Greenspan says Fannie, Freddie execs should explain their role in housing crisis

Former Federal Reserve Chairman Alan Greenspan said that executives of mortgage giants Fannie Mae and Freddie Mac should be asked why they were so intent on building their portfolios beyond trying to make a profit. 

Greenspan, who ran the Fed between 1987 and 2006, said he has never received any straight answers from the mortgage firms but said Congressionally mandated actions likely contributed to the housing bubble. 

During the day's questioning he repeatedly dismissed the idea that the Fed played a role in the housing bubble by keeping its interest rates low.  

"It's an unfortunate event" he said of the meltdown of the firms, which were taken over by the government more than 18 months ago. The problems likely wouldn't have occurred if the mortgage giants wouldn't have built up such a "huge accumulation of assets," he told the Financial Crisis Inquiry Commission on Wednesday. 

More than $125 billion emergency federal aid has been invested into the firms by Treasury to cover their losses. 

In 2000, there were Clinton administration and Congressional efforts to make housing more affordable to minorities and the disadvantaged by purchasing more subprime mortgage securities. 

He said obviously that fewer subprime assets would have removed "a substantial weight," from the companies' portfolios, saving massive losses to the firm and collapsing the housing market. 

With falling interest rates in 2003 and 2004 Greenspan said "a significant portion of the increased demand for subprime mortgage-backed securities during the years 2003 and 2004 was effectively politically mandated," he said. Because of those mandates the subprime market grew quickly and standards deteriorated rapidly.