Thursday, October 2, 2008

Fannie Mae Is Not Partying Like It's 1999 Any More

I love to go back and look at old news stories. They can often be instructive. A reader of mine tipped me off to an old New York Times story from September 30, 1999. The story detailed Fannie Mae's plan to ease credit requirements so that more people could get into a home. And Fannie wasn't the only entity thinking like this. Fannie was hoping that others would get in on the act as well (and indeed they did).

From the New York Times piece: Fannie Mae Eases Credit To Aid Mortgage Lending

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.

And this quote:

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.

I think we know how this all ended.

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Tina said...

haha! What a great article to start the day :D

Credit Matters said...

Tina, glad that you enjoyed the article.

Thanks for reading.

The Lion said...

I love reading older articles. Especially when they point out exactly what has now happened. It is kind of like knowing the end of the story before you read the first few chapters!

Credit Matters said...

I was a history major in undergrad, Lion.

Good stuff.

Anonymous said...

Was that truly Fannie Mae's idea or was that after ACORN blackmailed them?
Either way, that was one party that shouldn't have been thrown.

Credit Matters said...

I am sure that Fannie Mae heard the calls from ACORN. However, I also know that Fannie -- and its shareholders -- were looking for juiced returns.

You are right, though. This is one party that ended badly. Everyone is laying on the lawn now.

cb_opus said...

... and somehow this is ALL the current administration's fault.

Not waving a flag for anyone or any party in particular - I just REALLY wish people would acknowledge that is plenty of blame to go around, and that all parties involved are often disingenuous.

Politics is dirty business. Finance ain't much better. Then you combine them together and get this mess.

Thanks, CM! I feel much better now. :)

Credit Matters said...

Opus, feel free to vent any time. I respect CB's rules about politics. Their site; their rules.

Politics are welcome here. Doesn't bother me.

The Lion said...

You know, CM, that doesn't surprise me for some reason.

I love history. I used to hate it in high school, but man, my college professor inspired my love for history. We got to learn the back stories and stories from the "other" side (the folks who didn't win...). Good, good stuff.

Credit Matters said...

Lion, thanks, pal.

Be sure to read tomorrow's story. Interesting little story about something that's going on behind the scenes here at CM.

Will give you some insight into what I am doing here at CM.

Bob Wang said...

You are SUCH a tease.

Credit Matters said...

BW, hey, I've been in the media for too many years. I have to tease.

Anonymous said...

Nice find. Just goes to show no matter how good the original intentions for broader home ownership, it got lost with unintended consequences and greed over time.

Credit Matters said...

Thanks, Anon. Hat tip to my reader for sending the story my way.

The Lion said...

Can't wait although no promises that I will actually "see" it on Friday. Having tooth pulled :( Wish me luck!

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