Arnold Kling has a quick, middle of the road summary of his take on the role of GSEs in the housing bubble . I feel like almost everyone has an ax to grind on this issue, and Arnold’s moderate -although not unprovocative- position is, as a result, not so commonly held, but I think quite reasonable and worth highlighting:
I feel pretty confident in arguing that Freddie and Fannie could have stopped the housing bubble by holding onto their credit standards of the early 1990’s. However, I would not be comfortable attributing their relaxation of credit standards to the affordable housing goals. I think that the management attitude toward risk changed exogenously. In part, this was due to new CEO’s with less experience in dealing with mortgage credit risk. As home prices rose, all sorts of high-risk loans performed well, and senior management misread this to indicate that it was safe to lower credit standards. Certainly, the political environment reinforced that decision. But the numerical affordable housing goals were not the dominant factor.