There is an excellent summary of the mortgage crisis that I highly recommend here. The list of guilty parties includes some Republicans but mostly Democrats. The history is long and replete with warnings that went unheeded. These are the highlights as I see it:
1933-38: President Franklin D. Roosevelt initiated a series of "New Deal" reform programs designed to affect the mortgage market and homeownership. Fannie Mae was established to facilitate liquidity among lending institutions.
1968: As part of President Johnson's Great Society reform plan, much of Fannie Mae became a privately owned yet government-chartered company, a government-sponsored enterprise (GSE) providing authority to issue mortgage-backed securities. Though private, it remained backed by the federal government.
1970: President Nixon chartered Freddie Mac, the Federal Home Loan Mortgage Corporation, as a GSE to compete with Fannie Mae.
1977: Sen. William Proxmire, D-Wis., introduced a community reinvestment Senate bill. Opponents argued the bill would allocate credit without regard for merits of loan applications, thereby threatening depository institutions. The bill's sponsor stressed it would neither force high-risk lending nor substitute the views of regulators for those of banks. President Carter signed into law the Community Reinvestment Act.
October 1992: Congress, enacting the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, which created the Office of Federal Housing Enterprise Oversight (OFHEO) within HUD to "ensure that Fannie Mae and Freddie Mac are adequately capitalized and operating safely." Rep. Jim Leach, R-Iowa, warned about the impending danger non-regulated GSEs posed. He was concerned that OFHEO was a "weak regulator." Leach worried that Fannie Mae and Freddie Mac were changing "from being agencies of the public at large to money machines for the stockholding few."
June 1995: The Clinton administration, allied with Rep. Frank, Sen. Ted Kennedy, D-Mass., and Rep. Maxine Waters, D-Calif., directed HUD Secretary Andrew Cuomo to inject GSEs into the subprime mortgage market.
Fall 1999: Treasury Secretary Lawrence Summers issued a warning: "Debates about systemic risk should also now include government-sponsored enterprises, which are large and growing rapidly."
September 1999: With pressure from the Clinton administration, Fannie Mae eased credit requirements on loans it would purchase from lenders, making it easier for banks to lend to borrowers unqualified for conventional loans.
March 2000: Rep. Richard Baker, R-La., proposed a bill to reform Fannie and Freddie's oversight in a House subcommittee on capital markets. Rep. Frank dismissed the idea, saying concerns about the two were "overblown" and there was "no federal liability there whatsoever."
June 2000: Competitive Enterprise Institute President Fred L. Smith Jr. recalls testifying before the House Financial Services Committee that GSE "special privileges create a serious hazard to the market, to taxpayers (and) to the economy." Rep. Paul Kanjorski, D-Pa., responded: "Mr. Smith, that is almost a fallacious argument," adding that rapid growth of GSE debt holdings was nothing to worry about.
April 2001: The fiscal year 2002 budget declares that the size of Fannie Mae and Freddie Mac is "a potential problem," a White House release said, because "financial trouble of a large GSE could cause strong repercussions in financial markets, affecting federally insured entities and economic activity."
September 2004: OFHEO reported that Fannie Mae and CEO Raines had manipulated the agency's accounting to overstate its profits. Congress and the Bush administration sought strong new regulation and authority to put the GSEs under conservatorship if necessary.
May 2006: After years of Democrats blocking legislation, Sens. Hagel, Sununu, Dole and McCain write a letter to Majority Leader Bill Frist demanding that GSE regulatory reform be "enacted this year" to avoid "the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole."
September 2008. Rep. Arthur Davis, D-Ala., admits Democrats were in error: "Like a lot of my Democratic colleagues, I was too slow to appreciate the recklessness of Fannie and Freddie. I defended their efforts to encourage affordable homeownership when in retrospect I should have heeded the concerns raised by their regulator in 2004. Frankly, I wish my Democratic colleagues would admit when it comes to Fannie and Freddie: We were wrong."