Ironically, Gansoblanco, in your feeble attempt at sarcasm you've hit on a major truth. Yes, I think McCain/Palin *will* be a solid first step at reforming the intrusive, inefficient, self-serving entity of government we've seen over the last thirty or forty years.
Luminary got his analysis right in that CDOs are a major, if not the primary, cause of the current housing and financial infrastructures meltdown. The problem is that he didn't take his analysis far enough. i.e. what brought about the market for these high-risk/low equity investment vehicles and the need for Fannie and Freddie to market them? Answer: government intervention.
Simply put, if there had been no government motivation (read that "extortion") to provide financing to people who couldn't afford it, there just as simply would have been no reason for Fannie and Freddie to have to foist these questionable vehicles onto an unsuspecting investment community. "Unsuspecting" because the investment community knew these CDOs were, at least in part, protected by "the full faith and credit of the United States government."
It's not the market that needs more regulation, it's the government!
Ernie

 "The fact is that Fannie Mae and Freddie Mac have gotten too big and too expensive to the taxpayers. The McCain-Palin administration will make them smaller and smarter and more effective for homeowners who need help."

Sarah Palin September 6, 2008

This is the type of keen insight that will turn this country  around. No doubt.

2003 huh? Help me out here....which party held the majority in congress and the presidency in 2003?

Never said McCain was my near my top choice for prez, but when you are up against a junior high kid....
But he does chose a better VP

New York Times  - 2003:

The Bush administration today recommended the most significant
regulatory overhaul in the housing finance industry since the savings
and loan crisis a decade ago.

…The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.
”There is a general recognition that the supervisory system for housing-related government-sponsored enterprises neither has the tools, nor the stature, to deal effectively with the current size, complexity and importance of these enterprises,” Treasury Secretary John W. Snow told the House Financial Services Committee in an appearance with Housing Secretary Mel Martinez, who also backed the plan.
Mr. Snow said that Congress should eliminate the power of the president to appoint directors to the companies, a sign that the administration is less concerned about the perks of patronage than it is about the potential political problems associated with any new difficulties arising at the companies.
…”These two entities — Fannie Mae and Freddie Mac — are not facing
any kind of financial crisis,” said Representative Barney Frank of
Massachusetts, the ranking Democrat on the Financial Services
Committee. ”The more people exaggerate these problems, the more
pressure there is on these companies, the less we will see in terms of
affordable housing.”
Representative Melvin L. Watt, Democrat of North Carolina, agreed.
”I don’t see much other than a shell game going on here, moving something
from one agency to another and in the process weakening the bargaining
power of poorer families and their ability to get affordable housing,”
Mr. Watt said.

"If Governor Palin and I are elected in 49 days, we are not going to waste a moment in changing the way Washington does business,and we're going to start where the need for reform is greatest. In short order, we are going put an end to the reckless conduct, corruption, and unbridled greed that have caused a crisis on Wall Street.''
"Too many people on Wall Street have been recklessly wagering instead of making the sound investments we expected of them and when their companies collapse, only the CEOs seem to escape the consequences."
"Too many firms on Wall Street have been able to count on casual oversight by regulatory agencies in Washington and there are so many of those regulators that the responsibility for oversight is scattered, unfocused and ineffective.''
Senator John McCain, September 15, 2008

The question is who told them they could do the loans. It was Congress, Democrat and Rep, mainly Dems. They were not doing the loans that got them in trouble before that time.

So, if they told them to do it, open the books why not use it to make more money?

Do I say it is greed, you bet. But it was done just like any other business would have done. It is called making money. And the rule was opened up by the Community Reinvestment Act to give loans to people who could not pay them back, guaranteed by the tax payer (fannie and freddie). If Congress would have kept the old rule in this would not have happened.

Bottom line, it was Barney Frank and others that told the banks to do these loans. The banks and all did what they were told to do and expanded it. It was legal. And, McCain and Bush tried to bring it out to get them to stop it and it was not acted on by Congress.

It is purely laughable, if not something to cry about, that Dodd, Frank, Kerry and others in Congress now sit on the TV and point the finger just like little kids pointing to someone else to take the blame off theirselves.

I believe Senator McCain's identifying phrase is "Greed of Wall Street". 

