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502 Dissenting Statement

absolute right to reacquire these loans. Th ere can be little doubt, then, that as early
as 2003, Fannie and Freddie were under so much pressure to fi nd the subprime or
other loans that they needed to meet their aff ordable housing obligations that they
were willing to pay substantial sums to window-dress their reports to HUD.

3. The Affordable Housing Goals were the Sole
Reason That the GSEs’ Acquired So Many NTMs
Up to this point, we have seen that HUD’s policy was to reduce underwriting
standards in order to make mortgage credit more readily available to low-income
borrowers, and that Fannie and Freddie not only took the AH goals seriously
but were willing to go to extraordinary lengths to make sure that they met them.
Nevertheless, it seems to have become an accepted idea in some quarters—
including in the Commission majority’s report—that Fannie and Freddie bought
large numbers of subprime and Alt-A loans between 2004 and 2007 in order to
recover the market share they had lost to subprime lenders such as Countrywide
or Wall Street, or to make profi ts. Although there is no evidence whatever for this
belief—and a great deal of evidence to the contrary—it has become another urban
myth, repeated so oft en in books, blogs and other media that it has attained a kind
of reality. 103
Th e formulations of the idea vary a bit. As noted earlier, HUD has claimed—
absurdly, in light of its earlier eff orts to reduce mortgage underwriting standards—
that the GSEs were “chasing the nonprime market” or “chasing market share and
profi ts,” principally between 2004 and 2007. Th e inference, all too easily accepted,
is that this is another example of private greed doing harm, but it is clear that HUD
was simply trying to evade its own culpability for using the AH goals to degrade
the GSEs’ mortgage underwriting standards over the 15 year period between 1992
and 2007. Th e Commission majority also adopted a version of this idea in its
report, blaming the GSEs’ loosening of their underwriting standards on a desire
to please stock market analysts and investors, as well as to increase management
compensation. None of HUD’s statements about its eff orts to reduce underwriting
standards managed to make it into the Commission majority’s report, which relied
entirely on the idea that the GSEs’ underwriting standards were reduced by their
desire to “follow Wall Street and other lenders in [the] rush for fool’s gold.”
Th ese claims place the blame for Fannie and Freddie’s insolvency—and the
huge number of low quality mortgages in the U.S. fi nancial system immediately prior
to the fi nancial crisis—on the fi rms’ managements. Th ey absolve the government,
particularly HUD, from responsibility. Th e GSEs’ managements made plenty of
mistakes—and won’t be defended here—but taking risks to compete for market
share was not something they actually did. Because of the AH goals, Fannie and

103 See, e.g., Barry Ritholtz, “Get Me ReWrite!” in Bailout Nation, Bailouts, Credit, Real Estate, Really,
Really Bad Calls, May 13, 2010, http://www.ritholtz.com/blog/2010/05/rewriting-the-causes-of-the-
credit-crisis/print/; Dean Baker, “NPR Tells Us that Republicans Believe that Fannie and Freddie Caused
the Crash” Beat the Press Blog, Center for Economic and Policy Research http://www.cepr.net/index.php/
blogs/beat-the-press/npr-tells-us-that-republicans-believe-that-fannie-and-freddie-caused-the-crash;
Charles Duhigg, “Roots of the Crisis,” Frontline, Feb 17, 2009, http://www.pbs.org/wgbh/pages/frontline/
meltdown/themes/howwegothere.html.