Originally Posted by aceventura3

Just for the record it was under the Clinton administration when Fannie and Freddie were allowed to get into the "sub-prime" market big time. Fannie and Freddie were also allowed ridiculously high leverage ratios, 2.5%. Meaning for every dollar of debt, they only needed $.025 in cash. By 2007 Fannie and Freddie accounted for $6 trillion of the total $12 trillion dollars in US market exposure. All it took was a 2.5% drop in the value of their assets for them to become technically insolvent. We have know they were insolvent a long time. The reality is that a certain percent of the loans were based on inflated appraisals or loan to value ratios 100% or higher, which means their leverage was in fact higher. Those who tried to address the issue could not, due to politics. Fannie and Freddie drove the market and lead the excess. People who suggest private sector banking deregulation is at the root cause of this mess are misinformed or are misleading.

$700 million is about 5.8% of the total US mortgage market, a drop in the bucket.