Fed Seizes Fannie & Freddie; Thoughts?

[RugbyD]

10 years ago in the NYT...

http://query.nytimes.com/gst/fullpage.h ... nted=print

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 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.''

...

[mbuser]

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.

is it just me or have blurbs like that been all but ignored in the wake of this? i was amazed that pelosi had the gall to spew that garbage she did the other day when it's fairly clear that past liberal policies have as much to do with where we are at as anything else. one of fannie's biggest 'stockholders' was frank raines, director of the u.s. office of management and budget under clinton and ceo of fannie from 1999 to dec 04. here's a video* from oct 04 hearing - not that long ago in the big picture - regarding f/f's bookkeeping where he calls fannie's assets "riskless". perhaps not coincidentally, he made ~$20M in 2003

http://www.youtube.com/watch?v=_MGT_cSi7Rs

* disclaimer: clearly, a republican made the video. i guess any more it's pretty clear that it's one or the other