Ask conservatives what caused the financial crisis and you will hear that it was driven by government affordable housing goals that "forced" the GSEs, Fannie and Freddie, to pressure the private mortgage market into making loans to those who clearly couldn't repay them. These goals were the mechanism that compelled otherwise sound and sober lending institutions to make a mess of the U.S. economy. That's how the story goes.
The SEC has now filed suit against former GSE executives, and the story the SEC tells is very different. As has been reported by many independent analyses, the GSEs were followers, not leaders, in the sub-prime crisis. Furthermore, they got into the business belatedly not because of any government mandate, but because they were chasing market share and big bonuses.
For a good run-down of this, see Karen Petrou at Federal Financial Analytics.
The money quote: "the GSEs didn’t do it because they cared so much about the affordable-housing goals that, pressed by their regulator, they threw caution to the winds. They threw caution to the winds instead because they got paid better each time a breeze blew by."
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