“goal is hardly the same as coercing banks into giving out mortgages to people who likely can’t pay them back, “
The CRA only applied to deposit-takers, which were not the main lenders in the bubble. Investment banks, pure mortgage lenders, hedge funds, the entire Shadow Banking sector were free to do exactly as they pleased. Which they did, as they ate F&F’s lunch.
Moreover Dubya had eight years to reverse the CRA if he chose to. He didn’t.
” pushing the Fannies to cover those bad loans at government expense,”
Fannie and Freddie both had ceased to be government agencies back in the 1960s and 1970s. They were listed stocks on the New York Exchange during the bubble, owned by investors. There was absolutely no legal requirement for the American taxpayer to backstop Fannie and Freddie. The decision to make them the responsibility of the government and therefore the taxpayer was a decision made entirely by Bush and his administration.
“encouraging the resale of repackaged loans into the public market, especially when it was known at the time that those practices were possibly going to damage the wider economy “
Nonsense. CDOs, CMOs, CDOs Squared, Synthetic CDOs, all of this stuff was being cranked out by the unregulated private sector without the slightest pressure to do so by the government. Moreover CDOs had been around for decades, they were nothing new, and the CDOs of Fannie and Freddie were comprised of conforming paper, and like all conforming paper were the safest of loans and performed the best.
“Bush was not pushing mortgages for those who couldn’t afford them. He was trying to cover those toxic loans already in the system, and the undercapitalization of Fannie and Freddie was a major problem area.”
More nonsense. Bush never addressed “toxic loans” in any of his speeches, Fannie and Freddie didn’t deal in them anyway, they required conforming paper even when loans were made to subprime borrowers. NINJA loans, Option Arms, all of the exotic paper was the purview of firms other than F&F. They lost market share exactly because they weren’t dealing in high yield, high risk paper. The sole concern expressed by the Bush administration was the undercapitalisation of the Fannie, and that had exactly nothing to do with exotic paper, it was purely a matter of loans to assets.
“Their overleveraged position meant that should the mortgages they held decline little more than two percent, they would be technically wiped out”
Fine. So their investors would be wiped out. That’s the risk you take when you own stock in a listed company, which is what Fannie and Freddie were in 2008 before Dubya decided that the American taxpayer and not the investors should be left holding the bag.
“Eventually Fannie and Freddie held over half the mortgages in the country, and 45% of those they purchased between 2005, when the bill failed, and 2007 were subprime and other nonprime loans.”
And F&F holding half the mortgages in the country is news to whom, exactly? Apparently to those who don’t know that F&F were created in the first place in order to provide a secondary market for mortgages and at one time had no competition. So 45% represents a big loss of market share for what they once had. In the second half of your sentence you focus on subprime loans without noting that F&F dealt in conforming subprime paper, probably because you have no idea that that is significant because you have never mentioned conforming paper once.
You are obviously eager to excuse Bush but you really know little about the factors that were involved in creating the bubble. It was a perfect storm of events that began in the 1990s, it involved tax law exemptions for real estate, exemption of OTC derivatives from regulation, David X Li’s famous Gaussian copula function, financial engineering by quants, Greenspan dropping interest rates to extreme lows, and Bush was also there with his goofball plan to greatly increase minority home ownership. You can read all about it in his speech to HUD where he somehow fails to mention all of the risks that you seem to believe consumed him.