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[quote=Anonymous][quote]when you hear the AEI guys asserting that Fannie and Freddie bought lots of “subprime and other high-risk” mortgages — which often gets truncated to assertions that they bought lots of subprime — you are being conned. There’s not much actual subprime in there, and the “other high-risk” turns out to be not all that high risk, and nothing at all like subprime.

But why did Fannie and Freddie have to be bailed out? Basically because they had virtually no capital, so that even though their losses as a percentage of assets were smaller than private institutions, the losses were still enough to put them underwater.

None of this is meant to defend what F&F did or how they behaved. But there’s no contradiction between the assertion that F&F were bad institutions run by bad people, and the assertion that they played no important role in creating the financial crisis. The widespread belief that they did play such a role is the result of an effective right-wing disinformation campaign, not serious analysis.[/quote]

http://krugman.blogs.nytimes.com/2011/12/20/fannie-freddie-follies

In any case, two further points:  first, the main problem with F&F is that they were two government entities that were privatized during the privatization craze, but of course, were still given GSE status.  Just more privatizing gains and socializing risk a la post-Reagan conservative consensus.

Secondly, as bad as F&F were, there were markedly more responsible than any of the private players.  Had they not existed, the economic damage would've been just as bad if not worse.

As far as the current SEC case:

[quote]The complaint is extraordinarily weak. Taking its cues from the Wallison/Pinto school of inflated data, it claims that Fannie and Freddie failed to reveal to investors the true extent of their subprime portfolios. To make this claim, however, the S.E.C. has included categories of loans, such as so-called Alt-A loans, that may have had a subprime characteristic, such as low documentation, but which were often made to borrowers with high credit scores.[/quote]

http://www.nytimes.com/2011/12/20/opinion/nocera-an-inconvenient-truth.html
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