Has anyone any doubts about the federal government’s role in the housing and financial debacle? From Peter Wallison’s latest in the Wall Street Journal:

New research by Edward Pinto, a former chief credit officer for Fannie Mae and a housing expert, has found that from the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime or Alt-A.In general, a subprime mortgage refers to the credit of the borrower. A FICO score of less than 660 is the dividing line between prime and subprime, but Fannie and Freddie were reporting these mortgages as prime, according to Mr. Pinto. Fannie has admitted this in a third-quarter 10-Q report in 2008.An Alt-A mortgage is one in which the quality of the mortgage or the underwriting was deficient; it might lack adequate documentation, have a low or no down payment, or in some other way be more likely than a prime mortgage to default. Fannie and Freddie were also reporting these mortgages as prime, according to Mr. Pinto.It is easy to see how this misrepresentation was a principal cause of the financial crisis.Market observers, rating agencies and investors were unaware of the number of subprime and Alt-A mortgages infecting the financial system in late 2006 and early 2007.

The congressional champions of Fannie and Freddie are the same people who are now redesigning the financial regulatory regime so that such debacles never happen again. Feel confident?Oh, by the way, Wallison adds, “Since 2008, under government control, the two agencies have continued to buy dicey mortgages in order to stabilize housing prices.”Read the rest here.