help from Dems in Congress.

#9: was his flawed ideology that markets can be trusted to regulate themselves. Duh! Republican/conservatives (and their butt-boy, Alan Greenspan) have been crowing for 30 years that regulation was the culprit and markets could be trusted to regulate themselves -- another right-wing myth/fantasy exploded. By the way, go out and see how many cases you can find where CRA-covered banks actually protested that they were being forced to make loans against their self-interest. Good luck with that.

#8: Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent in 2006, according to Mortgage Finance, an industry publication. Fannie/Freddie played a contributing role, but the primary cause of the financial meltdown, exactly as the principal architect (Greenspan) admitted under oath (and against his own self-interest) [contd at #9]

#7: CRA fact: CRA only covers commercial banks, NOT private brokers/lenders/Wall Street, and commercial bank affiliates who opted out, which, together, made up the majority of subprime lending (CRA-regulated commercial banks made only 16% of the subprime loans in the peak-subprime year of 2006, according to the Federal Reserve). Fannie and Freddie Fact: For starters, they don't make loans, they buy them. [contd at #8]

#6: Democrats: wanted lower-income people in houses). CRA fact: The CRA was written in 1977, but according to the President's (Bush's) Working Group on Financial Markets, "turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007." But you think that a bill (CRA) enacted 33 years earlier was suddenly to blame? Yeah, right. [contd at #7]