9/20/2008

Even the NY Times understood that this meltdown was going to occur 10 years ago

From the NY Times in September 30, 1999:

"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. . . .

''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.'' . . .

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.'' . . .


Another article in the NY TImes from September 11, 2003:

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago. . . .


These reforms were blocked by Democrats who threatened to filibuster the bill in the Senate.

The Bush administration shares some blame because it pushed the Zero Downpayment Act:

We project that the new zero downpayment program would serve about 150,000 new home buyers in the first year alone. It would be structured to assist those credit-worthy but cash-poor working individuals and families who have been excluded from purchasing their first home. . . .


The LA Times writes on May 31, 1999 that:

It’s one of the hidden success stories of the Clinton era. In the great housing boom of the 1990s, black and Latino homeownership has surged to the highest level ever recorded. The number of African Americans owning their own home is now increasing nearly three times as fast as the number of whites; the number of Latino homeowners is growing nearly five times as fast as that of whites.

These numbers are dramatic enough to deserve more detail. When President Clinton took office in 1993, 42% of African Americans and 39% of Latinos owned their own home. By this spring, those figures had jumped to 46.9% of blacks and 46.2% of Latinos. . . .

Under Clinton, bank regulators have breathed the first real life into enforcement of the Community Reinvestment Act, a 20-year-old statute meant to combat “redlining” by requiring banks to serve their low-income communities. The administration also has sent a clear message by stiffening enforcement of the fair housing and fair lending laws. The bottom line: Between 1993 and 1997, home loans grew by 72% to blacks and by 45% to Latinos, far faster than the total growth rate.

Lenders also have opened the door wider to minorities because of new initiatives at Fannie Mae and Freddie Mac–the giant federally chartered corporations that play critical, if obscure, roles in the home finance system. Fannie Mae and Freddie Mac buy mortgages from lenders and bundle them into securities; that provides lenders the funds to lend more. . . . .

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2 Comments:

Blogger Kitty C said...

House Speaker Nancy Pelosi, when asked Tuesday whether Democrats bear some of the responsibility regarding the current crisis on Wall Street, had a one-word answer: “No.”



Pelosi (D-Calif.) ripped President Bush’s “mismanagement” of the economy and a lack of regulation that led to the current situation.

“I think the American people have had it with this situation where the middle-income people in our country are not protected from the ramifications of the risk-taking and the greed of these financial institutions,” Pelosi told MSNBC.

When asked whether the Democrats “deserve some responsibility” regarding the economic crisis, Pelosi responded: “No.”

Kitty Crane

9/20/2008 2:17 PM  
Blogger David said...

Great piece from the liberal New York Times.

For the record, John McCain, in 2006, warned us about this crisis and supported an amendment to the FEDERAL HOUSING ENTERPRISE REGULATORY REFORM ACT OF 2005 which was calculated at heading off this crisis.

http://www.govtrack.us/congress/record.xpd?id=109-s20060525-16&bill=s109-190

Obama, one of the two largest recipients of money from Fannie Mae and Freddie Mac, was not a supporter of this bill.

9/20/2008 4:43 PM  

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