Tuesday, September 30, 2008

The Writing Was on the Wall

This warning came from a NY Times article - in 1999.

Fannie Mae Eases Credit To Aid Mortgage Lending

Published: September 30, 1999

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''
- (snip) -
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

"From the perspective of many people, including me, this is another thrift industry growing up around us," said Peter Wallison a resident fellow at the American Enterprise Institute. "If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry."
So anybody who says that nobody could have foreseen this whole thing coming is full of shit. This guy saw it coming before it ever began.

Hat-tip: Don

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Anonymous Anonymous said...

My only BAIL OUT is living from social security check to social check & hoping my
rent stays under 50% of that check!

The whole mess could have started with George Washington--BUT regardless
it is/has been all under Bush's 8 year watch--did he just WATCH the mess
grow bigger?

3:11 AM GMT+13  
Blogger Joe Ramen said...

...it is/has been all under Bush's 8 year watch...

OCM, don't fall for that crap about it happening under his watch. That is a meaningless talking point. Bush had virtually nothing to do with the "mess." It matters very much where and when it began, and it didn't begin with Bush.

Bush didn't just watch the mess grow. I know you read the previous post from Friday (the RANT post) - did you overlook the part or the link to where GWB called for oversight 17 times this year alone and numerous times since 2001?

Regardless, the president cannot make the congress do anything. He can make suggestions and appeal to them to do something, but at the end of the day the congress is the body of lawmakers.

History matters!

9:09 AM GMT+13  
Blogger BobF said...

Bush and others did call for oversight but unless the news media reports it, we'll never know about it.

10:35 AM GMT+13  
Blogger Joe Ramen said...

That's right, Bob.

What gets me is that the same people who blame everything on Bush, giving him credit for all these things that require an evil, diabolical genius - these are also the same people who accuse him of being a complete moron and a buffoon.

He can't be both, so which is it?

Answer: Bush is whatever the left wants him to be at the time it suits them to make their case.

12:13 PM GMT+13  
Blogger BobF said...

Joe, I've noticed that too. They claim he's such a moron but he managed to outsmart them in two elections.

12:34 AM GMT+13  
Blogger Joe Ramen said...

Well, i wouldn't go so far as to say that winning elections is a testament to anybody's intelligence or being able to outsmart the electorate.

Winning elections has a lot to do with how well you can bullshit people.

And let's face it, the American electorate, as a whole, isn't that hard to outsmart; I think the "average" person is pretty thick and ignorant. It's not like he won by a landslide in either election.

My personal opinion is that Bush is well-intentioned and not that bright, but he surrounds himself with bright people.

2:56 PM GMT+13  

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