FRANK: It was irresponsible lending, primarily by the private sector and primarily by non-banks. You know, the banks have a right to complain. What happened was this: 30 years ago, if you took out a mortgage, you basically took it out from a bank, which had money that came from depositors, and there was deposit insurance, and it was regulated. And then new sources of liquidity came up in the world, where you could get money to be in the lending business from depositors, which meant you didn't necessarily have to be getting deposit insurance, or you weren't regulated. Secondly, information technology made possible securitization, which meant, one, that the loans were being originated by institutions that were not regulated, and two, that these institutions then packaged the loans, sold them, and had no financial responsibility that they weren't paid back. It's called securitization, and that's basically what happened. This effort to blame the government is nonsensical.

Some of them try to blame the Community Reinvestment Act. Every regulator under both Bushes has said it was not the case, and even three of the four members of the financial inquiry commission, who were appointed by the Republicans, said it wasn't the case. The only one who argues that is this real extremist called Peter Wallison, and it just flies in the teeth of all the evidence. The Community Reinvestment Act didn't do it.

Fannie Mae and Freddie Mac had a role, but first of all, people need to understand: Fannie Mae and Freddie Mac never made a loan. They're not loan originators. They buy the loans made by others. They were followers, not leaders, in buying up the loans. They did join in in buying loans, but these loans were all originated by the private sector, and, by the way, as to blaming the Community Reinvestment Act, the Community Reinvestment Act only applies to banks, technically, deposit-taking insured institutions. Most of the loans were made by institutions that weren't covered by the CRA, and they just wanted to make the money and it was securitization that made them do it. You read about this in Michael Lewis's book The Big Short, or Gillian Tett's book Fool's Gold. Fannie and Freddie were entities that moved it along.

Secondly, the notion that it was Clinton-era is just bizarre. It's like there's this great gap in their minds. What people forget is, having a president and the House and the Senate held by the same party is the exception in American politics, not the rule. From 2000 through 2006, for five of those six years -- there was a brief period when Jim Jeffords split when it wasn't true in the Senate -- the Republicans controlled the White House, the House and the Senate. That's more control than one party has had -- to get a longer period of one-party control of the White House, the House, and the Senate, you have to go back to Lyndon Johnson. Jimmy Carter only had it for four years, and it was during that period, beginning in the seeds of the crisis -- yeah, Clinton people pushed up home ownership, but Bush took over in 2001, and Bush ran the show for those six years. And Bush was even a bigger advocate of the ownership society than Clinton. In 2004, for example, Bush's administration ordered Fannie Mae and Freddie Mac to increase the percentage of mortgages they bought from people who were below the median income -- and I complained about it, said it wasn't good for them. We were, instead, trying to get more rental housing. Now I was slow to see this happening. In 2003, I didn't see a problem, but by 2004, we did see the subprime problem, and the Democrats at first tried to stop the bad subprime loans, and the Republicans blocked us. And it wasn't until 2007, when the Democrats took over both houses, that the anti-bad-lending legislation went through, and the ability of Paulson to put [Fannie and Freddie] into conservatorship, he couldn't get that from the Republicans. Bush couldn't. He got it from us.

You said Fannie Mae and Freddie Mac did have a role in pushing this along. How heavily do you think they contributed?