"The Fed’s low interest rates, combined with Fannie and Freddie’s government-sponsored purchases of mortgages, made it highly and artificially profitable to lend to anyone and everyone. The banks and mortgage companies didn’t need to be any greedier than they already were. When banks saw that Fannie and Freddie were willing to buy virtually any loan made to under-qualified borrowers, they made a lot more of them.
Greed is no more to blame for these bad mortgages than gravity is to blame for plane crashes. Gravity is always present, just like greed. Only the Federal Reserve’s easy money policy and Congress’ housing policy can explain why the bubble happened when it did, where it did.
Of further significance is the fact that Fannie and Freddie were under great political pressure to keep housing increasingly affordable (while at the same time promoting instruments that depended on the constantly rising price of housing) and to extend opportunities to historically “under-served” groups. Many of the new mortgages with low or even zero-down payments were designed in response to this pressure (see chart above). Not only were lots of funds available to lend, and not only was government implicitly subsidizing the purchase of mortgages, but it was also encouraging lenders to find more borrowers who previously were thought unable to afford a mortgage."