What happened in the financial meltdown was capitalism at its finest. Freddie Mac and Fannie Mae were only two players in a large market in which mortgages were bundled and sold as securities. Every major investment bank in the world played a role by giving an unfettered market for these bad assets, because the thinking was that, even with buyers not truly qualified, the underlying asset of the home could cover the value of the loan in default. What was not taken into account was that so many loans were in this state that when the defaults began hitting in the numbers they did, the value of the homes began to plummet, removing the underlying base on which these assets were valued.

If you want to look at root causes of what happened and are determined to blame Freddie and Fannie, then look at the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, sponsored by Sen. Don Reigle (R-Michigan) and Congr. Henry Gonzalez (D- Texas) and signed into law by George HW Bush, that forced those two institutions into buying a percentage of sub-prime loans that they were not allowed to purchase prior to then. Keep in mind that it had been a conservative mantra that home ownership would help bring conservative values into troubled and low income communities, starting under Ronald Reagan and reitirated by every Republican leader through George W. Bush. Despite the finger pointing at ACORN, it was actually a conservative movement to get the poor out of subsidized housing and into private ownership.

Coupled with the Gramm-Leach-Bliley Act of 1999, in which barriers put in place after the crash of 1929 preventing banks from selling securities, were removed that you have lending institutions going wild with money to be made on origination points and interest. The bank makes the sub-prime loans, bundled them together and sold them through their unregulated investment divisions, making more money on brokerage fees.

It was the growing number of bad assets in these investment divisions that caused so many large banks to begin to have problems, particularly as the defaults began to pile up and the underlying value of the loan (the house) began to depreciate quickly. Suddenly, the banks found themselves without both cash and value on paper. That was when Secretary Paulsen and President Bush stepped in and began the bailouts, getting cash into the banks to prevent their collapse from lack of capital.

AIG, incidentally, got involved in this by insuring those investments through an instrument called credit derivative swaps. AIG's Financial Products division sold billions of dollars of these instruments insuring these bad investments without checking their true value, making it "safer" for the investment community to buy and sell the sub-prime loans that had been bundled into securities.

So, you see, Fannie and Freddie were but two players in what happened. As Fannie and Freddie were forced by law to get into the sub-prime market, others saw money to be made. Banks would make origination fees, sell the loans off through their investment arm, making brokerage fees on securities insured for insurance fees. So long as the market for houses went up, no worry man. Keep the government out of free enterprise. The minute the whole thing collapsed, as people were unable to pay the loans, the loans went into foreclosure, the number of foreclosed homes surpassed the number of new homes available and the number of new buyers getting loans collapsed with no money to lend, the whole bubble collapsed and suddenly the free market needed to the government to bail them out. The free marketers became socialists over night.

So apportion blame to both parties in Congress over the years and good ol' American enterprise making a buck by moving money around instead of trying to make actual things.