Private mortgage lenders to blame for recession

Mark Mikowski, North Las Vegas

Wednesday, May 26, 2010 | 2:01 a.m.

Regarding Ed Dornlas’ Sunday letter to the editor, headlined “No other way to read it: Democrats are in trouble”:

Dornlas writes that “it is fairly widely recognized that the federal government, through Fannie Mae and Freddie Mac, encouraged lenders to grant the subprime loans that were the proximate cause of the recession ...”

Widely recognized by whom? Fox News? The Wall Street Journal? The right-wing blogosphere?

According to Aaron Pressman, writing in Bloomberg BusinessWeek in 2008, Fannie and Freddie were victims, not perpetrators, of the housing crisis.

Pressman writes that “virtually none of the $1.5 trillion of cratering subprime mortgages were backed by Fannie or Freddie ... most subprime mortgages did not meet Fannie or Freddie’s strict lending standards. All those no money down, no interest for a year, low teaser rate loans? All the loans made without checking a borrower’s income or employment history? All made in the private sector, without any support from Fannie and Freddie.”

It’s time to lay blame for the housing crisis, and by extension the recession, where it belongs. The packaging and selling of mortgage-backed securities allowed private mortgage lenders to make loans they knew were going to be uncollectable. However, someone else would be left holding the worthless mortgage.