You presume that reform of Freddie & Fannie would have prevented the housing bubble, but there is little reason to think so. I would place in evidence Britain and Japan, which each managed to inflate painful housing bubbles without anything even close to subprime mortgages. In fact, if the only problem were mortages to write off, there would be little of the current brouhaha. The trigger problem is that of an entire financial services industry that securitized these mortgages and gleefully sold them on to other financial institutions which, it seems, didn't understand what they were buying. Me, I'm going to blame the (in this case) under-regulated securities industry generally and, in particular, banks and hedge funds led by MBAs who should have flunked Finance 101, however well they may done in their Ponzi scheme courses. And perhaps we might even give a special mention to the banking industry and their well-greased Republican and Democratic allies who finally managed to tear down the Glass-Steagall safety walls in 1999.

italtrav,

The feature which allowed everyone in the financial markets to accept the sub-prime risk was the implicit government guarantee on FM/FM purchased loans. Running mortgages through FM/FM was marketed as eliminating the risk. This in turn vastly increased the potential purchasers of MBS.

Fully privatizing and eliminating this guarantee would have greatly reduced the issue. Even publicly disavowing the guarantee before the majority of loans ocurred would have been effective.

The morgage orinators took advantage of FM/FM's bad policies, and that's why the government should not be in these businesses.