The Posner-Becker blog has a good debate between the two on the role of Freddie Mac & Fannie Mae in the financial crisis. Becker thinks it was more substantial than does Judge Posner.
Judge Posner:
As Becker points out, Fannie and Freddie were effective in obtaining congressional and presidential assistance to ward off threats to their activities and their profits. But I don’t think that that assistance, unseemly as it was, and perhaps corrupt as well, was the basic problem of Fannie and Freddie, or the cause of their collapse; nor do I think their collapse was of any great consequence for the nation.
Rather, he blames the depression on other factors and suggests that, without Fannie & Freddie, things could have been worse. Had their debts instead been those of banks like Goldman and Morgan Stanley, those banks may have collapsed and the government may have taken over those firms. Posner lays more of the blame at the feet of Greenspan and Bernanke keeping interest rates too low, encouraging the housing bubble. He also suggests that financial deregulation had gone too far.
I take the exact opposite view from Posner: this recession, the most severe seemingly ever, is all about housing. Freddie and Fannie were the kingpins of the system that caused the bubble, and are thus the main cause of the recession. That they have not been eliminated is a big reason that we can’t seem to get past this recession and into a strong recovery.
As for financial regulation, the issue is not deregulation per se. The problem is that a lot of the products that Wall Street is selling are so complicated that they are essentially unregulatable. Thing like credit default swaps and mortgage backed securities need to be outlawed, not regulated. Wall Street needs to be castrated, not simply put on a leash.