Well, since no Liberal on the board has the balls or stomach to put up a counter-argument I will do so for the sake of debate.
So bear with me because I personally do not buy into this argument, but here it is:
1) Yes, Republicans were pointing out problems with oversight and government regulation regarding Fannie/Freddie before this meltdown.
2) This however glosses over the bigger problem that these two companies alone are not responsible for the meltdown.
Fannie and Freddie certainly followed the market into higher risk loans, but were stopped from going full-bore into the subprime paper business by their charter and conforming loan limits. They were allowed, by the Government, to keep less capital on hand to offset risk. And they were woefully under supervised by their government regulators. And they (acting like an investment fund) acquired lots of private label MBS’ backed by toxic mortgages.
3) While Republicans were attacking Fannie/Freddie, the housing bubble was being pushed to the limits by other banks, that would have maintained and burst the bubble, even if Fannie and Freddie did not exists.
4) This crisis could have been avoided if regulation was placed on outside investment banks as much as it was placed on Fannie/Freddie, to prevent them from getting to heavily involved in the sub-prime debacle.
5) In 1999, Congress passed the Gramm-Leach-Bliley Act, which abolished “all of the significant rules put in place at the time of the Great Depression designed to prevent a repeat.” Specifically, this act “destroyed the Depression-era barrier to the merger of stockbrokers, banks and insurance companies.”
It was this deregulation that spiraled "predatory" lending practices by de-regulated banks, who felt secure knowing that they could package these loans together and sell them off to government backed Fannie/Freddie.
As I said, I don't buy this argument, but since none of the libs here want to give a shot, for the sake of debate, here it is.
