To the say that Fannie & Freddie combined with the FED low rates caused the crisis, I read this (keynesian?) answer, is it correct?
''Agency origination only accounted for less than half of all MBS securitizations in 2005 and 2006 leading up to the crash. The rest of that Pre-2009 vintage consisted of private level MBS, securitized by traditional banks/lenders. Compare that to right now, where 98%+ of all Mortgages are conforming/agency loans. While Freddie and Fannie were involved with some shitty quality loans, it was the private market that suffered and ultimately led to the govt expanding Fannie and Freddie balance sheets to plug the hole in the failing mortgage market.
With that said, the agencies had some shitty underwriting standards back then because the gov't thought it would be cool to let a single mother of 2 with about 15k in annual income to be a home owner...but I think the real issue was private label securitizations that took too much risk, which did NOT have guarantees and ultimately failed, caused banks to mark down their worthless assets, which led to increased haircuts and margin calls, which led to a squeeze in liquidity and a credit event.''
First and foremost, you have to question the logic of such a claim. Even if you yourself do not have hard data to go on, I would ask him this...why, all of the sudden, did lenders randomly abandon sound lending and underwriting practices when the statistics say that this single mother could never pay back her loan? If all math says otherwise, what would be the point in lending this woman the money? There isn't any answer other than some party (probably with an interest in more homes being built and sold) was willing to insure the loans in case they went bad. This party could be the government, realtors, or home builders. Since realtors and home builders are only interested in making money, then the likely hood of loan defaults would off set any gains they might make in building or selling the homes, so they would essentially be buying their own homes from themselves at a loss. The government, however, does not really lose if they "lose", if you catch my drift. They will pass off that loss to the tax payer, while reaping the perceived benefit that under their watch the people had "wealth"
"If men are not angels,
then who shall run the state?"
In addition to what Texas asked, another question to consider is if interest rates had been higher, say 8%, 9%, 10%, would these loans have ever been made? Would they have ever been brought into existence? That quesiton, along with why the banks were so willing to make the risky loans, are the 2 key questions that must be answered.
For an overview of the crisis and links to resources, see here.
Just as an aside, the usual answer to the above questions is: Greed!
To which you can calmly ask why it was only in this particular industry that greed caused such a problem. To borrow an analogy from Tom Woods I think, greed is like gravity, present everywhere on the Earth at all times. So yeah, gravity might be the ultimate reason for any plane crashing, however it doesn't tell you much about the specifics of any particular crash, and why gravity (greed) became so enabled in that particular situation.
If the people you're debating are reasonable then that rebuttal ought to refocus them on issues as opposed to rhetoric.