Yes, Bush and McCain tried to tell all. It was the Dems who pushed to get "affordable housing."
This guy gets it more than you Mr. luminary.
How did we get here? Let's review: In order to curry congressional support after their accounting scandals in 2003 and 2004, Fannie Mae and Freddie Mac committed to increased financing of "affordable housing." They became the largest buyers of subprime and Alt-A mortgages between 2004 and 2007, with total GSE exposure eventually exceeding $1 trillion. In doing so, they stimulated the growth of the subpar mortgage market and substantially magnified the costs of its collapse.
It is important to understand that, as GSEs, Fannie and Freddie were viewed in the capital markets as government-backed buyers (a belief that has now been reduced to fact). Thus they were able to borrow as much as they wanted for the purpose of buying mortgages and mortgage-backed securities. Their buying patterns and interests were followed closely in the markets. If Fannie and Freddie wanted subprime or Alt-A loans, the mortgage markets would produce them. By late 2004, Fannie and Freddie very much wanted subprime and Alt-A loans. Their accounting had just been revealed as fraudulent, and they were under pressure from Congress to demonstrate that they deserved their considerable privileges. Among other problems, economists at the Federal Reserve and Congressional Budget Office had begun to study them in detail, and found that -- despite their subsidized borrowing rates -- they did not significantly reduce mortgage interest rates. In the wake of Freddie's 2003 accounting scandal, Fed Chairman Alan Greenspan became a powerful opponent, and began to call for stricter regulation of the GSEs and limitations on the growth of their highly profitable, but risky, retained portfolios.
If they were not making mortgages cheaper and were creating risks for the taxpayers and the economy, what value were they providing? The answer was their affordable-housing mission. So it was that, beginning in 2004, their portfolios of subprime and Alt-A loans and securities began to grow. Subprime and Alt-A originations in the U.S. rose from less than 8% of all mortgages in 2003 to over 20% in 2006. During this period the quality of subprime loans also declined, going from fixed rate, long-term amortizing loans to loans with low down payments and low (but adjustable) initial rates, indicating that originators were scraping the bottom of the barrel to find product for buyers like the GSEs.
The strategy of presenting themselves to Congress as the champions of affordable housing appears to have worked. Fannie and Freddie retained the support of many in Congress, particularly Democrats, and they were allowed to continue unrestrained. Rep. Barney Frank (D., Mass), for example, now the chair of the House Financial Services Committee, openly described the "arrangement" with the GSEs at a committee hearing on GSE reform in 2003: "Fannie Mae and Freddie Mac have played a very useful role in helping to make housing more affordable . . . a mission that this Congress has given them in return for some of the arrangements which are of some benefit to them to focus on affordable housing." The hint to Fannie and Freddie was obvious: Concentrate on affordable housing and, despite your problems, your congressional support is secure.
In light of the collapse of Fannie and Freddie, both John McCain and Barack Obama now criticize the risk-tolerant regulatory regime that produced the current crisis. But Sen. McCain's criticisms are at least credible, since he has been pointing to systemic risks in the mortgage market and trying to do something about them for years. In contrast, Sen. Obama's conversion as a financial reformer marks a reversal from his actions in previous years, when he did nothing to disturb the status quo. The first head of Mr. Obama's vice-presidential search committee, Jim Johnson, a former chairman of Fannie Mae, was the one who announced Fannie's original affordable-housing program in 1991 -- just as Congress was taking up the first GSE regulatory legislation.
In 2005, the Senate Banking Committee, then under Republican control, adopted a strong reform bill, introduced by Republican Sens. Elizabeth Dole, John Sununu and Chuck Hagel, and supported by then chairman Richard Shelby. The bill prohibited the GSEs from holding portfolios, and gave their regulator prudential authority (such as setting capital requirements) roughly equivalent to a bank regulator. In light of the current financial crisis, this bill was probably the most important piece of financial regulation before Congress in 2005 and 2006. All the Republicans on the Committee supported the bill, and all the Democrats voted against it. Mr. McCain endorsed the legislation in a speech on the Senate floor. Mr. Obama, like all other Democrats, remained silent.
Now the Democrats are blaming the financial crisis on "deregulation." This is a canard. There has indeed been deregulation in our economy -- in long-distance telephone rates, airline fares, securities brokerage and trucking, to name just a few -- and this has produced much innovation and lower consumer prices. But the primary "deregulation" in the financial world in the last 30 years permitted banks to diversify their risks geographically and across different products, which is one of the things that has kept banks relatively stable in this storm.
As a result, U.S. commercial banks have been able to attract more than $100 billion of new capital in the past year to replace most of their subprime-related write-downs. Deregulation of branching restrictions and limitations on bank product offerings also made possible bank acquisition of Bear Stearns and Merrill Lynch, saving billions in likely resolution costs for taxpayers.
If the Democrats had let the 2005 legislation come to a vote, the huge growth in the subprime and Alt-A loan portfolios of Fannie and Freddie could not have occurred, and the scale of the financial meltdown would have been substantially less. The same politicians who today decry the lack of intervention to stop excess risk taking in 2005-2006 were the ones who blocked the only legislative effort that could have stopped it.
Mr. Calomiris is a professor of finance and economics at Columbia Business School and a scholar at the American Enterprise Institute. Mr. Wallison, a senior fellow at the American Enterprise Institute, was general counsel of the Treasury Department in the Reagan administration.