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Fannie Mae Eases Credit To Aid Mortgage Lending – New York Times
September 29th, 2008 by Mike

Fannie Mae Eases Credit To Aid Mortgage Lending – New York Times.

You may want to hop over and read the linked article by Steven A. Holmes published September 30, 1999. In it Steven Holmes reports that Fannie Mae’s previous year portfolio contained 44% of its loans from low to moderate-income borrowers (subprime loans).

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 July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae’s and Freddie Mac’s portfolio be made up of loans to low and moderate-income borrowers.

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.”

I guess we did know about this financial meltdown years ago. Hmmm.

© 2008, J. M. Erickson. All rights reserved.


2 Responses  
  • georgette writes:
    September 29th, 200816:20at

    😯
    There are mulitple know and unknown reasons for our current condition. Regardless of blame, what do you think is a solution?

  • Mike writes:
    September 29th, 200816:54at

    Yeah, there’s lots of blame to go around…everywhere.

    I wish I were smart enough to know how to fix it. Having a food fight in the Congress certainly won’t do the trick.

    There’s an organization here in Florida, maybe other places, too, called “Throw The Bums Out!” Their goal is to unseat every incumbent in Congress. That might go a long way in fixing the gridlock, but I don’t know if that would help the financial markets before they start blowing up the economy.

    One solution is the currently proposed solution for the taxpayers to purchase all the “bad” financial instruments to the tune of $700 billion to relieve the markets of the bad debt and free up credit. This involves the government, however, and they have a unique skill of being able to screw up almost everything they get involved in.

    Another solution on the opposite end of the scale is to do nothing. Let the markets straighten themselves out. This would eventually happen and probably do it more effectively than government intervention, but the pain in the interim would be excruciating especially for those already hurting now.

    Would be nice to be able to see into the future.


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