The mismanagement of Fannie Mae and Freddie Mac is no orphan. It has many fathers, and deregulation of financial markets isn't one of them.

Starting three decades ago, lawmakers began calling for wider home ownership, which often resulted in government-backed mortgages going to people who couldn't repay them, forcing ever more of the risk on to Fannie and Freddie, two quasi-private corporations. Chartered by Congress years ago, Fannie and Freddie exist to buy mortgages from lenders so that the lender can then recycle the money to other borrowers.

The broadened mission of Fannie, Freddie and other mortgage lenders began in Jimmy Carter's administration with passage of the well-intentioned Community Reinvestment Act. Initially, this legislation mandated that mortgage lenders quit "redlining" urban neighborhoods of low-to moderate-income residents. That was a good idea, but pressure from Congress to approve ever more loans to buyers of modest means eroded the criteria banks traditionally used to gauge the risk of default.

In their place came subprime loans with low teaser rates set to soar. But many marginal borrowers expected to refinance at lower fixed rates and affordable payments.

To encourage lenders to approve these riskiest of mortgages, Congress required that Fannie and Freddie buy ever more of them. By 2005, high-risk home loans comprised 52 percent of Fannie's and Freddie's portfolios. No problem, banks were eager to unload this iffy paper and get back to creditworthy borrowers.

Then Fannie figured how to make this paper pay by bundling the worst and the best loans to back bonds for investment firms to sell. And investors the world over bought the bonds, not least because they saw Uncle Sam as their guarantor.

For years, some Republican lawmakers have proposed regulations to curb the worst excesses but were rebuffed by Fannie's and Freddie's foremost cheerleaders, Sen. Chris Dodd of Connecticut and Rep. Barney Frank of Massachusetts. With Sen. Barack Obama of Illinois, they were also the top three recipients of campaign contributions from the corporations' honchos and their supporters.

Former Clinton administration official Franklin Raines, a most egregious example, departed Fannie Mae with an accounting investigation at his back but personally ahead by $91 million. That's enough to buy down mortgage interest rates to levels affordable for hundreds of moderate-income families.

Appallingly, some Democrats still claim that deregulation fomented by Republicans and greedy investors caused the meltdown. Never mind that the policy of spreading homeownership around to folks who couldn't afford it will cost millions their homes and taxpayers an extra $700 billion.

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