…to the bank!”

The kerfuffle comprised of flying blame over the financial crisis goes on.

Depending upon whom you ask, and that depending upon their individual political agendas, the conclusion one could easily draw is that the private sector’s to blame and the public sector’s to blame.

Face it, though, the entire economic mess was triggered, if that’s the operative word, by unconstitutional government interference in the marketplace.

As congressional Democrats press on with their attempts to get financial legislation reform passed, a key component has been lacking from the debate: how to handle the government-sponsored enterprises Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE).

Although some Republican lawmakers have cried foul over the fact nothing has been included in a bill sponsored by Senate Banking Committee Chairman Sen. Chris Dodd, (D-Conn.), President Barack Obama’s administration has vowed to pursue reforming the GSEs … eventually.

However, despite a long history of alleged corruption, close ties to the current administration and a recent $10-billion extension of “emergency aid” to Freddie and Fannie in the deadest possible part of the news cycle, these two entities have gone relatively unnoticed by the news media, with a lion’s share of the spotlight given to Wall Street bogeymen like Goldman Sachs (NYSE:GS).

Reporting on the roles of Fannie Mae and Freddie Mac has been almost nonexistent, particularly in the broadcast media. Since March 28, ABC, CBS and NBC put together only broached the topic of GSEs one time. But Goldman Sachs and the circumstances surrounding an SEC investigation were mentioned 37 times.

Even in the cable media, home of the 24-hour news cycle, when GSE-reform is discussed, it’s dismissed as some sort of Republican talking point or distraction.

As usual, the big government, regulation addicted side of the aisle kick started the problem.

Background: Freddie and Fannie ‘Proximate Cause’ of Crisis

Though the attention has been lacking, there is a strong to be made that these government-sponsored enterprises are at least somewhat, if not largely, culpable for the economic crisis.

According to the “Financial Services Committee Republican Plan for Reforming Fannie Mae and Freddie Mac,” posted on March 26, it’s not just the collapse in housing these GSEs are responsible for, but the entire economic crisis.

“The evidence is clear that the Government Sponsored Enterprises (GSEs) – specifically, Fannie Mae and Freddie Mac – were the proximate cause of the economic crisis,” the Republican plan explained. “Ultimately supported by the taxpayers to the tune of hundreds of billions of dollars, Fannie and Freddie permitted their executives, investors, and creditors to make outsize profits when times were good, but stuck taxpayers with the tab when the housing bubble burst. Fannie and Freddie’s access to cheap capital and the taxpayers’ pocketbook helped run up housing prices to unsustainable levels, while crowding out lenders and investors who could not afford to compete against these government-sponsored juggernauts.”

Howsomever, there appeared to have been some hanky panky going on, of, as they say, an unsavory nature.

For example, there’s the chain of shenannigans brought to us courtesy of Goldman Sachs, wherein they’re accused of capitalizing in less than forthright fashion upon markets broken by the onslaught of federal buttinskyism.

A Senate showdown has put Goldman Sachs’ defense of its conduct in the run-up to the financial crisis on display before indignant lawmakers and a national audience. Democrats hope it also builds momentum for legislation, now before the Senate, to tighten regulation of the nation’s financial system.

Goldman Sachs CEO Lloyd Blankfein testily told skeptical senators at a hearing Tuesday that clients who bought subprime mortgage securities from the Wall Street powerhouse in 2006 and 2007 came looking for risk “and that’s what they got.”

The Senate investigative panel alleges the firm bet against its clients — and the housing market — by taking short positions on mortgage securities, and failed to tell them that the securities it was selling were very high risk.

Naughty, dudes and dudettes at Goldman Sachs, if these allegations are indeed true.

One rather impissening revelation, if it is indeed a revelation, are the series of not-all-that-good accusations and the resulting investigation into my own former bank (no, I didn’t own it, per se, just had lots of money in it before it was absorbed by Chase as it began sinking to Davy Jones’ Locker).

Of course, the below ABC News account is a bit on the bursting-with-enthusiasm side of things.

In an incident that critics view as emblematic of rampant greed at Washington Mutual, a remix of that song — with the lyrics changed to “I like big bucks and I cannot lie…” — was performed at one of the company’s lavish annual retreats years before it became the largest bank to fail in U.S. history.

Every year the bank would hold huge parties in exotic locales to celebrate its mortgage originators who created the most loans — the same high-risk loans that would ultimately prove to be the company’s undoing.

At the 2006 retreat in Kauai, a group of employees performed a “tribute” to the event’s honorees. To the tune of the 1992 hit “Baby Got Back,” the employees came out on stage and started rapping, “I like big bucks and I cannot lie / You mortgage brothers can’t deny / That when the dough roles in like you’re printin’ your own cash / And you gotta make a splash / You just spends/ Like it never ends / Cuz you gotta have that big new Benz…”

At a retreat in Maui the year before, NBA Hall-of-Famer Magic Johnsonwas the emcee. “President’s Club,” Johnson told the gathering. “It’s kind of like the NBA All-Star game. Everyone there is an All-Star.”

But on Sept. 25, 2008, collapsing under the weight of these now-toxic loans, Washington Mutual — with over $300 billion in assets, $188 billion in deposits, and 43,000 employees – was seized by federal regulators and sold to JP Morgan Chase for $1.9 billion in the largest bank collapse in the country’s history.

For the past year the Senate Permanent Subcommittee on Investigations, led by chairman Carl Levin and ranking member Tom Coburn, has been examining Washington Mutual’s collapse as part of a probe into the financial crisis.

What they have found is widespread fraud. The investigators have said that Washington Mutual engaged in fraudulent lending practices for years leading up to its demise.

I must admit that as we entered the mortgage quagmire, WaMu bank officers were being encouraged to push those loans any way they could, and one branch manager I know told me that there were generous bonuses being paid to help things along.

All the while, the bank was selling its toxic loans into the market: not only were some marred by fraudulent information, but others were ones that the bank believed would likely go bad. Still, the company did not alert the securities’ buyers about the looming problems. In fact, the bank even boosted compensation for its loan officers who sold higher-risk loans: the faster the speed and the greater the volume, the bigger the payday a loan officer would earn for the sales.

The entire article on Washington Mutual is here.

Any way you look at both sides in this, it is profoundly disconcerting.