When I suggest that Fannie and Freddie had something to do with the crisis (not the cause, but an important part of the story as to why housing prices took off between 1995 and 2006) people often respond by saying that Spain had a housing bubble, the UK had a housing bubble and they didn’t have Fannie and Freddie. No doubt it is true that Fannie and Freddie were all-American. But it’s also true that other nations pursued public policies to increase home ownership.
From the Washington Post on Spain’s housing boom and bust:
These banks, based in each of Spain’s regions, are charged with lending for community development. They expanded rapidly during the boom years, often going far beyond their traditional regional borders. They are also politically connected, governed not by a corporate board of directors but by people chosen by local politicians.
“Where the politicians were smart, they gave technical people the power to make business decisions,” said Federico Steinberg, a researcher at Real Instituto Elcano, a public-policy think tank. “But often the lending decisions involved politics, and credit was not rationally assigned.”
I don’t know how much of the housing market boom in the late 1990′s and early 2000′s was due to Fannie and Freddie. It did not occur only in the US. It may turn out it was all due to monetary policy or a world-wide mania for housing as an investment. But I suspect it had something to do with implicit and explicit subsidies to home ownership, a viral policy mania that was not limited to the United States.