The failure of IndyMac Bank wasn’t too difficult to foresee; IndyMac was always one of the biggest movers behind the no-doc/subprime/Alt-A mortgage craze earlier in the decade, so its insolvency was probably inevitable. The troubles of Fannie Mae and Freddie Mac come as more of a surprise, as those institutions are prevented by law from doing subprime lending. (The definition of “subprime,” in fact, amounts to “loans that Fannie and Freddie aren’t allowed to touch.”) So why are they in trouble? New York Times columnist Paul Krugman answers the question:

Part of the answer is the sheer scale of the housing bubble, and the size of the price declines taking place now that the bubble has burst. In Los Angeles, Miami and other places, anyone who borrowed to buy a house at the peak of the market probably has negative equity at this point, even if he or she originally put 20 percent down. The result is a rising rate of delinquency even on loans that meet Fannie-Freddie guidelines.

There are other reasons, Krugman explains, having mainly to do with inadequate capitalization on the part of Fannie and Freddie. Still, it’s clearer than ever before that “subprime crisis” is a misnomer, and that our current woes affect a lot more mortgages than initially thought.

N.B.: For a good primer on what Fannie Mae and Freddie Mac are and what they’re supposed to do, go read the whole column.