Shareholders Get Left Behind In Fannie and Freddie Rescue - WSJ.com

Shareholders Get Left Behind In Fannie and Freddie Rescue - WSJ.com:

It was the lobbyists on capital hill from the banks that held these mortgages that were partially to blame for pushing the GSEs to take these riskier loans - and now we pay the price, and the brokers and executives that came up with this garbage are vacationing in the Tahiti or skiing in the Pyranese.

"Then came the mortgage and credit crises. Most financial institutions responded by tightening their standards. Fannie and Freddie should have done the same, or at least held to the status quo. Instead, with Congress's encouragement, the mortgage buyers loosened theirs. Jumbo mortgages (and bigger risks)? No problem. Alt-A mortgages? Bring 'em on. The companies have an estimated $80 billion in what were once considered nonconforming mortgages -- and are now considered toxic waste -- on their balance sheets. As for the higher capital requirements meant to reassure investors, they were reduced.

All this was done in the name of propping up real-estate values, a strategy that has been a manifest failure as home prices continue to plummet in most parts of the country. This was the flip side to Fannie's and Freddie's Faustian bargain with the federal government."