“The truth is that they [Fannie and Freddie] never really wanted to dig too deep into the true nature of the loans they were buying.” Via Yahoo Finance.

I believe it. And that tells me that recklessness, or at least a horrendous lack of due diligence, was a huge reason Fannie and Freddie failed, costing U.S. taxpayers bazillions.

Anyway, when you have an implied government guarantee, why waste time checking the quality of the mortgages?

That idea also fits my open secret hypothesis, that everybody in the know knew those loans stank but because everybody was making a ton of money they didn’t want to rock the boat by shining a light on the quality of the loans.

That’s why the guys who discovered the house of cards (and made billions shorting the stuff) were all outsiders. The insiders didn’t want the music to stop. None of those brilliant, multimillion dollar a year banking guys figured it out until after the train wreck, if they ever figured out at all.

Anybody from Fannie or Freddie gone to jail yet?

ADDED: FDIC sues former IndyMac executives.