Michael Hudson writes one of the most convincing Fannie and Freddie Didn’t Do It pieces yet.

Actually, my soundbite isn’t quite right: Frannie contributed to the crash, as Hudson says. But they were minor players compared to Wall Street, not in any way the main bad guys—despite what the American Enterprise Institute and the like would have you believe. Hudson, who has a new book out called The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America—and Spawned a Global Crisis, shows why.

First there’s this: Fannie and Freddie’s market share plunged through 2006 (when the housing market turned) as Wall Street’s bubble machine went into high gear. It was a bit player in the riskiest loans. Just 5 percent of its loans were subprime. Wall Street’s percentage was 500 percent higher.

Ahh, Wall Street apologists say, but bankers wouldn’t have put together these MBS and CDO deals if Fannie and Freddie weren’t funding them indirectly via the securitization markets. Wrong:

In addition to buying loans directly, Fannie and Freddie also purchased mortgage-backed securities produced by Wall Street. From 2002 to 2007, Wall Street produced more than $3 trillion in securities backed by subprime mortgages and so-called Alt-A mortgages, another class of risky home loans. During that time, Fannie and Freddie purchased 23 percent of Wall Street securities underpinned by subprime and Alt-A loans, according to Inside Mortgage Finance.

That’s a big chunk, but still not enough to make the case that Fannie and Freddie were the main drivers of the growth in risky lending.

Need even more evidence? There’s this:

As of September, Federal Reserve data show, 2.2 percent of Fannie- and Freddie-backed mortgages were in foreclosure, compared to 13 percent of all subprime mortgages, 11.3 percent of all Alt-A mortgages, and 2.9 percent of all prime mortgages.

Or to put that another way:

Mortgages financed by Wall Street from 2001 to 2008 were 4½ times more likely to be seriously delinquent than mortgages backed by Fannie and Freddie.

Case closed, or it ought to be, but you can bet we’ll still be debunking the CRA/Frannie canard ten years from now. Why? I like how Hudson, who’s a staff writer with the Center for Public Integrity, gets at that:

Tagging Fannie and Freddie as the primary suspects in the mortgage debacle diverts attention from bigger offenders and from policy decisions—such as deregulation in the mortgage market and on Wall Street—that helped create the climate for out-of-control lending.

There you go. And it comes from an awfully well funded propaganda machine.

Further Reading:

Audit Interview: Michael Hudson. “We’re in a battle now to define what happened.”

Covering the Republicans’ Crisis Commission Document. Bethany McLean shows why he said-she said reporting doesn’t cut it

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.