Jesse Eisenger has a great piece about how Freddie Mac resisted efforts to boost mortgage refinancing. You should really read it, but I thought I'd highlight this piece:
In closed door meetings, two Republican-leaning board members and at least one executive resisted a mass refi policy for an additional reason, according to the interviews: They regarded it as a backdoor economic stimulus.
That's more or less accurate. Larger-scale and more vigorous implementation of mortgage refinancing through federally owned Fannie Mae and Freddie Mac would have been economic stimulus (where exactly the "backdoor" is we'll leave as subjective) and that's precisely why it's so terrible they go through with it.
And that in a nutshell is how our screwy politics have been hurting the economy for years.