Fannie’s Smoking Gun

From The LRC Blog:

Fannie’s Smoking Gun

Posted by Bill Anderson at March 2, 2009 02:39 PM

It seems that the editors of the New York Times and Paul Krugman are practicing selective amnesia again. You might recall that they have been adamant in their insistent that Fannie and Freddie were not the cause of any difficulties in the markets, and it was all due to the lack of regulation of private markets.

Rob Blackstock has sent me a copy of an article from the September 30, 1999, New York Times in which Fannie began to ease credit:

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. (emphasis mine)

 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.

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And for your listening enjoyment, “Take a Load Off Fannie” by The Band

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