Fanny and Freddy didn't cause the financial collapse, and their role in providing affordable mortgages to people didn't cause it either. It was the subprime mortgages that caused the problems, a thing that Fanny and Freddy got into well after the big banks had.
Here's one article on point. NYTimes
Central to Wallison’s argument is that the government’s effort to encourage homeownership among low- and moderate-income Americans is what led to the crisis. Fannie and Freddie, which were required by law to meet certain “affordable housing mandates,” were the primary instruments of that government policy; their need to meet those mandates, says Wallison, is what caused them to dive so heavily into those “risky” mortgages. And because they were powerful forces in the housing market, their entry into subprime dragged along the rest of the mortgage industry.
But the S.E.C. complaint makes almost no mention of affordable housing mandates. Instead, it charges that the executives were motivated to begin buying subprime mortgages — belatedly, contrary to the Big Lie — because they were trying to reclaim lost market share, and thus maximize their bonuses.
As Karen Petrou, a well-regarded bank analyst, puts it: “The S.E.C.’s facts paint a picture in which it wasn’t high-minded government mandates that did [Fannie and Freddie] wrong, but rather the monomaniacal focus of top management on market share.” As I wrote on Tuesday, Fannie and Freddie, rather than leading the housing industry astray, got into riskier mortgages only after the horse was out of the barn. They were becoming irrelevant in the most profitable segment of the market — subprime. And that they couldn’t abide.
Here's another - The Atlantic
Second, Wallison fails to inform his readers that Wall Street's "private-label securitization" of mortgages, which objective analysts identify as the primary source of most subprime and other high-risk loans, experienced a dramatic increase in market share that was exactly contemporaneous with the housing bubble, rising from about 10 percent market share in 2003 to nearly 40 percent by 2006. Overall, loans originated for private-label securitization have defaulted at about six times the rate of Fannie and Freddie loans. Indeed, Wallison does not explain--cannot convincingly explain--why the housing bubble occurred during a period when Fannie and Freddie's market share dropped precipitously.
Third, Wallison ignores the parallel bubble-bust cycle we experienced in commercial real estate, which does not have affordable housing policies of the sort he criticizes for Fannie and Freddie. Commercial real estate values experienced a peak-to-trough price decline of 45 percent, which was considerably worse than the 33 percent peak-to-trough price decline we saw in residential real estate. If, as Wallison contends, it was affordable housing policies that caused the residential real estate bubble, then what caused the bubbles in commercial real estate? Moreover, why did we have similar surges in credit liquidity in student loans, auto loans, and credit cards? The mainstream narrative advanced by Rep. Frank and most others--that it was unregulated securitization on Wall Street that drove the financial crisis--explains these parallel bubbles fairly well; the argument advanced by Wallison does not.
The financial collapse being blamed on Fanny and Freddy is something that has been analyzed and investigated repeatedly, and from what I have seen, it appears that Wall St. and the Big Banks are the real culprits. But hey, I'm not a banking expert, and will happily read any other sources you might have.
(Edit) That being said, apparently F and F misled people about how much risky subprime mortgages they held.
(edit2) A better analysis is here:
We recognize that the other two narratives have popular appeal: They each blame a clear entity, and thus outline a clear set of reform proposals. Had the government not supported housing subsidies (the first narrative) or had policy makers implemented more restrictive financial regulations (the second) there would have been no calamity.
Both of these views are incomplete and misleading. The existence of housing bubbles in a number of large countries, each with vastly different systems of housing finance, severely undercuts the thesis that the housing bubble was a phenomenon driven solely by the U.S. government. Likewise, the multitude of financial-firm failures, spanning varied organizational forms and differing regulatory regimes across the U.S. and Europe, makes it implausible that the crisis was the product of a small coterie of Wall Street bankers and their Washington bedfellows.
We believe the crisis was the product of 10 factors. Only when taken together can they offer a sufficient explanation of what happened:
Read more at WSJ
Hey Mods, can we split the discussion ZA and I are having about the financial crisis into a different thread. I'm afraid we're hijacking this one.