According to Arizona Senator Jon Kyl;

“The banks were forced – literally forced – to make mortgage loans to a lot of people that in the past they hadn’t made them to, because (the people) couldn’t afford them,” Kyl said in a teleconference with Arizona reporters.

“But they were deemed to be red-lining, to be discriminating against people who need to share in the American dream of home ownership. Well, it’s a great dream, and we want as many people to share in it as possible, but not if they can’t afford it,” he said.

Well, that is about as clear an explanation as I’ve heard.

Loans to marginal lenders became troubled. Fannie Mae and Freddie Mac took care of the loans by bundling them and selling them to other financial institutions.

Kyl said he helped draft bills in 2003 and 2004 intended to tighten regulation of Fannie and Freddie in an effort to forestall a potential multibillion-dollar bailout.

“Several pieces of legislation were offered up. I could be partisan and tell you who they were offered by and who stopped them, but I won’t. The bottom line was that the prediction, unfortunately, came true,” he said.

Sen. Kyl was a key player in negotiating the Wall Street Bailout Bill (A.K.A., Economic Stabilization Bill).

Via the East Valley Tribune.