Fannie Mae and Freddie Mac

                    

Fannie Mae and its related Freddie Mac, semi-private companies, had been blessed with special government backing. The Democrat party took them under its wings as a special means of helping the “poor” and minorities. It also became a political device to “overcome” so-called red- lining, where minorities allegedly could not get loans because banks unfairly turned them down for credit.

                       

Hundreds of billions of dollars were soon involved. Influential politicians had friendly execs employed, with

incentives to augment the gigantic volume of systemic mortgage growth and guarantees.

                       

Over the years many observers noted the accumulated danger but Congressional influence disregarded any attempt at reducing the growing risks to the entire mortgage system.

                       

We know now about the subprime debacle as the banks attempted to cope with the toxic assets that resulted from being fed Fannie Mae and Freddie Mac fare. Blame has been placed on the shoulders of the bankers by the politicians who were actually responsible.

                       

We get more of the same with Dodd-Frank legislation. You can expect more of the same fiasco resulting unless cooler heads prevail in correcting that bit of legislation. The Dodd-Frank Act does not prevent credit bubbles but enhances them.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewHole tweets.)